Robin Li, the CEO of Baidu Inc., one of China’s IT giants, recently admitted that Baidu received a ticket in July of 2017 from the police because of testing a driverless car on public roads in Beijing in July 2017, which was not permitted under the traffic regulations at that time.
This regulatory vacuum soon came to an end when three government agencies in Beijing jointly issued guidelines implementing rules for road testing of self-driving cars on December 15, 2017. These were the first detailed regulation on autonomous vehicles in China. Following that, Shanghai and Chongqing issued their own local regulations in February and March respectively before a national road testing guideline (the “National Road Testing Guideline”) was finally promulgated in April this year.
Development of intelligent vehicles can be traced back to 2015 in China, when the State Council publicized the national strategic plan Made in China 2025 that aims to transform and upgrade China’s manufacturing industry. One of the plan’s priorities is to develop intelligent equipment and products, including the research and commercialization of self-driving vehicles.
Under the Made in China 2025 plan, China saw the issuance of a number of key policies and regulations on intelligent vehicles in early 2017 before the issuance of the National Road Testing Guideline.
Traffic matters are governed primarily by a national law, namely the PRC Road Traffic Safety Law, supplemented by a number of implementing rules, national guidelines and provincial or municipal regulations in China. To date, China has no comprehensive regulatory framework for autonomous vehicles. While the National Road Testing Guideline has been published, it remains a subject of heated debate how self-driving cars should fit into the traditional transportation laws, product liability laws, etc.
However, prior to the issuance of the National Road Testing Guideline, several policies and plans on this topic were issued last year by the State Council (the central government of China) and the primary industrial regulators, i.e. the National Development and Reform Committee (“NDRC”) and the Ministry of Industry and Information Technology (“MIIT”), evidencing the government’s determination to accelerate the development of intelligent vehicles at national level.
The State Council called for research on artificial intelligence and cultivation of an intelligent economy in a national plan in the middle of 2017, that encompasses development of self-driving technologies and intelligent vehicles.
Pursuant to that call, the NDRC and MIIT issued several action plans in the last quarter of 2017, including:
- the Three-Year Action Plan to Enhance the Core Competitiveness in Manufacturing Industry (2018-2020) issued by NDRC on November 27, 2017;
- the Implementation Plan for the Commercialization of Key Technologies for Intelligent Vehicles issued by NDRC on December 13, 2017;
- the Three-Year Action Plan for Bolstering the Development of the Next Generation Artificial Intelligence Industry (2018-2020), issued by MIIT on December 14, 2017;
- the Guidelines on Establishment of the National Standard System for Telematics Industry (Intelligent & Connected Vehicles) (“ICV Standard Guidelines”) jointly issued by the MIIT and the Standardization Administration of China on December 29, 2017.
The NDRC includes intelligent vehicles as a key sector in its action plan and sets forth a number of key tasks for the commercialization of intelligent vehicle-related technologies. The NDRC also is committed to supporting and providing financial aid to qualifing projects in this sector.
On the other hand, MIIT aims to establish a comprehensive system of national standards for autonomous vehicles, such as terms and definitions relating to autonomous vehicles, functional evaluation standards, information security standards, and information perception standards. MIIT seeks to promulgate at least 30 key national standards by 2020, that will support autonomous vehicles with driver assistance functions and low-level automated driving functions, and to develop a more comprehensive system with more than 100 national standards by 2025 geared to support high-level automated driving.
On April 3, 2018 the MIIT, the Ministry of Public Security (the “MPS”) and the Ministry of Transportation (the “MOT”) jointly issued the Administrative Rules for Road Testing of Intelligent and Connected Vehicles (for Trial Implementation), i.e. the National Road Testing Guideline. The National Road Testing Guideline was promulgated to introduce a nationwide legal framework for testing autonomous vehicles on public roads. It took effect on May 1, 2018 and aims to facilitate the development of automated driving technology through the wide deployment of public road tests.
Key points of the National Road Testing Guideline are set out as follows:
Definition of intelligent and connected vehicles
The National Road Testing Guideline defines an “intelligent and connected vehicle” as a new generation vehicle that is equipped with advanced car-borne sensors, controllers, actuators and other devices in combination with modern communication and network technologies, which can ultimately replace the operation by human drivers and achieve safe, efficient, comfortable and energy-saving driving. Autonomous vehicles should be capable of, among others, intelligent information exchanging and sharing between the vehicle and humans, other vehicles, roads and cloud servers, perceiving complicated surrounding conditions, intelligent decision-making and collaborative control.
The automation functions of autonomous vehicles are divided into three different levels, namely conditional automation, high-level automation and full automation. Conditional automation is the driving mode where the system performs all driving tasks and the driver needs to intervene when requested by the system; high-level automation is the driving mode where the system performs all driving tasks and may request the driver to respond in certain circumstances but the driver may ignore such requests; and the full automation is the driving mode where the system performs all driving tasks that a human driver can perform under all road conditions without any intervention of the driver. These are generally understood to refer to L3, L4 and L5 under the definition of levels of automation as outlined by SAE International.
Testing procedures and requirements
Before an autonomous vehicle can be tested on roads, a test permit (described in more detail below) must be obtained from the authority. The local counterparts of the MIIT, the MPS and the MOT at the provincial or municipal level are jointly responsible for administration of autonomous vehicle tests and issuance of test permits for autonomous vehicles.
The [AV] testing entity shall … record, analyze and reproduce an incident involving the test vehicle, and compensate the losses caused by the test vehicles.
The following requirements must be complied with in order to obtain a test permit from the authority:
Requirements of the testing entity
The testing entity shall be an independent legal entity registered in China that has necessary technical and financial capability to, among others, manufacture vehicles and their components; conduct related research and development activities; monitor the test vehicles remotely on a real-time basis; record, analyze and reproduce an incident involving the test vehicles; and compensate the losses caused by the test vehicles. Before being permitted to test on public roads, it must complete certain tests as required by the authority in a closed test field. It shall take out traffic accident insurance with an insured amount of at least five million Yuan (approximately USD $786,485) or provide a letter of guarantee of the same amount for each test vehicle.
Requirements of the test vehicle
Test vehicles, including passenger vehicles and vehicles for commercial use but excluding low-speed vehicles and motorcycles, shall meet the following requirements.
First, the test vehicle should not yet be registered with the authority but must satisfy all statutory inspection and testing requirements except for endurance requirements. If any statutory testing requirement is not satisfied due to the automation function, the entity applicant must prove that the safety of the vehicle has not been jeopardized.
Second, the test vehicle shall be equipped with an autonomous driving system and have the function to switch between the autonomous driving mode and the manual driving mode safely, immediately and easily. The test driver shall be able to intervene and control the vehicle directly at any time under the autonomous driving mode.
Third, the test vehicle shall have status recording and storage as well as online monitoring functions, which enables the real-time transmission of information relating to the driving mode, the location and the movement of the vehicle, and which can automatically record specified data during the period of at least 90 seconds prior to a traffic accident or malfunction of the test vehicle and store such data for at least three years.
Fourth, the test vehicle must complete sufficient tests in a closed field and its self-driving function must be tested and verified by a third-party testing institution recognized by the authorities.
Requirements of the test driver
The test driver shall have at least three years unblemished driving experience with no record of drunk or drugged driving, no severe traffic violation record (e.g. speeding 50% over the speed limit or violation of traffic lights), and no traffic accident record of causing death or serious bodily injury. It is also required that the test driver shall enter into an employment contract with the testing entity. In addition, the test driver shall have a good technical understanding of the self-driving testing program and operation methods and have the capacity to deal with the emergency situations.
The testing entity shall submit relevant materials to the authority evidencing that the above requirements are complied with and the authority will decide whether to grant a test permit in respect of each test vehicle, which will be valid for no more than 18 months. After the testing entity receives the test permit from the authority, it shall apply for a plate for the test vehicle. If any information shown on the test permit such as the testing entity, the test vehicle or the test driver is changed, the testing entity shall reapply for a test permit.
Local transportation authorities in Beijing, Shanghai and Chongqing have promulgated local rules to further regulate autonomous vehicles in their own regions:
- the Beijing Administrative Rules on Acceleration and Promotion of Work relating to Road Testing of Autonomous Vehicles (for Trial Implementation) issued on December 15, 2017;
- the Shanghai Administrative Measures on Road Testing of Intelligent and Connected Vehicles (for Trial Implementation) issued on February 27, 2018;
- the Chongqing Administrative Rules on Road Testing of Autonomous Vehicle (for Trial Implementation) issued on March 14, 2018.
These local rules contain similar but more detailed requirements in respect of the testing entity, the test vehicle and the test driver to the National Road Testing Guideline. For instance, the Chongqing rules prohibit the test driver from working for more than two consecutive hours or working for more than six hours per day. Applicants for road testing permits must comply with both the National Road Testing Guideline and the relevant local rules.
On January 5, 2018, the NDRC issued the Strategy for Innovation and Development of Intelligent Vehicles (Draft) (“Draft Strategy”) for public comments, which marks a further step of the government towards its goal of promoting autonomous vehicles.
The Draft Strategy envisages that by 2020, a systematic framework for China will be in place for technology innovation, industrial ecosystem, infrastructure network, regulations and standards, product regulation and information security. The Draft Strategy aims to massively develop autonomous vehicles in China and sets an ambitious goal that by 2025, China hopes to have almost 100% of new vehicles as autonomous vehicles.
The Draft Strategy recognizes the following tasks for the development of intelligent vehicles in China:
- promoting an independent and controllable technology innovation system for intelligent vehicles;
- creating an inter-sector and integrated industrial ecosystem for intelligent vehicles;
- setting up an advanced and complete road infrastructure system for intelligent vehicles;
- formulating further regulations and standards for intelligent vehicles; and
- building up a comprehensive and efficient information technology system for intelligent vehicles.
Autonomous vehicles contain various sensors that are designed to collect massive data of the vehicle’s operation, user’s preference as well as its surroundings. The sensors generally are cameras, radar, thermal imaging devices and LIDAR, and will collect data such as statistics, photos and videos. With the development of autonomous vehicles, the concerns of data privacy and unreasonable disclosure of personal information are high.
China’s Cyber Security Law, which came into effect June 1, 2016, and a series of underlying rules, regulations, guidelines and industry standards have imposed new regulatory requirements in terms of data privacy and data protection. These new legal requirements have significant implications for industry players in the autonomous vehicle industry in relation to the collection, use, processing and cross-border transfer of data.
Without doubt, the widespread adoption of autonomous vehicles will have a great impact on the automobile insurance industry. For example, insurance costs are expected to shift from the individual car owners to the automobile manufacturers gradually because the automakers will likely be held accountable for accidents occurred during the self-driving mode. Insurance premiums will drop considerably since accidents will decrease as human drivers will make fewer mistakes with the assistance of the automated system. Commercialization of artificial intelligence and big data technologies and mass production of autonomous vehicles in the near future will have far-reaching consequences for insurance businesses in China.
Recent developments in the sector are well welcomed by the industry and clearly show China’s determination and commitment to bolster the autonomous vehicle sector. The national and local road testing guidelines and rules represent a firm step towards an upgraded and intelligent automobile industry. It is expected that more regulations and national standards will be promulgated shortly. Interaction between new technologies and traditional laws may present both opportunities and challenges for the industry players and they should keep a close eye on future developments.