China driverless van startup sees demand surge amid outbreak

The coronavirus has hurt many companies in China and around the world. Neolix, a driverless delivery business based in Beijing, isn’t among them -- in fact, it’s seen a jump in demand.

The startup, which has attracted customers including Alibaba Group Holding, Meituan Dianping and JD.Com Inc., has booked orders for more than 200 vehicles in the past two months; before then, it had only produced 125 units since manufacturing began last May, founder Yu Enyuan said in an interview.

Amid the virus anxiety that has disrupted businesses and supply chains, China’s push into autonomous transport and the future of delivery is getting an unexpected boost. Neolix’s small vans help customers reduce physical contact and address labor shortages caused by lingering quarantines and travel restrictions.

Neolix’s inventories have been depleted during the epidemic with its vehicles being used to deliver medical supplies in hospitals, including in Wuhan, at the outbreak’s epicenter. Its vans are also being used to help disinfect streets and move food to people who are working on the front lines to curb the spread of the virus, Yu said.

“Demand has been surging since the virus outbreak and more importantly, people’s perception toward driverless delivery had a complete 180-degree shift,” Yu said. “People realize that such vehicles can get things done when it is risky for a human being to do so.”

Regulatory barriers

Billionaire Jack Ma three years ago forecast China would have one billion deliveries a day within a decade and that commercialization of driverless-courier technology could provide lessons for autonomous vehicles carrying passengers. Yet there have been restrictions for such vehicles to be used on open roads. During the unprecedented virus outbreak, regulatory barriers are being eased, as roads are empty.

“China’s digital services economy has prospered during the crisis as people shifted to online consumption,” said Bill Russo, CEO of consulting firm Automobility Ltd. “This will accelerate the commercialization of autonomous service delivery solutions. Neolix and others stand to benefit.”

Local authorities in China are offering incentives to fund purchase and operation of driverless delivery vans in their jurisdictions for up to 60 percent of the tag price, according to Yu. The government subsidies will speed up promotion of the vehicles, according to the company, which expects to sell 1,000 units this year.

“The industry has entered into a fast expansion phase because of the virus,” Yu said.

Autonomous vans

The development of autonomous vans is accelerating not only in China. Delivery robot company Nuro Inc., Neolix’s rival in the U.S., won the first federal safety approval for a purpose-built, self-driving vehicle last month, paving the way for its plans to deliver groceries autonomously in neighborhoods. The approval, valid for two years, indicates that regulators at the Department of Transportation think specially built robot cars can start taking to the roads in the U.S.

“It is great advancement for all companies developing such delivery vehicles,” Yu said.

Yet some industry observers are more cautious about the near-term prospects. China’s relatively low labor costs may undermine promotion of autonomous delivery for some time, said Cui Dongshu, secretary general of the China Passenger Car Association, who sees the current demand as temporary.

Russo, the consultant, said he thinks the order uptick for companies like Neolix will translate to future demand as well.

“New habits are formed and new capabilities are needed,” Russo said. “The consumption pattern has shifted and this will likely be viewed as an essential set of capabilities in the new normal, post-coronavirus world.”