Tips for understanding the legal regulation of “Internet of Vehicles”: “two terminals” and “one point”

“Internet of Vehicles” (IOV), also called the “intelligent connected vehicles”, as the name indicates, is a proposal to make automobiles and their functions networked and smart. It emerged in China in the 2010s and since then the number and diversity of applications and business scenarios have grown as the technology has developed. The classification of IOV services defined by Prof. Zhao Fuquan, Director of Tsinghua Automotive Strategy Research Institute at Tsinghua University is cited below[1]:

Classification of IOV services

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Precisely because of this the regulation of the IOV has to be comprehensive and systematic, as it involves not only traditional offline industries such as manufacturing, sales, repair and maintenance of cars, but also online industries like communications, the Internet, smart traffic management, and even new industries including artificial intelligence and autonomous vehicle technology. Therefore, it is helpful if entrant’s to the IOV industry can find Ariadne’s thread in the apparently overwhelming “maze” of IOV regulation. This thread is the “one point” linking the “two terminals” of this industry, i.e. the two terminals of “automobile manufacturers” and “end users”, and the one point of “data/information” flowing and exchanged along the chain between the two terminals.From this table it can be seen that the IOV industry is wide ranging, including “all exchanges of information during the whole life cycle of an automobile, covering all links such as R&D, production, sales, use, recycling.”[2]. In other words in place of the traditional offline automobile ecosystem composed of drivers, automobiles and roads the IOV is all at once an independent “third cyberspace” fluid on the road (distinguished from the home and office cyberspaces).

Automobile manufacturers are at the forefront of the IOV industry and are faced with a series of life-or-death challenges such as how to make their products intelligently connected , how to adapt to the IOV business model, and what are the dos and don’ts in dealing with regulation. Users are the ultimate link and service receiver of the IOV industry and their rights and interests, especially their personal information and its security, must be prioritized in regulation, and included in the compliance obligations of the IOV operators.

As for the “one point”, it can be seen from the table above that IOV services rely on the core element of “data/information”. For example, without the collection, transmission, analysis, processing and feedback of information, it would be impossible to carry out the services of safety, energy saving and information set forth in the table. The IOV provides a two-way or even multi-way free-flowing platform with information flowing from mounted terminals in vehicles to service providers, from service providers’ feedback and information to user vehicles, and point-to-point or chain-like flow of information between service providers on the upper and lower links. Therefore, it is fair to say that data is the lifeline of IOV, without which IOV would be non-existent.

By taking into account the typical application scenarios of the IOV and combining it with the core information business automobile manufacturers will indeed hold the key to the IOV service market. Already car manufacturers are working with Internet giants to develop the IOV. The “Plan for Automobile Industry’s Middle and Long-term Development”, issued by the MIIT, NDRC and MOST on 6 April 2017, set out detailed development goals for IOV in China such as “by 2020…domestic intelligent connected vehicles will parallel that of the world; by 2025…intelligent connected vehicles will rank first in the world”, “by 2020, more than 50% of new automobiles will be equipped with DA (Driver Assistance), PA (Partial Automation), CA (Conditional Automation) systems, with an assembly rate of 10% for Internet-connected driver assistance systems…by 2025, the assembly rate for DA, PA and CA systems in new cars will reach 80%, and 25% of these will be PA and CA highly and fully autonomous vehicles entering the market”. The Plan states that the combined application of big data, innovative travel and service models, will facilitate automobile production so that by 2020, IOV will take a major leap forward and by 2025, the R&D, production and sales of backbone services will be integrated ”. It is clear that car manufacturers are facing a golden opportunity and it is a critical period to begin to enter the IOV .industry.

A glance at qualifications and foreign capital eligibility to participate in the data/information core business

As discussed above, at the forefront of the IOV industrial layout, are automobile manufacturers. Consequently, they must have a clear idea of how the industry will be regulated for instance qualifications, licenses and market access for the operation of the data/information platform.

Towards this end, in the following table, we list six major business sectors closely related to collection, storage, processing and provision of information in the use of the IOV as well as current regulations that are relevant. . This may help guide IOV market participants especially foreign-funded ones.

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Car manufacturers benefit by putting in place IOV-related functions during the production stage. At an early stage manufacturers can develop, specific branded services for the product, install and test related software and hardware on vehicle mounted terminals , and thereby become more competitive and innovative, create a more reliable closed IOV ecosystem, maintain and build its brand and attractiveness, and protects its core technologies and IPRs. Some manufacturers are already doing so.

Given the licenses required and restrictions on foreign capital, car companies, especially foreign-funded ones will face two alternatives when arranging their IOV-related business. They either invest on their own and conduct business to the extent permitted by law, or cooperate with qualified third party service providers. In making decisions, car companies must consider not only commercial factors such as costs, IPR protection, partners and their overall development strategies, but also at least two regulatory aspects :

First, the regulation of market entry. This includes restrictions n and even prohibition on foreign company participation and also the requirements that all car companies must meet for licenses. For example, staffing conditions, service facilities, technical plans and information security protection measures needed for a Value-added Telecommunication Service Operating License.

Second, information security protection during operation. The new Cyber Security Law has demonstrated that China is strengthening the protection of online personal information and data. Accordingly, network operators and service providers face greater information security obligations. All the IOV data/information related services listed above fall into the category of network services, so service providers are obliged to provide information security during daily operation.

For car companies that may find it difficult to obtain licenses, or are unwilling to bear an excessive level of information security protection, it is wiser to cooperate with qualified third party service providers.