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Q1 2020 at a Glance: China’s Autonomous Driving under the Pandemic 
COVID-19 and China
Image Credit: Ihor Dvoretskyi/Unsplash

►Autonomous driving (AV): Only one passenger car L4 company raised money in Q1. Where is the money flowing? Commercial cars.

►Trucking, port and last-mile delivery is the new sexy, as it’s hard to commercialize from robotaxis at the current stage.

►Business model innovation? A deep re-shuffling is happening here. Giants are taking control.

Getting into 2020, we believe that entrepreneurs will look for ways to enhance the execution of technology – by starting mass production of products, which will usher in the era of autonomous vehicles (AV) 2.0.

Automotive startups, like other startup sectors like hospitality and retail, have been hammered by COVID-19. 

In the first quarter of 2020, funding activities plummeted to CNY 8 billion across 22 deals. But a surprising type of group has weathered the storm. Autonomous driving, accounting for more than half of total funding in the quarter, saw a flourish of funding across such scenarios as logistics business systems (trucking, port, last-mile delivery) and mining. In comparison with passenger vehicles, we see the adoption of autonomous trucks (ATs) is on the way, with commercialization approaching fast. The only Level 4 autonomous driving company featuring robotaxis that raised a new round in Q1 was Pony.ai. Mobility & transport is seeing less funding as the industry moves to a mature stage. 

Autonomous trucks gain ground in China, seeing a surge in demand 

With the opportunities of autonomous mining rising, more companies in China have proved the readiness for the mining industry to implement autonomous technology on a large scale. VIPioneers raised CNY 100 million from Cathay Capital in Q1, becoming the first to start commercial implementation in China back last September. The biggest challenge for the company is to generalize the first autonomation system – designed for Baoli coal mine – across different mines while sustaining system stability with a fast implementation speed. 

“This is a market valued at more than hundreds of billions of yuan, larger than most people expect. Each mining truck costs around 500,000 to 600,000 yuan in labor. Autonomous tech improves efficiency by 30% thanks to its cost-saving in oil and maintenance, ” VIPioneers co-founder and CEO Chen Long said

Ports are experiencing similar changes, being the second scenario to gain traction this year. Beijing-based Trunk (主线科技) has provided products for Tianjin port, and Shanghai-based Westwell (西井科技) sells to around 40 ports worldwide with its automation system products. The company saw a 102% compounded growth from 2016 to 2018.

It has also reportedly closed a new round of funding this month, led by Essence Securities, among other investors. Beijing-based UISEE (驭势科技) has plotted more than 10 ATs in its SGMW plant and provided unmanned luggage delivery services in Hong Kong Airport. The company closed a strategic investment led by Bosch (also the investor of Hesai), CICC and Shenzhen Venture Capital.

Early-stage startups are benefiting from their efforts in making a difference in the area they focus – by seizing benchmark orders to gain relevancy and mindshare. 

Some other giants and vehicle manufacturers see the potential for growth in Transportation-as-a-Service. A plethora of names are seeking to expand revenue streams beyond their main businesses – mobility service providers (Uber, DiDi Chuxing), automakers (no matter electrical or internal combustion engine), and Internet tech giants (Google and Baidu). 

Didi’s CTO Zhang Bo, who overlooks the company’s autonomous driving business, said that Didi values the industry alliance in competing in the market, especially as the industry moves to monetization. The strategy resonates with D-alliance, an initiative that Didi promoted to bring shared mobility networks with OEMs closer in 2018. 

Under the alliance, four essential components are networked mobility that DiDi takes control, AV technologies, OEMs and supply chain and sufficient capital inputs. Spinning off the AV business and raising money independently for it are meaningful moves for DiDi, which can open the gate to cooperation with industry resources mentioned above.  

An open platform like Apollo is edging closer, as well as the war between DiDi and Baidu. But the country still lacks a dominant OEM or tech leader, which will be very significant in designing industry rules in this burgeoning market. 

Compared with America, the industry in China has yet to see a successful transaction (say, acquisition of Cruise by General Motors). Besides, China is still lacking a strong OEM that is thriving in the research of AV, not to mention a powerful enough Electric Vehicle (EV) maker – Tesla has dwarfed its competitors (say, NIO) in market cap, killer products and technology.

Read more on Nio’s Q1 delivery results.

Mobility & transport – a robust industry with an almost-settled competitive landscape

Mobility & transport has taken a significant share of funding in the whole automotive & mobility industry in the past five to six years, witnessing dozens of mega-deals with the rise of giants, as well as mergers and acquisitions (M&As) and bankruptcies. The window, however, seems to be closing in 2020, with more opportunities concentrating on giants. 

Mobike (acquired by Meituan Dianping), ofo (bankrupt), Togo (unable to pay debts, on the verge of bankruptcy), DiDi Chuxing and Shouqi Limousine & Chauffeur made the most headlines back in 2017. Ride-hailing causes a greater share of the market to consolidate in the hands of big ones at the expense of smaller operators, as network effects favor larger companies. The same consolation trend happens in the bike-sharing niche as well. The market is dominated by three players – Meituan, DiDi and HelloBike.

Read more about DiDi’s latest funding for its bike brand Qingju.  

Car-sharing, with its glut of companies there were scaling without testing a minimum viable product (MVP) successfully, is no longer capital’s darling. 

Our final concern is on the second-hand car selling platform, which secured a sizeable median deal size back in 2017 (mainly pushed by Chehaoduo and Renrenche’s funding). The ‘first half’ of the war in this vast and lucrative market has come to an end, with a deep shuffle going on and winners standing out. But winners are also suffering from the losses caused by COVID-19

Editor: Luke Sheehan
ANALYST
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