25 May 2017

No “Data”, No “Internet of Vehicles”

This article was written by Susan Ning(partner), Peng Heyue(partner), Yang Nan(managing associate) and Wang Shengran(legal assistant)

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

Service type

Content

Safety service

Autonomous driver safety assistance, cooperative driver safety assistance, vehicle safety monitoring and rescue, remote control, privacy security

Energy saving service

Cooperative energy-saving driving, energy-saving route planning, driving behavior analysis and reminder, vehicle condition monitoring, improvement of public transport efficiency

Information service

Communications and network service, Internet content service, navigation and LBS, customized service, corporate data service, software service

Transport service

Traffic information service, highway traffic management, public transport management, vehicle fleet management, management of special vehicles

Support  service

Automobile repair, ancillary service (parking, refueling, recharging, maintenance, etc.), automobile finance and insurance, automobile lease and pooling, sales of cars, other related services (hotel booking, traveling, smart home control, etc.)

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).

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.

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. 

1. Online data processing and transaction processing (B21[3])

Typical application scenario

Through public communications networks or the Internet, service providers use vehicle mounted software and hardware to collect data about vehicle configuration, operation, driving, fuel consumption, etc., and after real-time or near real-time analysis and processing, give the results back to car owners to improve vehicle performance and driver assistance, or to directly exercise remote online control or condition monitoring over vehicle mounted electronic appliances.[4]

Business conformity features[5][6]

(1) Using data processing application platforms connected to public communications networks or the Internet, e.g. vehicle mounted connection and processing platforms and the back-end data processing platforms of service provider;

(2) Through public communications networks (e.g. mobile cellular networks) or the Internet;

(3) Exercising control and/or data processing over electronic devices connected to the network;

(4) Aimed at users; therefore, services provided for the purposes of internal R&D, process improvement and otherwise not for users are not eligible.

License required

Value-added Telecommunication Service Operating License

Cap on foreign investment

No more than 50%[7]

2. Information service (B25)[8][9]*

* Depending on different application scenarios, IOV may touch upon multiple sub-categories of this business. See items 2.1-2.5 below.

2.1 information publishing platform and delivery service

Typical application scenario

Information platforms where users can select and download applications and other information content using their vehicle mounted terminals for later use such as a directly accessible “Application Store” .

Business conformity features

(1) Third parties may publish texts, images, audio-videos, application software and other information content;

(2) According to users’ needs, service providers may deliver and distribute information content to a terminal designated by users, such as their vehicle mounted terminals.

License required

Value-added Telecommunication Service Operating License

Cap on foreign investment

Application store: up to 100% in the Shanghai Free Trade Zone ( registered office and service facilities must be in the Zone)[10]; no more than 50% outside of the Shanghai Free Trade Zone

Non-application store: no more than 50%

2.2 Instant information exchange service

Typical application scenario

Users may use vehicle mounted software and hardware to instantly send and receive information  such as audio-videos, texts, images and documents; for example sending and receiving text messages or making voice calls on vehicle mounted terminals (except information exchanges like voice calls relying on a Bluetooth connection between terminals and communication devices like mobile phones).

Business conformity features

(1) Using public communications networks or the Internet by software and hardware on vehicle mounted terminals;

(2) Users may send and receive information content like voice messages “instantly”.

License required

Value-added Telecommunication Service Operating License

Cap on foreign investment

No more than 50%

2.3 Information search query service

Typical application scenario

Using vehicle mounted software and hardware (such as web browsers),to search websites, texts, pictures, audios and videos, namely, a search engine on vehicle mounted terminals.

Business conformity  features

(1) Service providers independently perform activities like information collection and search, data organization and storage, classification and indexing, sorting out and sequencing, but not through a third-party search engine ;

(2) Users may conduct information searches  and get the results on vehicle mounted terminals.

License required

Value-added Telecommunication Service Operating License

Cap on foreign investment

No more than 50%

2.4 Information protection and processing service

Typical application scenario

Service providers may do virus scanning and killing, information protection and spam interception through user-end software installed on vehicle mounted terminals.

Business conformity  features

(1) Providing services through user-end software on users’ vehicle mounted terminals and service provider’s back-end platform;

(2) Related services are online and on a real-time basis.

License required

Value-added Telecommunication Service Operating License

Cap on foreign investment

No more than 50%

2.5 Other services providing information content to users

Typical application scenario

Service providers may push information  to users, such as weather, traffic, news, finance and economics through software and hardware on vehicle mounted terminals.

Business conformity  features

(1) Service providers have to collect, sort out and deliver information themselves;

(2) The information provided can be directly pushed to users’ vehicle mounted terminals.

License required

Value-added Telecommunication Service Operating License

Cap on foreign investment

No more than 50%

3. Service of Internet resource coordination (B11[11])

Typical application scenario

Users may upload and store data about vehicle configuration, operation, running and fuel consumption (related historical records, for example) to/on the “cloud platforms” run by service providers and may access, use and retrieve it later at any time; or use the applications  offered by service providers on their cloud platforms to perform specific functions and obtain related operational and management services . This approach can be seen as a “cloud service” rendered on vehicle mounted terminals.

Business conformity features

(1) Service providers operate devices and/or resources of related cloud services, such as creating a cloud service platform that can be accessed from vehicle mounted terminals;

(2) Services provided include data storage, Internet applications development environment, Internet application deployment and operation management, featuring “retrieve at any time, use when needed, extend at any time and coordinate and share”.

License required

Value-added Telecommunication Service Operating License

Cap on foreign investment

As a sub-category of “IDC business”, this service cannot be conducted by foreign-funded entities (excluding ones funded by qualified HK and Macau entities)

4. Call center service (B24[12])

Typical application scenario

Automobile manufacturers or other types of car-related products or service providers (such as roadside assistance providers) permit providers of call centers databases and operators to offer related services to users on behalf of them, such as business consulting, information and data queries; users may use vehicle mounted software and hardware to access the call center  and/or database set up by providers through public communications networks or the Internet and acquire such services in audio.

Business conformity  features

(1) Service providers need to “build” related service facilities themselves, especially  databases through information collection, processing and storage;

(2) “Build for others”, namely, service providers must be entrusted by other entities to provide services to their users on their behalf; if “built for themselves”, for instance, a car company builds its own call center system and database to provide its users with services such as business consulting and information queries, it will not constitute a regulated value-added telecommunication service but will only be regarded as general after-sales or technical support service.

License required

Value-added Telecommunication Service Operating License

Cap on foreign investment

Up to 100% in the Shanghai Free Trade Zone (registered office and service facilities must be in the Zone)[13]; no more than 50% outside of the Shanghai Free Trade Zone

5. Storage and forwarding service (B23[14])

Typical application scenario

Users may  use vehicle mounted software and hardware for functions such as voice mails and e-mails.

Business conformity  features

(1) Service providers need to rely on “storage and forwarding mechanism” such as voice mail system and e-mail system;

(2) Functions realized are still data/information related functions such as information receiving, sending and storage.

License required

Value-added Telecommunication Service Operating License

Cap on foreign investment

Up to 100% in the Shanghai Free Trade Zone (registered office and service facilities must be in the Zone)[15]; no more than 50% outside of the Shanghai Free Trade Zone

6. Online map service

Typical application scenario

Users may use vehicle mounted software and hardware forgeographic location and location information marking on a map displayed on vehicle mounted terminals.

Business conformity features

(1) Service providers must be providers of “online map services”[16] such as geographic location, location information uploading and marking, and map database development;

(2) The provision of this service must be based on geographical location information such as GPS data collected and provided by vehicle mounted software and hardware.

(3) Nonetheless, it is worth noting that, if automobile manufacturers pre-installed hardware that can collect geographical location information on vehicle mounted terminals, such as GPS module, or automobile manufacturers collect geographical location information from vehicles using such hardware or supporting software and transmit and store it via the Internet, it is not sufficient , from the act itself, to confirm that manufacturers have provided an online map service; only when the manufacturers combine the information about geographical location and the map technologies they have obtained or developed and offer the combined information to users by marking locations on a map and then users  use the functions of positioning and navigation, that the  manufacturers service can be deemed to be an online map service; however, as one of the major application scenarios of the IOV, instead of by manufacturers, navigation by online mappingis usually provided by qualified third-party online map service providers.

License required

Surveying and mapping qualification certificate[17]

Cap on foreign investment

No more than 50%[18]


Tips for automobile manufacturers

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. 


[1] Reference: LIU Zongwei, KUANG Xu, ZHAO Fuquan, The Current Situation, Problems and Countermeasures in Chinese Internet of Vehicles Industrialization Development, Science and Technology Management Research, 2016, 36(4), p. 122

[2] ibid.

[3] The numbering follows the numbering in the MIIT’s “Classification Catalogue of Telecommunication Services (2015)”; .

[4] This also includes “transaction handling”, i.e. commercial e-commerce platforms providing third party transaction services such as Taobao and JD; therefore, if such platforms are incorporated into IoV, online shopping of car-related items on vehicle mounted platforms, for example, it will also constitute this type of business, but from public information we have not located any scenario of this kind.

[5]A list of the conformities between the application scenarios and the definition and scope of the business; the same with the rest of the items.

[6]See Item B21 of “Classification Catalogue of Telecommunication Services (2015)”.

[7]See Article 6 of “Provisions on Administration of Foreign-funded Telecommunications Enterprises (2016 Revision)".

[8]See Item B25 of “Classification Catalogue of Telecommunication Services (2015)”.

[9] It is worth noting that, online provision of certain types of information content may be subject to other  regulations and require other licenses, such as Online Publishing Service License, Network Culture Operation License, License for Publication of Audio-Visual Programs through Information Network, etc.

[10]See 1 of Article 2 in “Opinions of the Ministry of Industry and Information Technology and the People's Government of Shanghai Municipality on Further Opening Up Value-added Telecommunications Business in China (Shanghai) Pilot Free Trade Zone”.

[11] See Item B11 of “Classification Catalogue of Telecommunication Services (2015)”.

[12] Please see Item B24 of Catalog of Telecommunications Services (2015 Version).

[13]See 2 of Article 2 in “Opinions of the Ministry of Industry and Information Technology and the People's Government of Shanghai Municipality on Further Opening Up Value-added Telecommunications Business in China (Shanghai) Pilot Free Trade Zone”.

[14]See Item B23 of “Classification Catalogue of Telecommunication Services (2015)”.

[15]See 2 of Article 2 in “Opinions of the Ministry of Industry and Information Technology and the People's Government of Shanghai Municipality on Further Opening Up Value-added Telecommunications Business in China (Shanghai) Pilot Free Trade Zone”.

[16]See Article 33 of the Regulation on Map Management.

[17]See Article 33 of the Regulation on Map Management.

[18]See Article 8 paragraph 2 of the Interim Measures for the Administration of the Surveying and Mapping Conducted by Foreign Organizations or Individuals in China (2011).

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