Jeehoon Ki

Differences in Public Policy on Autonomous Cars in France, Japan, and Korea:
An Analysis through the Lens of Sectoral Innovation System

23/10/2018

Summary

Public policy affects the behavior of players in an industry. This study explores the similarities and differences of public policy on autonomous cars in France, Japan, and Korea. The study contributes to a better understanding of how and why these countries follow their respective trajectories of socio-economic transformation in the emerging era of autonomous cars. In this research note, behaviors of major actors in the Korean self-driving car industry and Korean government’s policies are described as preliminary findings.

Autonomous Cars and Public Policy

Autonomous car technology has advanced considerably over recent years by utilizing artificial intelligence (AI) and internet of things (IoT). Autonomous cars (ACs) are expected to transform the use of cars from simple transportation utility to an extension of our homes and offices (Nurun 2013), and to accelerate a shift from personal car ownership to shared mobility. Robo-taxis and driverless freight trucks may eventually replace taxi and truck drivers. The AC has enormous potential to transform our economy, society, and culture.

Governments in many countries, particularly in advanced countries, have been formulating public policies on ACs to embrace this new paradigm. Public policy is instrumental in socio-economic transformation especially when a new technological paradigm is emerging. Public policy provides the “rules of the game” that affect practices and behaviors of consumers, producers, and intermediaries in a sector. In the 1990s, for example, the then Korean Ministry of Information and Telecommunication adopted CDMA technology for the country’s mobile network instead of TDMA (Lee and Lim 2001). This policy led to then electronics companies Samsung, LG, and Hyundai developing CDMA equipment. Wireless telecommunications operators such as SK Telecom also built CDMA mobile network. Korean government’s electric vehicle policy also sets the rules of the game. The government supports battery electric vehicles (BEVs) and fuel cell electric vehicles (FCEVs) in terms of R&D, subsidy, and infrastructure (Joint ministerial working group 2018). Therefore, understanding public policy, that is, what public policy the government implements and why such a public policy was formulated, contributes to the understanding of socio-economic transformation.

Similarities and Differences in the Public Policy of ACs

The present study aims to gain a deeper understanding of the similarities and differences of public policy on ACs in France, Japan, and Korea and why these policies are formulated in that way. Similarities may be common components of public policy on ACs while differences can indicate the path dependency of the respective countries in public policy on ACs. Given that public policy affects practices and behaviors of actors in a sector, these findings contribute to a better understanding of how and why these countries follow their trajectories of socio-economic transformation. If we identify what has shaped the trajectories, we can develop a deeper understanding of other countries’ economic and social transformation by ACs.

The Literature on Public Policies of ACs

Public policies on ACs are surveyed mainly in the form of public policy trend reports by government research institutes, especially in Korea (Korea Institute for Advancement of Technology 2017, Chun and Koe 2015). These reports describe the public policies of several countries on ACs, but they stop there: they do not analyze the differences and similarities of these policies and why they are so. Academic literature focuses on the technological development and potential benefits of ACs and barriers to implementation and provides policy recommendations (Fagnant and Kockelman 2015, Milakis, van Arem and van Wee 2017). However, the literature does not pay sufficient attention to public policy on ACs as a driving factor of socio-economic transformation in the emerging AC era.

Research Methodology

Domains of Public Policy and Comparative Analysis

The present study divides public policies on ACs into four categories: (1) technology roadmap establishment, (2) deregulation and revision/enactment of laws, (3) R&D investment, and (4) building infrastructure (Korea Institute for Advancement of Technology 2017). The study investigates the key public policies of each country in each of the four categories. Conceptually, key findings can be presented in a four by three matrix (Table 1).

These findings will be used to appreciate the differences and similarities of public policy on ACs in France, Japan, and Korea. A comparative analysis is conducted first on the cases of France and Japan, which is expected to highlight the similarities and differences between Europe and Asia. The cases of Japan and Korea will then be compared, which is expected to highlight the similarities and differences between Asian countries.

Sectoral Systems of Innovation

The study employs the Sectoral Systems of Innovation (SSI) framework (Malerba 2004) to find out why each country implements their own public policies. The SSI is a lens with which to analyze the innovation process and the factors affecting innovation (Malerba 2004, i). The main building blocks of SSI are (a) knowledge and technologies, (b) actors (firm, government, etc.) and networks, (c) institutions (norms, practices, laws and so on), and (d) demand. In the SSI perspective, innovation process and sectoral transformation are the co-evolution of these four building blocks of the sector. The SSI and its building blocks are visualized in Figure 1.

The AC is an innovation in the automobile sector, and thus, SSI is a useful tool for analyzing the role of public policy in the socio-economic transformation process by ACs. The present study seeks out the reasons behind a country’s decision to implement certain public policies in the four building blocks of the SSI framework. For example, truck platooning R&D and its tests on public roads are more active in Europe than in Japan and Korea because trucking is a much bigger industry in Europe than in Japan and Korea. This factor is related to demand, which is the fourth building block of SSI. Korean public policy on automobiles is affected by Hyundai Motor Group because the company accounts for approximately 60% of the domestic market. This factor is related to the firm, which is the second building block of SSI.

Comparison of France and Japan

France and Japan are two of the most advanced countries, with some of the largest automobile manufacturers globally, including Renault, Toyota, Nissan, etc. By comparing France with Japan regarding public policy on ACs, this study attempts to find similarities based on their comparable socio-economic evolutionary level and their highly developed automobile industries. The differences are expected to be the result of the cultural, geographical contexts of France and Japan (Europe and Asia, respectively).

Comparison of Japan and Korea

Korea successfully caught up with developed countries such as Japan. As a country which was a developing country in Asia until relatively recently compared with France and Japan, Korea represents Asian developing countries, such as China and India, in some essential aspects of government policies, firm behaviors, and consumer preferences in the automobile sector. During its rapid economic growth process, Korea exhibited successful technological catch-up in various sectors including the automobile sector. The Korean government protected its domestic market, and Korean firms implemented suitable technological catch-up strategies including path-creating, stage-skipping, and path-following technological catch-up (Lee and Lim 2001). In the 1980s, Hyundai Motor Company opted to skip focusing on the development of the standard type of engine, the carburetor engine, and instead focused on developing fuel injection engines. This strategy was instrumental to the company becoming one of the major multinational automobile manufacturers. This success has also led many Asian developing countries to study and follow Korean public policies as well as the strategies employed by Korean firms.

Multinational automobile manufacturers have also been paying attention to the Korean market. Korean consumers prefer large sedans and luxury foreign cars because Koreans are conscious of how others view and evaluate them, and they consider their cars as symbols of their wealth. This preference could be extended to ACs because initial commercial ACs are expensive and attract considerable attention from the public. Consumers in China and India have very similar preferences, which is why Renault uses the Korean market as a test bed for their new large sedans via its subsidiary Renault Samsung Motors.

This study attempts to find the interactions between Korean public policy and the behaviors of firms and consumers in the emerging AC era, which is a good starting point to understand and anticipate the socio-economic transformation of Korea and that of Asian developing countries. Multinational carmakers can utilize these insights in establishing their business strategies for the huge Asian market.

Autonomous Car Industry in Korea

Korea is the 6th largest auto manufacturing country worldwide, producing more than 4 million vehicles in 2017. In Korea, various actors prepare for the coming self-driving car era, including carmakers, car parts suppliers, tech giants, startups, etc. Figure 2 presents a breakdown of the Korean self-driving sector by actor type.

 

Among the carmakers which have plants in Korea, Hyundai Motor Company demonstrated Leve2l 4 automated driving on a 190 km highway road trip in February 2018. Kia Motors develops 5G-based vehicle communication networks (5G V2X) with SK Telecom, Korea’s largest wireless carrier. Korean car parts suppliers Hyundai Mobis and Mando focus on developing sensors for autonomous vehicles. In August 2018, Hyundai Mobis invested about 6 million euros in a Korean startup StradVision for deep learning cameras. This is the largest investment in Hyundai Mobis’ history except investments in its subsidiary companies. Meanwhile, tech giant Samsung Electronics acquired a U.S. car infotainment and audio company Harman for 8 billion US dollars in 2017. LG Electronics is actively partnering with various companies for its automated and connected car business, including global digital mapping company HERE Technologies, automotive semiconductor manufacturer NXP, German advanced driver assistance systems (ADAS) developer HELLA Aglaia, and chipmaker Qualcomm.

The Korean government is implementing various policies that facilitate self-driving technology development and commercialization. The government has three targets:

1. By 2020, the commercialization of Level 3 self-driving cars
2. By 2022, the construction of infrastructure for full automation (e.g., cooperative intelligent transportation system (C-ITS), high-definition (HD) maps)
3. By 2030, the commercialization of full automation

To achieve these goals, the Ministry of Trade, Industry and Energy (MOTIE) charted a technology and services roadmap in December 2017. The roadmap is divided into three parts: elements technology (e.g., multi-band radar, low-cost LiDAR), autonomous driving algorithms (e.g., highway driving assist (HDA), lane change assist (LCA)), and autonomous driving service such as robo-taxi, autonomous electric shuttle. Meanwhile, the Ministry of Land, Infrastructure and Transport (MOLIT) unveiled a policy roadmap in February 2018. MOLIT’s policy roadmap consists of four segments: R&D facilities, infrastructure, public relations, laws & regulations. Step-by-step goals in each segment are presented in Figure 3.

References