A Baidu Inc. logo is displayed on the company's autonomous car at the company's headquarters in Beijing, China, on Tuesday, Jan. 19, 2016. Wang Jing, the senior vice president in charge of Baidu's autonomous driving efforts, is on a mission: To push China to the forefront of the coming driverless-car era. He thinks the company can leverage its expertise in artificial intelligence, data mapping and Internet connectivity to excel in autonomous driving technology. Photographer: Qilai Shen/Bloomberg
Tech groups such as Baidu are seen as strong competitors to traditional carmakers such as General Motors © Bloomberg

To understand the hopes that tech moguls harbour in relation to autonomous vehicles, think of them as smartphones with wheels. In China, Audi, Daimler and BMW have bowed to the government’s demands that they use Chinese software in their self-driving cars. This suggests Beijing has already made that leap of faith.

Already, a modern car is powered by as many lines of code as a flight control system, according to a study by McKinsey. That complexity is set to increase as vehicles become less reliant on human intervention, requiring detailed mapping software as well as capabilities to interpret sensor data and make decisions.

Even more importantly for margin-starved auto executives eyeing the profitability of social media platforms such as Facebook, bored riders’ attention can be distracted by content or advertising. Data from the Federal Highway Administration show that Americans travelled 4.5tn miles by car in 2016. Assuming an average speed of 40mph, this equates to six hours a week for every American to be showered with content.

Driverless systems are likely to exhibit scale benefits similar to those seen on social media platforms. The more users one system attracts, the more data can be gathered, ultimately making it safer. Add to that a wealth of marketable data on riders’ driving habits. That is why tech groups such as Baidu, which has an open-source platform for autonomous driving, are seen as strong competitors to traditional carmakers such as General Motors, which is betting on driverless tech through its Cruise subsidiary. Analysts at Bernstein estimate that GM’s public projections for Cruise could imply an ultimate equity value of more than $700bn: 14 times GM’s own.

The Chinese market is crucial for driverless technology because surveys show that consumers are keen to adopt it and because both private and public money are pushing it. For western carmakers partnering with Chinese software companies, the key question is this: how much value to give up?

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