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China far ahead in applying self-driving tech

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Move follows China EV expansion in Europe

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European peers raise fears of competition

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US market in effect blocked to China tech

By Nick Carey

MUNICH, Oct 6 (Reuters) - Blocked from the U.S. market,

Chinese self-driving technology firms are accelerating their

push into Europe, setting up headquarters, striking data deals,

and road-testing - prompting alarm from local rivals over

competition concerns.

In China, the world's largest car market, more than half of

cars sold - including many entry-level models - now offer

autonomous driving technology, sometimes as standard.

Beijing is pushing its companies to dominate

autonomous-vehicle development globally while crafting national

regulations to provide a clear roadmap at home.

That expansion is already underway. Reuters spoke to a dozen

company executives who described how Chinese firms are using

Europe as a beachhead for global expansion, mirroring the push

with electric vehicles.

"We're focusing on Europe for our global future," said Dong

Li, chief technology officer of QCraft, which announced plans

for a new German headquarters at last month's Munich auto show,

citing a more open environment than in the United States.

"There are barriers in the U.S. market," he said, referring

to U.S. national security concerns over the data that autonomous

driving systems collect.

Europe offers a more open regulatory environment, the

companies said, although driver-assistance systems there are

currently limited to a few luxury models and developers complain

about patchwork regulation.

European Commission President Ursula von der Leyen called on

Friday for a continent-wide push to develop self-driving cars,

acknowledging they were already a reality in the United States

and China.

"The same should be true here in Europe," she said.

CHINESE FIRMS TARGET EUROPE FOR GROWTH

QCraft, a Beijing-based startup that supplies

driver-assistance systems, is working with Chinese and European

automakers and expects to sell its technology in Europe within

two years.

Buses in 26 Chinese cities operate QCraft's Level-4

autonomous technology, meaning they can drive for extended

periods without human intervention.

Deeproute.ai, another Chinese firm focused on supplying

Level-4 technology to automakers, plans to build a European data

center once it secures deals now under discussion with European

and Chinese automakers.

Leading Chinese autonomous-tech developer Momenta, which

supplies systems to automakers including Toyota and General

Motors ( GM ), has partnered with Uber ( UBER ) to start testing

Level-4 technology in Germany next year.

Momenta announced in September it will supply

driver-assistance technology for Mercedes-Benz in China,

starting with the electric CLA sedan. Mercedes has started

testing the same technology in Europe, two sources familiar with

the matter told Reuters.

Momenta "has its eye on that prize: Europe", one of the

sources said.

EUROPEAN STARTUPS WANT FAIR COMPETITION

Other leading Chinese self-driving players including WeRide,

Baidu and Pony.ai are also expanding in Europe, said Yvette

Zhang, automotive consultant with research firm AlixPartners.

Like Chinese EV makers, they see an opportunity to generate

higher profits than they can make in China's overcrowded market.

"Investors expect growth," she said. "They are looking for

other markets to grow."

Some European rivals want subsidies and protectionist trade

policies while others recognise that Chinese competition could

sharpen technology industry-wide and accelerate Europe's lagging

development.

Jim Hutchinson, CEO of British startup Fusion Processing,

which plans Level-4 driverless bus tests next year, argues for

stricter oversight, citing national-security and competitive

concerns.

"If we want to have this technology, we need higher levels

of regulation and a bit of intervention for a level playing

field," Hutchinson said.

'EUROPE IS THE ONLY MARKET THEY CAN COME TO'

Advanced driver-assistance systems that remain pricey in

Europe are being offered cheaply - even free - in China by

automakers looking to differentiate themselves in the price war.

According to research firm Canalys, about 15 million cars

sold in China this year - more than 60% - will have Level-2

technology, which allows automated driving under certain

conditions but requires human drivers' attention.

Chinese regulators in June approved nine automakers for

public-road testing of Level-3 systems that allow drivers to

look away in most circumstances.

Following a U.S. ban on China connected-car technology under

President Joe Biden, European governments have been seen as more

accommodating to Chinese cars and technology, said Tu Le,

founder of consultancy Sino Auto Insights.

"Europe is the only market they can come to," he said. "They

have to make their move."

Alex Kendall, co-founder and CEO of European autonomous-tech

firm Wayve, advocates for an open market with streamlined

regulations. Chinese competition, he told Reuters, will

accelerate growth in a fledgling industry.

"How many autonomous vehicles are there in the world today?

Not many, right?" Kendall asked. "Even if you're in some subset

of the world, there's acres of space to grow."

At September's Munich auto show, Chinese self-driving firms

including Momenta, QCraft, Horizon Robotics ( HRZRF ) and

DeepRoute.ai showed up in force for the first time, alongside

Chinese EV makers, to tout their low-priced systems.

Momenta's Level-4 testing with Uber ( UBER ) will start in Munich,

the hometown of BMW, which partners with Momenta in

China. The Uber ( UBER ) partnership is the "starting point for a broader

rollout across Europe," Momenta's European chairman Gerhard

Steiger said at the show.

DeepRoute.ai CEO Maxwell Zhou echoed that ambition in an

interview: "Europe is a huge market," he said. "It's very

important for us."

EU SEEKS UNIFIED RULES TO COMPETE GLOBALLY

Europe's self-driving technology firms are testing their own

systems but most European countries do not allow public

deployment of anything beyond basic Level 2 systems that require

drivers to maintain control at all times.

The European Commission is aiming to harmonize a fragmented

regulatory landscape for testing and eventual deployment of more

sophisticated systems. For now, such testing is limited to a few

markets including Britain and Germany.

Berlin-based startup Vay is currently testing self-driving

technology for robotaxis and buses in Germany and runs a

remotely-driven rental car service in Las Vegas and with

D'leteren's car rental unit Poppy Mobility.

Vay co-founder Fabrizio Scelsi supports the EU push for

simplified regional regulations and calls for more government

backing to bolster domestic players while embracing foreign

innovation.

He said Chinese competition will force "European players to

sharpen their strategies very quickly," as the race for

autonomous dominance shifts gear.