China China’s strategic initiative to nurture innovation and

China holds the largest
opportunity for savings from advances in transportation

China has the highest transport
costs in the world. As a global manufacturing center it spends approximately
$1.4 trillion annually in transportation for manufacturing, more than three
times the amount of the US2.
This expense is expected to grow as the country pursues its ambitious goals to
upgrade industry over the next decade1.

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Recent technological advances
present an opportunity to reduce transportation expenses by cutting variable
costs and increasing flexibility and output. According to a study released by
the Energy Information Administration, connected and automated vehicles (CAVs)
have the potential to reduce fuel consumption by as much as 44% for passenger
vehicles and 18% for trucks by 20505.

China is very likely to pursue
large-scale advances in transportation

Made in China 2025 is
China’s strategic initiative to nurture innovation and quality into its
manufacturing value chain. The plan highlights ten priority sectors including
advanced information technology, automation, robotics and new energy vehicles
and equipment. The sectors prioritized in China’s strategic initiative suggest
a focus on improving industry profitability through advances in transportation
and automation.

Automotive companies such as BYD
and JingChi
have been transforming the transportation landscape in China over the past
decade. Electric Vehicles already account for 1.5%
of cars sold in China, compared to
0.7% in Europe and 0.6% in the US7. Meanwhile,
China’s top tech companies Baidu,
Alibaba
and Tencent
(BAT) are contributing to large-scale advances in transportation, investing
over a combined $5 billion in 20176.

China’s transportation is expected
to modernize faster than Europe and US

As China’s demand for transportation advances, so will the country’s efforts to
modernize its installed vehicle base
(vehicles on the road). Driven distances in China will pass
the individual levels of EU and US around 20253. As illustrated below, shared autonomous
transportation is forecast to account for 37%
of Chinese km driven in 2030, compared
to 25% in the US and 26% in Europe, respectively3.

Despite these forecasts, many
uncertainties remain. Industry participants may gain a first-mover advantage
from the fast adoption of transportation technology, putting the Chinese
economy in the spotlight. Conversely, these changes could have radical structural
implications for the automotive and transportation industries, impacting the
workforce or cutting back on production. The one certainty is that a faster
adoption of emerging technology in China will place the country at the
forefront of transportation policy and implementation strategy.