China Snapshot -‐ Autonomous Vehicle Technology

17th June 2015

China Snapshot Sn - Autonomous vehicle technology

Already the worlds largest automobile market, China may also be one of the earliest to develop fully autonomous cars. Rouse's Technology Information Services Snapshot report provides a brief overview of how that is happening. Highlights: Fig.1 The Partnership Landscape The Ministry of Industry and Information Technology's (MIIT) seminar on 17 March focusing on connected cars saw the participation of conventional automakers including SAIC Motor, FAW, Changan, Chery, GAC Group, and BAIC Motor, as well as leading Internet firms like Alibaba (BABA.NYSE), Baidu (BIDU.NASDAQ), and Leshi Internet Information & Technology Corp. (LeTV, 300104.SZ).

Auto Shanghai, April 2015, China's largest auto trade fair, hosted a summit on "intelligent connected cars", a number of which were displayed at the show. Alliances Formed We are increasingly seeing traditional OEMs team with internet companies to develop connected vehicles, including self-driving cars. Amongst them are SAIC and Alibaba Group, BAIC and Letv, BMW and Baidu who have already begun cooperating on developing semi and fully autonomous vehicle technology (Fig.1). Perhaps the most dramatic news came from Baidu’s SVP of Technology and Strategy, Wang Jin, at the 2015 China Cloud Computing Conference who announced that the company, in collaboration with BMW, plan on releasing an semi-autonomous car by the second half of 2015 ready for road tests. According to the head of Baidu’s deep learning lab (Google X equivalent), Yu Kai, believes that a semi-automated vehicle is the preferred way forward using traditional pedals whilst giving the driver greater freedom Road Trials Begin Fig.2 Development Progress Media reports reveal that FAW and Beijing Hyundai currently lead the way with on-road tests. FAW in collaboration with the National University of Defence Technology completed a 286 km driving test 2011. The vehicle autonomously overtook 67 times and the average speed was 87 km/h. Beijing Hyundai in 2012 with the help of the Military Transportation University completed an autonomous vehicle journey from Beijing to

17th June 2015

Tianjin. Various other OEM's have announced either R&D projects or Fig.3 Applicant enty and type of test track trials (Fig.2). autonomy 200 Patent Growth

A different picture emerges from the patent landscape. Applications in 150 56 the last five years grew 250% with the bulk of it falling within Level 4 Full Self-Driving Automation technology1. Despite this high growth, 100 overall numbers are still small. We expect to see a greater number of applications published in the coming year following the high amount of 70 96 commercial activity in autonomous vehicles. So far patent growth in 50 China appears to be largely driven by foreign OEMs and Chinese 20 Research Institutes and Universities, lead by the Beijing Institute of 0 Technology. Foreign applicants make up approximately 30% of Chinese Level 3 Level 4 filings regarding Level 3 and Level 4 technology. Company Uni/Research Inst. Individual Broadly speaking, corporations mainly hold Level 3 autonomous vehicle technology while universities and research institutes hold a much larger proportion in Level 4 autonomous vehicle technology (see Fig.4 Top 10 applicants in China for Fig.3 and Fig.4). When just looking at Chinese entities, 59% of the Level 3 & 4 autonomy applicants are either Universities or Research Institutions and 22% GM are companies. Four out of the top 10 applicants are foreign with Beijing Inst. of Tech GM with the most patents followed by Ford with the third most. Ford We are yet to see most of the Chinese OEMs appearing on the Uni. Beijing Union patent landscape, which could partly be due to the 18-month Univ. Shanghai Jiaotong publication lag. However, the presence of institutional patentees Google should not be ignored, as major OEMs have already begun inking Univ. Tongji agreements with such entities as Fig.1 shows. To name a few: BYD and Beijing Institute of Tech have cooperated on an autonomous Chery vehicle competition, Chery and Wuhan University announced Toyota Level 3 cooperation in 2013, Beijing Hyundai (JV) are working together Univ. of Military Level 4 with the Military Transportation University, and Guangzhou Auto 0 5 10 15 20 (GAGC) signed an agreement with the Hefei Institute of Physical Science, (Chinese Academy of Sciences) in early 2014. Within the Advanced Driver Assistance Systems (ADAS) Fig.5 ADAS Patent applicaons in technology space, which falls under Levels 1 and 2 of the NHTSA China per year classification, we see a much stronger commercial presence. 80 2011-2013 were the strongest filing years and we expect to see an increasing trend as more patents pass their publication date. 60 Overall 348 ADAS systems uncovered in total including 40 technologies from almost every well known kind of ADAS system including (but not limited to): Adaptive cruise control, 20 Automated Parking, Advanced emergency braking, Automatic Lane Detection/Keeping, Automated Blind Spot Monitoring, 0 Automated Steering, Automated Braking, and Anti-collision. 2001 2003 2005 2007 2009 2011 2013 2015 Geely, Bosch, GM, Ford and Chery were the top 5 filers.

1 We have used the US National Highway Transport Safety Agency (NHTSA) classification of autonomous vehicles (found at www.nhtsa.gov) Patent analysis was conducted on patent applications in China which we judged to fall within level 3 and level 4 technology of the NHTSA's classification.

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Litigation Fig.6 No. of ADAS Patent applicaons in China by applicant Customarily there is very little litigation activity seen between automotive OEMs and suppliers, due to close and Geely hierarchical relationships. Only 98 records of invention Bosch patent and utility model infringement cases were found in GM the transportation sector as a whole from CIELA2. These Ford show an above-average win rate of 78% (compared with Chery Toyota 64% average for all cases). However, average BYD compensation within the sector is just below CNY 200,000 Hyundai Mobis (compared with CNY 270,000 overall average). Hyundai Motor Volvo Volkswagen Connental Regulation Lifan Along with the US and UK, China is not a signatory of the Nissan 3 Valeo SA Vienna Convention and was therefore able to start Great Wall deployment of autonomous vehicles earlier. So far, no Honda specific regulations on autonomous cars have been issued Foton however, it has been reported that the Research Institute Renault of Highway Ministry of Transport will work jointly with Denso Takata Baidu on issues relating to intelligent driving, Autoliv transportation safety, research into laws and regulations Mobileye and technology standards. China's internet sector is largely Panasonic Corporaon closed to foreign participation, and foreign companies face 0 20 40 60 80 restriction around encryption and data protection. In terms of navigation, China has exclusively mandated use Fig.7 Win rate and avg. compensation for of the "Beidou" satellite navigation system. It is likely that transportation sector Inv. & UM patents the strategic heights of information technology involved in connected cars will be monopolized by domestic players. Overall avg. CNY 300,000 100% CNY 269,657 The automotive sector too has historically restricted CNY 250,000 foreign competition through mandated JVs for OEMs and 80% CNY 200,000 local content regulations. Restrictions remain on imported 78% 60% R&D test vehicles and equipment, and China’s continued CNY 195,233 CNY 150,000 support of SOEs. It is likely that, as in the case of BMW and 40% CNY 100,000 Hyundai, the best option is to partner with domestic 20% CNY 50,000 incumbent internet businesses such as Baidu and for suppliers to work with domestic JV partners. 0% CNY 0 Win Rate Average Compensaon

2 CIELA is a free online IP case litigation database covering administration appeals and civil litigation judgments dating back to 2006. Visit www.ciela.cn for further case analysis. 3 The Vienna Convention on Road Traffic 1968, Article 8 stipulates: “Every driver shall at all times be able to control his vehicle or to guide his animals.” This Article has been amended in May 2014 and will now allow signatory countries to permit driverless vehicles.

Appendix 1 - NHTSA's Classification of Autonomous Cars U.S. Department of Transportation Releases Policy on Automated Vehicle Development 4 NHTSA 14-13 Thursday, May 30, 2013

NHTSA defines vehicle automation as having five levels: No-Automation (Level 0): The driver is in complete and sole control of the primary vehicle controls – brake, steering, throttle, and motive power – at all times. Function-specific Automation (Level 1): Automation at this level involves one or more specific control functions. Examples include electronic stability control or pre-charged brakes, where the vehicle automatically assists with braking to enable the driver to regain control of the vehicle or stop faster than possible by acting alone. Combined Function Automation (Level 2): This level involves automation of at least two primary control functions designed to work in unison to relieve the driver of control of those functions. An example of combined functions enabling a Level 2 system is adaptive cruise control in combination with lane centering. Limited Self-Driving Automation (Level 3): Vehicles at this level of automation enable the driver to cede full control of all safety-critical functions under certain traffic or environmental conditions and in those conditions to rely heavily on the vehicle to monitor for changes in those conditions requiring transition back to driver control. The driver is expected to be available for occasional control, but with sufficiently comfortable transition time. The Google car is an example of limited self-driving automation. Full Self-Driving Automation (Level 4): The vehicle is designed to perform all safety-critical driving functions and monitor roadway conditions for an entire trip. Such a design anticipates that the driver will provide destination or navigation input, but is not expected to be available for control at any time during the trip. This includes both occupied and unoccupied vehicles.

4 http://www.nhtsa.gov/About+NHTSA/Press+Releases/U.S.+Department+of+Transportation+Releases+Policy+on+Automated+Vehicle+ Development