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China's Geely ramps up self-driving efforts amid auto market slowdown

Carmaker aims for nearly full automation by 2022 with opening of German research

Geely shows off its Geometry A electric vehicle at the auto show in Shanghai in April. The company has also announced big plans for self-driving technology.   © Reuters

HONG KONG --  Geely Auto Group, China's largest private automaker, is ramping up efforts to develop self-driving technology as it grapples with a slowdown in the domestic car market.

Geely, a group company of Volvo Cars owner Zhejiang Geely Holding Group, said earlier this month that it aims to introduce Level 4 self-driving technology -- defined as fully autonomous driving under certain conditions -- by 2022. Geely opened a new research center in Germany the following week to enhance its R&D capacities for the "new propulsion systems and next-generation mobility technology." The company did not disclose the size of the investment but said it plans to hire 300 engineers for the new facility.

The industry generally recognizes five levels of autonomous driving, from 1 -- driver assistance systems -- to 5, cars that are fully self-driving under all conditions.

Geely's moves are expected to intensify competition for the adoption of greater autonomous driving functions, as global auto giants and startups alike race to seize the lead in this emerging field. Analysts warn, however, that the company has a number of regulatory and technical hurdles to clear if it is to achieve its aim.

China, already the world's largest car market, is expected to be a core battlefield for smart vehicles. Beijing has laid out a blueprint under which half of new cars on sale in the country will have some level of autonomous driving capability by 2020. The government's "Made in China 2025" initiative, moreover, calls for autonomous vehicles to have a market penetration of 60% by 2025.

"Geely Auto is committed to transforming into a technology leader of which autonomous driving technology will be at its core," said An Conghui, group president and CEO, in an announcement on May 10.

There are currently six Geely-brand models on sale with Level 2 autonomous driving systems, and they had sold a total of 450,000 units as of April. This puts Geely in the lead in terms of early adoption of autonomous driving technologies. But analysts say the headwinds will be much stronger as Geely moves to test more advanced functions on its cars. Two of analysts' biggest concerns are the lack of a regulatory framework and China's complex driving environment.

Automated driving is just one cutting-edge area Geely is exploring. Vehicles from Lynk & Co., its joint venture with Volvo Car, come standard with features like digital payment compatibility for use in car sharing. (Photo by Shunsuke Tabeta)

"It's unlikely that China's infrastructure will allow the adoption of Level 3 self-driving systems any time soon," Nick Lai, head of Asia auto research at JP Morgan, said, as regulators are still very cautious about potential safety issues. Level 3 systems allow drivers to disengage from some driving functions in certain scenarios, while Level 2 or 1 systems are designed to only provide some assistance to drivers.

While many companies are already able to achieve full autonomous driving in closed conditions, the real-world driving environment presents far more challenges -- including bad drivers.

To facilitate testing under various scenarios, Geely signed an agreement with the municipal government of Ningbo, Zhejiang Province, earlier this month, to create an autonomous driving test zone. In this zone, self-driving vehicles can communicate with other cars and infrastructure via roadside sensors, edge computing systems, and 5G technologies.

But analysts point out another hurdle for Chinese automakers: the lack of domestic component suppliers to support more sophisticated self-driving solutions. Trade tensions with the U.S. over advanced technologies and foreign governments' growing distrust of Chinese investment could further dampen automakers' ability to acquire overseas companies with the needed technologies.

"Currently, the technologies of foreign parts suppliers are way ahead of the domestic makers," said Toliver Ma, a Hong Kong-based analyst at Guotai Junan Securities, "There isn't any Chinese company that can supply parts to support vehicles with Level 4 self-driving systems."

Ma said he expects Chinese companies to face greater scrutiny of their attempts to acquire parts makers, especially in the U.S., but said regular procurement is not likely to be affected as most international companies have factories in mainland China.

Ma believes that Geely is better positioned than most of its Chinese rivals as it has stronger research and development capabilities and can leverage the advanced technologies of Volvo Cars. And compared to emerging smart vehicle makers, it has a stronger balance sheet to support the long development cycle needed for next-generation mobility solutions, he said.

While Geely is conducting most if its autonomous driving-related research within China, the company is also expanding its overseas R&D locations.

The new German research center, which is close to the Frankfurt airport, is expected to hire around 300 engineers and technology specialists over the next few years. The group also has research centers in Coventry, in the U.K., and Gothnburg, in Sweden.

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