Securities Daily | Intelligent Connected Vehicles: 'Technological Upgrade + Safety Assurance' Collaborate to Drive Industry Development into Fast Lane

The rapid development of intelligent vehicles is attracting more and more attention.

In 2021, multiple tech giants such as Baidu and Huawei accelerated the construction of intelligent vehicle ecosystems. Recently, the China Intelligent Connected Vehicle Industry Innovation Alliance and the National Intelligent Connected Vehicle Innovation Center released the 'Guidelines for the Construction of a Group Standard System for Intelligent Connected Vehicles', promoting further progress in the industrialization and commercialization of intelligent connected vehicles. This also means that intelligent vehicles will enter a stage of highly networked mass application.

While the level of intelligence is improving, information security issues have also become a 'growth concern' for intelligent connected vehicles. Since the beginning of this year, incidents such as 'information leaks', 'system attacks that alter routes', and others have occurred frequently.

The development of intelligent connected vehicles cannot be separated from information and data. For this reason, it is very important to regulate the industry with laws and regulations and set 'traffic lights' for this hot track.

What is an intelligent connected vehicle? Simply put, it is the organic combination of connected vehicles and intelligent cars.

At the 2021 World Intelligent Connected Vehicles Conference, Xiao Yaqing, Minister of Industry and Information Technology, stated that the penetration rate of new L2-level passenger vehicle markets has reached 20%, connected vehicle deployments are advancing in an orderly manner, over 3,500 kilometers of roads across the country have been intelligently upgraded, and more than 5 million vehicles are equipped with connected terminal devices.

Ma Tianyi, chief analyst of communications at Minsheng Securities, told the Securities Daily reporter that according to current statistical criteria, intelligent connected passenger vehicles must be equipped with L2-level or higher assisted driving capabilities, as well as features such as vehicle networking and OTA upgrades. Although the proportion of sales of intelligent connected passenger vehicles has fluctuated this year, it is still on an upward trend, with new energy vehicles accounting for more than 30%.

Since the beginning of this year, cities such as Beijing, Shanghai, Chongqing, Guangzhou, Wuxi, Changsha, and Wuhan have successively established intelligent connected vehicle demonstration zones to lead the development and implementation of automotive intelligent networking.

At the same time, the development of intelligent connected vehicles has also received more policy support. The 'Administrative Specifications for Road Testing and Demonstration Applications of Intelligent Connected Vehicles' released on July 27th state that industry institutions and enterprises are supported to conduct road tests on a larger scale and carry out demonstration applications in various scenarios, further promoting data sharing and mutual recognition of results, and encouraging exploration of commercial development models. On September 27th, the 'Three-Year Action Plan for the Construction of New IoT Infrastructure' was issued, which explicitly mentions the creation of a comprehensive monitoring platform for coordinated services of connected vehicles (intelligent connected vehicles) in the field of intelligent transportation, accelerating the construction of application scenarios such as smart parking management and autonomous driving, and promoting the networking and coordination development of urban transportation infrastructure, vehicles, and the environment.

Currently, China's intelligent connected vehicle industry is transitioning from the technology research and development and testing verification phase to a new stage of demonstration applications and large-scale commercial promotion. There is an urgent need to introduce and improve relevant standards. The recently released 'Guidelines for the Construction of the Intelligent Connected Vehicle Group Standard System' further constructs the Chinese intelligent connected vehicle group standard system, increasing the number of group standard items to 212 and research projects to 13 based on the 2020 version.

Wang Zhao, Director of the Standardization Institute at China Automotive Technology and Research Center Co., Ltd., stated that standards are a double-edged sword. The industry should pay attention to technological progress, industrial development, and government management needs, fully considering the scope and urgency of standard demands driven by technological and industrial development, and determine through what form and level of standards to meet the diverse needs of intelligent connected vehicles.

Through the formulation and launch of standards, as well as capital and technological investments by automakers, the market penetration rate of new L2 passenger vehicles will steadily increase in 2022.

New forces in the automotive industry are emerging with great momentum. With NIO, Li Auto, and Xpeng successively listing overseas, they have not only sparked a startup boom for new energy vehicles in China but also promoted the popularization of intelligent connected vehicles. Against this backdrop, traditional automakers are also accelerating their pace of upgrading vehicles towards intelligence.

Behind the successive launches of intelligent connected cars by automakers such as BAIC, SAIC, and Changan are internet technology companies like Tencent, Alibaba, and Huawei collaborating with automakers using intelligent technologies and internet resources. Most new car-making forces have started from auxiliary systems and algorithms, continuously making breakthroughs in autonomous driving and human-machine interaction systems.

Xu Hui, secretary of the board of directors of Great Wall Motor, told the Securities Daily reporter that automakers have increasingly recognized the trend of 'software-defined vehicles.' The decoupling of software and hardware, as well as the standardization of parts, will reshape the automotive supply chain. Industry control points shift from manufacturing to software and services. 'Hardware redundancy design + software iteration capability' will become a watershed between technology mobility companies and traditional automobile manufacturers.

Xu Hui stated, 'The continuous charging of software within the automotive industry has already emerged. The value composition of intelligent connected vehicles will become hardware, software, and content/services. In the future, it is expected to generate sustainable revenue from the sold cars, re-opening up a new blue ocean market. Automakers need to build a global unified architecture big data platform, create an analysis closed loop around user data, vehicle data, and environmental data, deeply mine data value, and lay the foundation for exploring new business models.'

The development of intelligent connected vehicles is subverting the entire travel market. In terms of hardware, automakers need to control design technology routes and consider how to better carry out vertical integration upstream and downstream to provide a better travel service experience. In software, software has become a new competitive point, with the operating system being at the core of software capabilities, responsible for controlling and managing the hardware and software resources of an entire intelligent vehicle. Better integration of hardware and software, as well as enhancing automakers' own software R&D capabilities, have become new highlights for valuation premiums of automakers.

Electrification, connectivity, and automation have become the development directions for the future automotive industry, and a consensus has been reached within the industry. Digital technologies such as cloud computing, the Internet of Things, 5G, artificial intelligence, autonomous driving, and blockchain will bring new business models to automakers. Xu Hui stated that Great Wall Motor is using emerging technologies to accelerate its transformation from a traditional manufacturing enterprise into a technology-driven mobility company, providing users with a richer travel experience based on automotive software and services.

Under the trend of innovation, how can technology giants be overlooked? In 2021, internet companies flocked into the automotive manufacturing sector, with Baidu, Huawei, Didi Chuxing, Xiaomi, OPPO, and 360 among others entering the market either through cooperation or independent research and development to cross over into the field of vehicle manufacturing. The increasing number of internet technology enterprises has opened up a new situation for the development of intelligent connected vehicles.

Meanwhile, the intelligent connected vehicle industry chain is long, with software and hardware suppliers continuously expanding. These companies have benefited from the demand for intelligent upgrading in the automotive industry, enjoying market dividends and capital favor.

With the integration of 'mobile internet services + in-vehicle technology', cars are expected to become the largest mobile consumer smart terminals, energy transmission tools, and data processing nodes. Service data related to people, vehicles, and parking lots is experiencing explosive growth.

Although data has become an important strategic resource for automakers' transformation in the next phase, a series of automotive safety issues that arise as a result cannot be ignored.

At the 2021 World Intelligent Connected Vehicles Conference, Chen Luping, Chief Engineer of the China Software Testing and Evaluation Center, released the latest results on intelligent vehicle information security testing: Among the 11 newly released models with security protection measures, wireless network security issues accounted for 73%, reverse engineering of vehicle and mobile terminal apps accounted for 64%, unauthorized access to sensitive data accounted for 45%, and unauthorized access to personal information accounted for 18%...

This result has drawn widespread attention. In fact, since the beginning of this year, various data security issues such as 'user privacy data breaches' have been continuously exposed, causing significant fluctuations in the stock prices of many companies.

Wang Yingmin, Chief Engineer of Datang Telecom Group, believes that 5G communication technology can accelerate the advancement of automotive intelligence and drive the development of application scenarios such as autonomous driving. However, this also poses higher requirements for information security.

Yan Jinghui, a member of the Expert Committee of the China Association of Automobile Circulation, told the Securities Daily reporter that the intelligent connected vehicle industry chain consists of many links, and enterprises have interconnectivity in terms of data. If any link is not properly protected, security issues in the communication field in the past may recur in the automotive sector, potentially even endangering driving safety.

"The so-called intelligent vehicles are currently only in the stage of assisted driving or semi-autonomous driving. The application of 5G in fields such as intelligent driving, intelligent transportation, and connected vehicles is still in the research and development and testing stages, with only a small number being commercially available. However, the intricate application scenarios increase the risk of information leakage," said Jia Xinguang, chief analyst at China Automotive Industry Consulting Development Company, to the Securities Daily reporter.

In terms of enhancing information security levels, enterprises related to the automotive industry chain still have a long way to go. Zhang Xiang, a researcher at the Automotive Industry Innovation Research Center of Northern Polytechnical University, suggests, "R&D personnel should analyze data to reduce potential hazards, appropriately lower the accuracy of data collected by in-vehicle cameras, try to process enterprise data locally after collection, and promptly delete and patch vulnerabilities. Unified management of scrapped vehicle data should be carried out to improve security. Relevant departments should establish unified standards for companies in the automotive, internet, travel, and other industry chains."

In fact, the management of data security for intelligent connected vehicles is being further strengthened. In May this year, the Cyberspace Administration of China issued a notice soliciting public opinions on the 'Several Provisions on the Security Management of Automotive Data (Draft for Soliciting Opinions)', further clarifying issues such as responsible entities, data scope, collection methods, privacy protection, and data export. In June, the Ministry of Industry and Information Technology issued the 'Notice on Strengthening Network Security Work for Connected Vehicles (Intelligent Connected Vehicles) (Draft for Soliciting Opinions)', proposing that relevant enterprises should take management and technical measures to strengthen the security protection of vehicles, networks, platforms, and data in accordance with the standards related to connected vehicle network security and data security.

"In the coming year, detailed specifications will also be introduced for information collection in intelligent connected vehicles. Issues such as how to define responsibility in case of accidents by autonomous vehicles led by machines are also expected to be resolved," Jia Xinguang believes.