Under the Banyan Tree – Get ready for a LOT of driverless cars in China

Welcome to HSBC Global Viewpoint, the podcast series that brings together business leaders and industry experts to explore the latest global insights, trends, and opportunities. Make sure you're subscribed to stay up to date with new episodes. Thanks for listening, and now on to today's show. Hello from Hong Kong and welcome to Under Benry where we put Asian markets and economics in context. I'm Fred Newman, chief Asia economist here at HSBC — and I'm Harold Finland, the head of Asian equity strategy. For years, we've been hearing about autonomous driving in China, but things are really taking off now and we've got some numbers that are actually pretty astonishing. — That's right. And joining us to bring those numbers to you is our special guest for the week, Yuchi Ding, head of China Autos Research, who's been across the story from the very beginning. Plus, the latest on the nationwide autonomous drive rollout, technology, and competition with the US. We've got a lot to get through, so let's get started. From HSBC Global Investment Research, you're listening to Under the Banyan Tree. Euchen, welcome onto the podcast. Um, you've written a report about autonomous driving in China. Now, I'll be very frank. I think I've been seeing people writing or hearing about this for 10 years now. If me and Fred go to China now and say, I want to buy a autonomous car. Can I buy one? — You can buy it this month. One of the leading smart EV company uh Expon will launch a new model GX this month and it will come up with robo taxi version and and that robo taxi version can both serve the purpose of a private car as well as robot taxi if you want it and also I would uh update it's a commercial viable service. So if you uh travel to Shenzhen Nansan area, you can actually hell a robo taxi to take you to the place you want to go and there will be no driver sitting in the driver's seat. — So let's put some numbers around this. Um so there are certain areas in China where just like in the US you can now hail a autonomous cab within a certain area. How many of these uh autonomous taxis are now in operation in China and the US and where do you think this will go? Are we talking about you know two 300 going to a thousand maybe or what are we talking about in terms of numbers? Yeah, in China we currently have uh give or take around five,000 robot taxing running on — the whole of China. So all these different cities, all these different pilot project — and is roughly the same as the US or — Yeah, I would say it's similar China US in terms of the commercial attraction is largely similar and uh in China we do see by 2030 about half a million robo taxi fleet on road. — You go from 5,000 now to 500,000 in 5 years time. Well, you know, you know 2030 is only four years away if that three years. — Three years uh 100 time expansion. So making a car is a commodity in China. So it's really about the technology including the sensors to the processors to the softwares. — So um we do see um the sensors the hardware's uh cost is coming down. — But let me ask you on the technology because I mean we you have enormous expansion here. You're saying we're going to a half a million of these taxis in three years. — Have we perfected all of this? Is it is really adoption ready for the broader public to use? — Yes, it's already ready. So, let's say the current uh robot taxi company can running no disengagement, no human intervention for tens of thousand miles. Um in that sense, it's basically commercial viable and reliable robot taxi service. So I would say technology is ready. — Have you looked at some of the accident statistics? Are they doing better than humans driving? Is it actually safer to have tens thousands of these vehicles on the road or is it still a risk that they occasionally do a you know quite a fatal fatal mistake? — Yeah. Uh I would say uh machine is indeed better. They have better sensors. They have more processing power. So basically as the software progressing it drives more um in a mature way. So I would say 10 years ago when we test drive it feels like a green driver. Now it's a pretty experienced calm driver. — So let's take a hypothetical situation. There's a robo taxi. It drives on the street and there's a man that is crossing that collision. The man breaks his leg. he

needs to go to hospital and he sues who how does that work insurance wise how have they thought that through — um I think there's a clear uh protocol so first of all these robbo taxis uh is equipped with uh cameras so they record everything so and everything uh they can see so uh the any accident can be clearly defined so which party need to be responsible for that — let's say in this case the robo taxi clearly made a mistake it was a glitch or it didn't see something the guy came from behind the tree. So it made a mistake and how then is that then the robo taxi needs to pay for that? — Yeah. So basically uh currently is the robo taxi operator who will be taking the responsibility although I would argue uh the responsibility will be clearly defined it's a hardware issue or it's a software issue or uh which part of the it went wrong. So it can be then clearly defined and traced back. So I think everything is traceable because it's all computer, it's all recorded, it's basically um on recording all the time. So yeah. — Um can we talk a little bit about the two leading uh nations in this technology clearly US and China and uh I think you've told us that they have roughly the same number of vehicles on the road about 5,000 uh in each country. Is there a difference in the technological approach that has been taken in the US and China in terms of the underlying technology? Is one superior to the other or they different approaches or are they kind of converging on the same type of technology here? — I would say technology wise um is now increasingly a commodity. So I think the narrative of autonomous driving has been shifting from technology differentiation towards a commercial scaling. So technology if you can do it roughly I would say China US. — So basically you say a US autonomous taxi a robo taxi and a Chinese robo taxi technology wise it's exactly the same. — It's largely the same. I would even argue uh the company difference is more of a difference than the um country difference. uh China robot taxi companies such as pony and we ride they have lighter sensors but if Tesla is — lighter being a form of a sensor — radar rad like a type of radar sensor — it can see longer distance than radar so that's lighter but for uh Tesla they also run pilot robo taxi program but they insist no lighter only visual camera — so I think the technology do have some deviations but — and then if they are roughly technological ally comparable even though the company differences are bigger than the national differences overall as he put it. Um do you foresee then one country having the edge over time when it comes to revolutionizing the world into autonomous driving? — So both countries looks very dynamic. Both are heading for explosive commercial pathway but I would argue US uh the whole return and revenue model is much better because you guys are traveling to US you know the veil right? So they can charge more. So they charge much more. — They charge much more — and the cost would be almost the same because the technology is not too different you say right? — Uh actually no I would say the China cost structure is much better because uh we have this whole supply chain here the sensors cost the processing chips um cost has been materially um — so it's the same technology lower cost in China it's more expensive in the US but costwise but they can charge much more because it's quite cheap in China. Exactly. Because China is a cost structure is more favorable. So it has a better scaling potential. — Well, Errol, first of all, I'm blown away by this. Thank you for joining us, Eugene. Uh, you know, you're talking about 500,000 of these vehicles being deployed in the next few years. The technology has matured. Uh, you can use as a robo taxi, you can use it for personal purposes as well. — They're rolling it out now. — And they're rolling it out. And it's not a future, it's not a future hypothecical thing. is it's happening this month with a new model coming. But Harold, uh, this leads me to one great idea. — You and I, not being the best drivers ourselves, we're going to take under the banyan tree on a road trip in across China in an autonomous vehicle and we'll just record episode by episode — and we have the podcast port inside so we can just sit and and chat away. — We chat away and that will be on — under the menu tree on the road. — Excellent. And on that note, it's goodbye from the three of us. Thanks for listening and please do subscribe to Under the Banyan Tree on your podcast platform of choice if you haven't already. Indeed, and that also applies to our sister podcast, the macro brief from London. Under the Banyan Tree is an HSBC global investment research production produced by Graeme Mai. We'll be back again next