Some Chinese automakers are going all in on driverless vehicle technology to develop robotaxis. But the U.S. government is about to pull back the reins on Chinese testing of driverless vehicles in the U.S. market due to national security. Here are the details and why it's a big deal.
Going all in
China appears to be pressing the accelerator when it comes to developing driverless vehicles. It makes sense considering China accounted for nearly 62% of the 10.4 million battery-powered electric vehicles (EVs) that were manufactured across the globe in 2023; EVs are more easily adapted to driverless technology. For context, the U.S. was ranked second and produced only 1 million, according to GlobalData.
Already, Chinese companies are heavily experimenting with driverless technology in their home market, with plans to continue that research abroad. Baidu operates a fleet of 500 robotaxis, often found without safety drivers, for emergencies in Wuhan, China. The company notes it plans to add another 1,000 vehicles. Sixteen or more Chinese cities have allowed Chinese companies to test driverless vehicle technology on public roads as their industry attempts to take a controlling grip on global driverless vehicle leadership.
Here's the kicker, and perhaps part of why the U.S. government is about to step in. Chinese companies have set up research facilities in the U.S. and Europe and are sending the data and research back home, where it is not allowed to leave the country.
U.S. response
The U.S. Department of Commerce is expected to propose policy in August that would bar Chinese software in driverless and connected vehicles. More specifically, the Biden administration wants to propose policy that would bar Chinese software in vehicles in the U.S. that possess Level 3 automation or above, as well as vehicles with Chinese-developed advanced wireless communication abilities.
In the 12 months that ended November 2022, Chinese driverless vehicles tested over 450,000 miles in California with autonomous vehicle technology, raising concerns about connected vehicles using driver monitoring systems to listen, record, or potentially control the vehicle.
"The national security risks are quite significant," Commerce Secretary Gina Raimondo said in May, according to Autonews. "We decided to take action because this is really serious stuff."
Why it matters
For investors, the long-term ramifications could be huge. The potential policy from the U.S. government could slow down China's ambitions for driverless tech, especially for automakers such as Nio, which has announced navigate-on-pilot (NOP) and autonomous driving as a service (AdaaS) for its ET7 sedan. The policy could also certainly stunt growth plans for Chinese auto BYD, which just announced a deal with Uber Technologies to bring 100,000 EVs to the latter's fleet.
U.S. companies that stand to benefit from the potential policy would be Tesla (NASDAQ: TSLA), General Motors(NYSE: GM), and Alphabet's Waymo. While Ford Motor Company and Volkswagen threw in the towel on developing their driverless vehicle technology, Tesla could rebound from its delayed robotaxi unveiling, now coming in October, and have less competition. It would also give General Motors more time to rebound from its shutdown of Cruise operations.
Ultimately, for investors, it will be increasingly important to watch a number of automotive developments between the U.S. and China as well-built, highly affordable, and also heavily subsidized Chinese EVs attempt to break into the U.S. market with or without driverless tech. The U.S. government is currently stepping in because allowing that at this time could cripple U.S. EV and autonomous development in the near term -- and that would be bad news for many investors.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Daniel Miller has positions in Ford Motor Company and General Motors. The Motley Fool has positions in and recommends Alphabet, BYD Company, Baidu, Tesla, Uber Technologies, and Volkswagen Ag. The Motley Fool recommends General Motors and recommends the following options: long January 2025 $25 calls on General Motors. The Motley Fool has a disclosure policy.
