Background
The traditional sanitation industry has been faced with severe problems including difficulty with recruitment, poor working conditions, high labor costs, and frequent occurrences of accidents. Yet applying autonomous driving technology to this traditional industry can solve these problems via cost reduction and efficiency improvement, for autonomous driving sanitation vehicles are expected to decrease labor and management costs and avoid accidents drastically.
Market Size: The sanitation market size ushers to reach CNY 300 billion by 2025.
In 2018, China's sanitation market size was CNY 193 billion (USD 27 billion). EqualOcean predicts that the sanitation market size will amount to CNY 300 billion by 2025 with a CAGR of 6.50%, showing great market potential.
The market size of new energy sanitation vehicles was CNY 1 billion and the sales volume of sanitation vehicles reached 101,000 units in 2018, with a 1.49% penetration rate of new energy sanitation vehicles. EqualOcean predicts that by 2025, the market size for new energy sanitation vehicles will amount to CNY 42 billion.
Driving Forces
Sanitation has been an ideal commercialized application scenario for L4 autonomous driving technology.
Under the constraints from policy and ethics of humanity, realizing commercialization of self-driving passenger cars still faces many challenges. Meanwhile, various autonomous driving applications have been continuously excavated, such as transportation in harbor and mining areas and sanitation self-driving. Due to the loose requirements for running speed and comfort, fixed routes and numerous closed and semi-closed scenes, sanitation scenarios make it easier to achieve the commercialization of L4 autonomous driving.
As Mr. Yanye Tang, vice president and partner of Autowise.ai (Chinese:仙途智能) introduced, as a leading start-up company in the commercialization of autonomous driving technology, Autowise.ai has deeply engaged in the autonomous driving sanitation field, integrating autonomous driving technology and sweepers' mass-produced capacities. It is reported that most products of Autowise.ai have been equipped with L4 autonomous driving technology and are applied in various scenarios.
Reduction in upstream procurement costs and surging demand from downstream stimulate market growth.
To begin with, compared with traditional sanitation vehicles, autonomous driving vehicles only need several workers to superintend the cars and wind up the waste left over, which can reduce approximately 60% of the labor input. Furthermore, because of the hostile working environment, the price of working hours at night is higher. At the same time, the probability of driving accidents occurring at night is also higher, resulting in unnecessary costs. Meanwhile, some of the core components of autonomous driving are gradually replaced by domestic products, effectively reducing procurement costs and promoting the commercialization of autonomous driving sanitation.
Dr. Qingxiong Yang, Vice President of WeRide(Chinese:文远知行) and an expert in the autonomous driving field, introduced WeRide's driverless sanitation vehicles technology and their business planning in an exclusive EqualOcean interview. According to his statement, only when a model achieves mass production of factory-installed products can it have the opportunity to support its large-scale commercialization. Especially for the self-driving sanitation industry, scaling effects can only be realized through reaching a certain product capacity, under which smart sanitation can eventually be applied.
In conclusion, although in the short run, the price of self-driving sanitation vehicles is relatively higher, it will eventually go down with cost reduction and efficiency increase in the long run.
Industry Chain
The upstream of the self-driving sanitation industry chain contains auto parts providers and car suppliers. The midstream comprises of autonomous driving technology corporations, which operate the sanitation projects independently or provide self-driving sanitation vehicles and equipment to sanitation enterprises. Consequently, the downstream includes sanitation project parties and sanitation enterprises, respectively.
Current Market Condition
Most of the application scenarios are closed and semi-closed, gradually expanding to fully open scenes.
Currently, most operation scenarios are closed scenes, like parks and schools, and semi-closed scenes, like tunnels. Moreover, since most of Autowise.ai's products are small and mini sweepers, their open applicated scenarios are limited to narrow roads, including side roads.
According to Mr. Tang's statement, Autowise.ai has chosen to lay emphasis on urban sanitation scenarios in consideration of its commercialization realization. Aside from common closed scenes including industrial parks and schools, Autowise.ai has made a breakthrough, applying its products to semi-closed scenes, such as tunnels, and fully open scenes, like narrow streets and side roads.
Besides, Dr.Yang told us that WeRide launched its Robo Street Sweepers on open roads in the southern metropolis of Guangzhou this September. And the Robo Street Sweeper is known as the first mass-produced and purpose-built self-driving sweeper vehicle in China.
Introduction of business models in the Chinese self-driving sanitation market.
There are four business models of self-driving sanitation:
In Mode 1, autonomous driving technology corporations contract projects independently and establish fleets of self-driving vehicles, providing sanitation services.
In Mode 2, technology corporations and sanitation enterprises set up a joint venture to provide sanitation services.
In Mode 3, sanitation enterprises serve as service providers independently by establishing their technology department or M&A.
In Mode 4, autonomous driving technology corporations supply self-driving vehicles or solutions to contract projects for sanitation enterprises.
According to Mr. Tang's statement, Autowise.ai has chosen to lay emphasis on urban street cleaning sanitation scenarios to realize in consideration of its commercialization realization easiness. In terms of Autowise.ai's business model, the company operates autonomous driving sweeper fleets and owns contracted projects in many cities in China (Mode 1).
Furthermore, for their future business model consideration, Mr. Tang said, the global market will be seen as an integral part of Autowise.ai's business emphasis. And the European market has been the primary focus thanks to the company's collaborations with well-known local automakers. In the future, Autowise.ai will continue to expand overseas markets, aiming at setting foot in North America, Middle East and other growing markets in Southeast Asia. Besides, considering future mature applications of remote operations and realization of autonomous driving on-the-scene, scalable scaled business operations can be facilitated and achieved in this industry.
Multiple players crowd into the industry, and the Chinese sanitation market is highly fragmented.
Self-driving sanitation players mainly include autonomous driving technology companies, service robot firms, equipment manufacturers, pan-artificial intelligence firms, and traditional sanitation companies in the transformation process.
Unlike self-driving sanitation sweepers, sanitation robots, including products from Gaussian and IDRIVERPLUS, can not be applied in open scenarios with a relatively weaker cleaning ability. They mostly appear in property services, including shopping malls, office buildings and hotel internal ground cleaning.
Equipment manufacturers, including Yutong and FULONGMA, have strength in hardware and production capacity. Compared with technology firms, these companies have a better understanding of the sanitation industry. Also, with years of development in sanitation, they have established solid customer relationship.
Self-driving technology companies, such as Autowise.ai and WeRide, have advantages in building algorithms and software development. Dr. Yang told us that in a closed and a semi-closed scene, self-driving sanitation vehicles are mainly responsible for dealing with sanitation problems, ensuring accurate identification of debris and high-precision positioning while performing road edge sweeping. However, sanitation vehicles should lay more emphasis on safe driving in a fully open scene. It is noted that these vehicles would usually avoid peak traffic hours and specific situations, such as storms, for efficiency reasons.
In terms of the competitive landscape, Dr.Yang and Mr.Tang both stated that, at present, the market is highly fragmented, bringing potential opportunities for private enterprises and start-ups.
Challenges
One major challenge of the self-driving sanitation field is the technological barrier.
Unlike autonomous driving passenger cars, self-driving sanitation vehicles are required to ensure driving safety and deal with sanitation problems meanwhile, which forms the technological barrier in the field. Dr. Yang mentioned that immature autonomous driving technology in the field is another challenge, acting as a barrier for most companies.
Traditional sanitation companies which collaborate with technology firms will possibly stand out from the competition, considering the technological barrier of the autonomous driving industry and the marketing resources needed for accomplishing sanitation projects.
Relevant policies need to be facilitated to support future development of the market.
Self-driving sanitation is the cross-application of autonomous driving technology, which is also restricted by laws and regulations. As stated by Dr.Yang, one of the notable challenges is that China's relevant policies have yet to open up in this area entirely.
Current applications of driverless technology in the field of sanitation include small sweepers and large sanitation vehicles. At present, some cities allow small sweepers to operate legally in restricted areas with equipment licenses, while large self-driving sanitation vehicles must have vehicle licenses in advance. In addition, autonomous driving test licenses are mainly issued to passenger cars, causing a rougher situation in conducting reasonable verification of autonomous driving sanitation vehicles.
Furthermore, Dr.Yang told us that only a few cities, such as Guangzhou, Beijing and Shanghai have promulgated policies regarding self-driving sanitation. Also, WeRide launched its Robo Street Sweepers on open roads in the southern metropolis of Guangzhou this September.
Although the open scenario application of medium and large-scale sanitation vehicles has been piloted in some areas, the whole industry urgently needs laws and regulations to promote the standardized and rapid development of the industry.
Conclusion
Under government support, advancement of technology and large-scale operations for self-driving sanitation vehicles, China's self-driving sanitation market will have experienced rapid growth after 2022.