The 5G commercial era has arrived ahead of schedule, will it help the Internet of Vehicles usher in an explosive period?

Introduction

The Internet of Vehicles (intelligent networking) industry is driven by the combined effects of policy, funding, and technology. In particular, the early arrival of the 5G commercial era has provided a good opportunity for the Internet of Vehicles industry to explode.

The Internet of Vehicles (intelligent connected vehicles) industry is driven by the combination of policies, funds and technology. In particular, the early arrival of the 5G commercial era has provided a good opportunity for the Internet of Vehicles industry to explode. In the "Three-Year Action Plan for the Development of the Internet of Vehicles (Intelligent Connected Vehicles) Industry", the Ministry of Industry and Information Technology clearly stated that by 2020, the Internet of Vehicles user penetration rate will reach more than 30%, the new car driving assistance system (L2) installation rate will reach more than 30%, and the new car installation rate of connected vehicle information service terminals will reach more than 60%, building a comprehensive application system covering information services, safety and energy efficiency applications.

Overall, the Internet of Vehicles industry is on the eve of an explosion. The article "Top Ten Industrialization Trends of 5G Internet of Vehicles" on the WeChat public account "5G Industry Applications" systematically analyzes the industrialization trends of the Internet of Vehicles. While seeing huge opportunities, we should also rationally look at the huge challenges and pressures facing the development of the 5G Internet of Vehicles industry, including unclear business models, policies and regulations to be improved, and imperfect technical engineering. Only by breaking through the business boundaries, management boundaries, and technical boundaries that hinder the development of the 5G Internet of Vehicles industry can we truly embrace the Internet of Vehicles industry with a trillion-dollar market space.

01. Breaking through the commercial boundaries of the Internet of Vehicles

1. Three major challenges facing the Internet of Vehicles business model

The business model of Internet of Vehicles involves users, investors, builders, equipment providers and operators. Users mainly include car owners, car companies/Tier 1 (traditional car companies, new entrants, autonomous driving startups, Tier 1, etc.), operators, industry customers (taxi companies, insurance companies, bus companies, etc.), traffic management/transportation commissions, etc.

The builders of the Internet of Vehicles will purchase the products and solutions of equipment vendors as needed to build V2X communication coverage, including roadside infrastructure deployment and vehicle-mounted terminal deployment. Professional Internet of Vehicles operating companies will provide road test environments, V2X communication and information services to various users.

The entire Internet of Vehicles business model is still in the design stage and needs to be effectively verified. It faces three major challenges: weak user demand, huge investment scale, and unclear operating model.

Challenge 1: User demand is not strong

From the perspective of the services provided by the Internet of Vehicles to car owners, the Internet of Vehicles initially mainly provided information services, such as positioning management, UBI (Usage-Based Insurance/User-Behavior Insurance) services based on user behavior, and fleet management for the B-side. Currently, it has returned to travel needs, solving safety and efficiency issues for consumers. In the future, the Internet of Vehicles will enable autonomous driving, and realize collaborative autonomous driving and single-vehicle autonomous driving.

Currently, the main business scenarios based on V2X are for traffic safety and traffic efficiency. According to the 17 typical vehicle networking application layer standards defined in the automotive standards committee T/CSAE 53-2017 application list, there are 12 safety services, 4 efficiency services, and 1 near-field payment information service.

However, it is precisely these traffic safety and traffic efficiency services that users do not actually respond strongly to, the rigid demand is unclear, and users are even less willing to pay for these services.

Challenge 2: Huge investment scale

The Internet of Vehicles realizes vehicle-road collaboration, which requires the support of two "rates": one is the coverage rate of roadside infrastructure deployment, and the other is the penetration rate of vehicle-mounted terminal deployment.

The deployment of roadside infrastructure involves RSU (Road Side Unit), roadside intelligent facilities (including cameras, millimeter wave radars, a small number of laser radars, environmental perception equipment, as well as intelligent traffic lights, intelligent signs, etc.), MEC (multi-access edge computing/mobile edge computing), cellular base stations (LTE or 5G base stations), etc. Except for cellular base stations, which are clearly invested and deployed by operators, the investment entities of other equipment are unclear.

At the same time, the investment scale of roadside infrastructure is huge. As of 2018, China's expressway mileage was 142,600 kilometers, national highway mileage was 363,000 kilometers, provincial highway mileage was 372,200 kilometers, rural road mileage was 4,039,700 kilometers, urban roads were over 400,000 kilometers, and there were more than 500,000 urban intersections. Based on a conservative estimate of 1 million yuan per kilometer for intelligent transformation, the investment in intelligent transformation of expressways alone is as high as more than 140 billion yuan.

If it is necessary to cover all national highways and urban roads, the infrastructure investment is estimated to be more than 300 billion. Such a huge investment has problems such as uncertain returns and the need to bear legal and security risks. Who will invest is one of the key factors in testing the development of the industry.

Challenge 3: Unclear operating model

China's road infrastructure construction and operation entities are diverse. The intelligent infrastructure of general urban roads is constructed and operated by the public security traffic police; the intelligent infrastructure of national and provincial trunk roads and rural roads is constructed and operated by the Transportation Bureau; the intelligent infrastructure of expressways is constructed and operated by the provincial transportation investment group and local municipal transportation investment companies respectively, and the intelligent infrastructure involving expressway traffic violations is purchased by the expressway traffic police or entrusted to the transportation investment group. The diversity of owners has directly led to the fragmentation of the construction and operation entities of the roadside infrastructure of the Internet of Vehicles.

There are several different types of operators in the Internet of Vehicles, including government-owned or joint venture enterprises, highway service providers, operators or tower companies, etc. Different operators have their own advantages and disadvantages.

Enterprises that are wholly owned or jointly invested by the government can better coordinate with relevant government departments to carry out roadside infrastructure construction and realize data openness, but the enterprises themselves often have no experience in vehicle network construction and operation and maintenance; highway service providers can quickly implement highway roadside infrastructure construction and realize data openness, but they also generally have no experience in vehicle network construction and operation and maintenance; operators or tower companies have network construction, operation and maintenance and engineering experience, but they need to coordinate with relevant government departments to carry out roadside infrastructure construction and data openness.

These types of operators all face the challenge of unclear operating models, that is, how to receive money from users. Possible ways include the operator providing relevant big data analysis services to the traffic management and transportation committee and charging relevant fees. Taking the public security traffic police as an example, their main job is to ensure traffic safety and improve traffic efficiency. Therefore, there is a demand for Internet of Vehicles that can reduce traffic accidents and improve traffic operation efficiency. For example, service charges can be levied for Internet of Vehicles to improve the traffic efficiency of urban roads. Taking the Transportation Bureau as an example, it is necessary to ensure the transportation safety of operating vehicles. Therefore, there is a demand for Internet of Vehicles services that improve the safety of operating vehicles.

In addition, the operating entity may also charge car owners for intelligent network access service fees; charge car companies for intelligent network access service fees; charge industry customers for intelligent network access service fees and big data analysis service fees, etc.

However, we should note that the government's purchase of Internet of Vehicles service models needs to be explored in depth. Access services and big data analysis services for car owners, car companies and industry customers also need further research. In the short term, Internet of Vehicles operators still need to rely on government purchases of services to gain development space.

2. Three paths for exploring the Internet of Vehicles business model

In order to actively respond to the challenges in the business model of the Internet of Vehicles, the government and the industry need to explore together. Possible paths include the following:

Path 1: Continue to explore and deepen information service business

On the one hand, with the advent of the 5G era, the types of information services that the Internet of Vehicles can provide will be more abundant. For example, in-vehicle VR video calls, in-vehicle VR games, in-vehicle AR real-scene navigation, and real-time download of in-vehicle high-precision maps. As the main entrance to in-vehicle information services, the in-vehicle infotainment system (IVI, In-Vehicle Infotainment) will also be empowered by the 5G Internet of Vehicles, evolving from single functions such as video and navigation to intelligent systems that process more complex information and have more powerful functions. It is the nature of users to pay for entertainment and information. The more willing users are to use it, the stronger their willingness to pay for it will be.