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US Autonomous Vehicle Market Dominance Under Threat By China

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The buzz around autonomous vehicles is continuing to snowball as global tech majors are upping their game to take advantage of the burgeoning prospects.

Per an Allied Market Research report, the global autonomous vehicle market is expected to reach $556.67 billion by 2026 at a CAGR of 39.47% from 2019 to 2026.

The long-term prospects are much more alluring. Per a McKinsey research autonomous vehicles are expected to contribute about 66% of the passenger-kilometers traveled in 2040, generating $1.1 trillion in mobility services revenues and $0.9 trillion in sales that year.

U.S. Leading the Race

The United States is leveraging its first mover advantage in the autonomous vehicle market. Notably, California opened its public roads for testing driverless vehicles way back in 2014. This enabled U.S. developers like Alphabet (GOOGL - Free Report) division Waymo to test millions of miles in the state alone.

Major companies like Apple (AAPL - Free Report) , Tesla (TSLA - Free Report) , Intel, Uber and NVIDIA have taken several initiatives, including partnering with global automakers like Toyota (TM - Free Report) , Volvo, BMW to strengthen their footprint in the market.



In June this year, Apple acquired a self-driving shuttle firm, Drive.ai, to boost its expertise in neural networks, which play an important role in developing software for driverless vehicles.

Moreover, Tesla’s current fleet of vehicles now represents partial automation, which the company aims to fully convert into self-driving platforms.

Per Modor Intelligence, the U.S. autonomous car market is expected to witness a CAGR of about 46.39% between 2019 and 2024.

China: A Potential Challenger?

Chinese developers like Baidu (BIDU - Free Report) are catching up fast with their U.S. counterparts. Baidu is the leading tester in China, having covered about 87,000 miles in testing in Beijing last year. However, this is considerably less than a typical month for Waymo.

China’s policymakers believe that the autonomous vehicles industry is crucial for the country to be successful in its strategy to transform into an AI-led economy by 2030. The government is targeting large-scale adoption of early-stage vehicles in 2020, and expects 10% of all new vehicles sold by 2030 to be fully autonomous.

Earlier this month, it was revealed that China is testing autonomous vehicles in a dedicated highway in east Shandong.  

Recently, Chinese autonomous-driving company Pony.ai partnered with Toyota to expedite the development and deployment of self-driving vehicles. The pilot cars are likely to start operating on public roads in Beijing and Shanghai in September 2019, leveraging Pony.ai’s autonomous driving system in Lexus RX vehicles.

Conclusion

The competition for dominating the autonomous vehicle market is set to heat up between the U.S. and China-based companies in the backdrop of the trade war.

However, China needs to optimize autonomous vehicle decision algorithms to suit its complex and chaotic traffic environment. This could delay the adoption of Chinese autonomous cars by two to three years compared to the United States. The first applications of autonomous vehicles in complex traffic might begin in the next five years, but mass adoption is expected to occur only after 2027.

Nevertheless, China’s efforts in the autonomous vehicles market pose serious threat to the United States’ dominance.

Notably, in a KPMG index to measure the level of preparedness for autonomous vehicles, China currently holds the 20th position among 25 countries, whereas the United States ranks fourth.

Alphabet currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

While Apple, Baidu and Toyota carry a Zacks Rank #3 (Hold), Tesla carries a Zacks Rank #4 (Sell).

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