China Autonomous Driving – L3 vehicles approved for highway trials

In a significant regulatory move, the Ministry of Industry & Information Technology (MIIT) has granted licenses to test Level 3 advanced driver-assistance systems (ADAS) to two models namely, Arcfox (極狐汽車) Alpha S6 and Changan Deepal SL03.  The Arcfox will undergo trials on selected highways in Beijing at speeds up to 80km/h while the Deepal will be tested in congested urban areas of Chongqing at a maximum speed of 50km/h.  Under current regulations, L3 vehicles still require a human driver to remain behind the wheel, ready to take control in case of emergency.  

In terms of hardware, the Alpha S6 is equipped with 3 LiDARs units and 34 high-precision sensors.  Deepal also features 34 sensors but does not include LiDAR.  Both models utilize Huawei’s autonomous driving system.

Separately, BYD has reportedly already conducted extensive testing in Shenzhen, covering over 150,000 kilometers, while Xpeng and Li Auto are set to begin trials in Guangzhou and Beijing, respectively. MIIT is expected to continue issuing test licenses to other automakers.

The shift to Level 3 represents a significant technological and legal advancement. According to MIIT officials, liability for accidents will be shared among the driver, the automaker, and the autonomous driving system provider according to the situation of the event and whether the system is engaged. This framework is crucial for building consumer trust and stimulating demand in a market facing reduced subsidies.

Our view: We believe this regulatory catalyst is positive for both automotive and autonomous component industries.  Among automakers, we consider BYD (1211 HK, HK$95.25, HK$350bn) to be another prepared player, having already conducted extensive testing.  Xpeng (9868 HK, HK$72.30, HK$138bn) also stands out well as a software-centric contender.  In addition, Hesai (2525 HK, HK$169.40, HK$26.5bn) and Robosense (2498 HK, HK$36.16, HK$17.1bn) are likely to benefit from rising volume demand.  However, the road ahead involved navigating liability and insurance complexities, suggesting that full commercial deployment may still be a multi-year journey.