How USD300bn of smart infrastructure may accelerate autonomous driving

Research on autonomous driving (AD) has until now been mainly focused on the vehicle side. In this report we study the often overlooked side of AD: infrastructure as an enabler and driver of smart mobility. Based on our analysis of technology, economics and policy (especially in freight transportation), we think China is best positioned to lead in 'vehicle infrastructure cooperation' (VIC). We forecast US$300bn of roadside investment in China between 2022E-40E, benefiting domestic and internationally exposed technology equipment and construction companies. We expect VIC to potentially bring US$270bn pa of labour cost savings for China’s road freight transportation market.

From a technology perspective, China has yet to catch up with global leaders when it comes to single-vehicle AI AD. But outfitting its existing highways with smart roadside units is less technologically demanding—we therefore think China is more focused than other countries on VIC as roadside support, and could bypass the tech hurdles using single-vehicle AI. From a policy perceptive, China's government has a proven track record of infrastructure build-out. As China’s FAI 2.0, smart infrastructure has already received policy supports from central government. From an economics perspective, while immediate ROI may not be overly positive, infrastructure investment often has rippling benefits across the economy. We analyse the government's and various businesses’ investment intentions and rationale, and identify labour cost savings as a possible economic benefit that justifies the costs, in addition to the government's support.

We believe the market has overlooked potential opportunities brought by VIC AD. Our interactive model on potential roadside looks into the various smart roadside equipment needed to provide vehicles with better vision and hence make AD easier to achieve via single-vehicle AI technology. Our logistics freight-cost development interactive model factors in different components of freight costs and elaborates on market size potentials. In our analysis we expect highway transportation costs to be similar to railways (assuming no drivers in vehicles) while railways take last-mile road haulage from both ends. We also extend our analysis beyond China, though we think most countries might want to wait and see what progress China achieves before drafting their own AD paths.