Why China’s robo-taxi hopefuls face a rough ride in the U.S.

Yesterday we published a piece I wrote for Fortune magazine’s next issue, on how Alphabet’s Waymo is—for now, at least—the front runner in self-driving cars. You can read it here, but the gist is that Waymo was able to take a more cautious approach than rivals such as Cruise and Uber, and this seems to be paying off in the form of a steadily-expanding business and a relative lack of regulatory woes.

One thing that I all-too-briefly touched on in the article was the subject of Waymo’s Chinese competitors, which have begun testing their vehicles on American roads—companies like Pony.ai, AutoX, and Apollo (owned by Baidu, China’s answer to Google) that have long been allowed to ply robo-taxi services on limited routes in cities like Shenzhen and Beijing. AutoX and Apollo even have California DMV permission for fully-autonomous “Level 4” tests without a driver present.

So if Waymo’s U.S. rivals are currently stalled or way behind, could the real threat be Chinese? The experts I interviewed for my article certainly aren’t writing off that possibility—though Frederic Bruneteau, of the Ptolemus automotive consultancy, did warn that these companies may have a harder time dealing with the fallout of any crashes in the U.S. than they’ve done in China, where there’s no free press and the authorities may be more tolerant of potential national champions.

But I reckon the Chinese robo-taxi players’ biggest problem in the U.S. will be anti-Chinese sentiment, grounded in national-security concerns. We already saw President Biden order an investigation into Chinese internet-connected cars in February, homing in on the risks of their data collection. That probe is legally underpinned by executive orders from both Biden and his predecessor, Donald Trump. But these orders can be overturned by a future president, so yesterday Rep. Elissa Slotkin (D-Mi.) introduced a bill that would ensure such an investigation can’t be simply dropped.

“We’ve worked with the Commerce Department on this bill to establish a formal national security review of Chinese-made connected vehicles,” Slotkin said. “The legislation would also codify the Department of Commerce’s authority to ban any connected vehicles from the U.S. market if the review makes clear they pose a risk to national security.”

This has implications for the wider U.S. auto market—all new cars are connected these days, and national security is one way to counter an invasion of China’s cheap, popular electric vehicles in particular. But it would really be a big deal for robo-taxi development, and I’m not just talking about companies like AutoX and Apollo. Waymo itself is working with China’s Zeekr (which is owned by Volvo parent Geely, and which listed in New York this month) on a new, steering-wheel-free self-driving car that may supersede the modified Jaguars Waymo currently has on the road.

So stay tuned to see how Slotkin’s bill fares. Meanwhile, there’s another aspect of the Waymo story that I didn’t have space for in my article: the potential for licensing out its Waymo Driver system to traditional automakers.

The likes of Mercedes-Benz and Volvo are selling or preparing to sell cars that can achieve “Level 3” autonomy, meaning the car can monitor and react to its environment on its own—unlike a “Level 2” Tesla, in which the driver is supposed to keep an eye out at all times. But a human driver still needs to be around to take control occasionally. Ford and Volkswagen are also targeting Level 3, despite setbacks over the years. But there are plenty of other car manufacturers that lack the resources to develop self-driving cars on their own.

According to Bruneteau, this—and the fact that Waymo doesn’t present competition in the automaking field—may provide an opportunity for Alphabet’s operation to license its technology. “There could be an invasion from the robo-taxi segment to the high-end and midrange segments of those [automakers] who haven’t been able to sufficiently invest,” he told me. “And today, that’s most of them.”

And a Waymo spokesperson indicated that this is indeed an option, noting that the Waymo Driver could be integrated with everything from ride-hailing vehicles and trucks to personal cars: “By building a driver, not a vehicle, we’re building a system of multiple applications and routes to commercial scale, which means we have multiple routes to huge markets without being locked into a single use case, and that our share of the [autonomous vehicle] market can grow without the costs of vehicle manufacturing.”

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David Meyer

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This story was originally featured on Fortune.com