XPeng, Li Auto Secure L3 Licenses: China's AV Race Heats Up

China's electric vehicle (EV) sector is accelerating into advanced autonomous driving with XPeng and Li Auto securing L3 test licenses on December 16, 2024, alongside Huawei-led HarmonyOS models launching inner tests in Shenzhen. This surge follows the Ministry of Industry and Information Technology (MIIT)'s approval of China's first two production L3 vehicles—Changan's Deepal SL03 and BAIC's Arcfox Alpha S—marking a pivotal shift from testing to real-road deployment in cities like Beijing and Chongqing. As Chinese EV giants like XPeng, Li Auto, and Huawei push L3 boundaries, the industry debates skipping to L4 amid policy tailwinds and global chip supply boosts.

Breakthrough L3 Approvals: From Policy to Pavement

China's L3 "conditional autonomous driving" era gained momentum with MIIT's December 15 announcement of the first production-ready L3 models:

• Deepal SL03 (Changan): Limited to 50 km/h low-speed follow-following in congested traffic on Chongqing's inner ring expressways—no lane changes.
• Arcfox Alpha S (BAIC with Huawei ADS 1.0): More capable at 80 km/h on Beijing highways, supports lane changes without a lead vehicle.

Huawei CEO Yu Zhiqin highlighted these differences, noting Arcfox's edge for highway scenarios. Building on this:

• XPeng obtained Guangzhou's L3 test license for routine high-speed road testing; VP promises full-model L3 rollout by Q1 2025, with L4-capable VLA tech in Q1 2026.
• Li Auto secured Beijing's L3 license for similar tests.
• HarmonyOS (Huawei) kicked off Shenzhen inner tests with employee-owned 2025 Aito M9 and Zunjie S800 on 1,000 km of high-speed roads, logging 20,000+ km already.

These moves align with MIIT's 2025-2026 roadmap for L3 commercialization, including standards and city pilots.

Diverging Strategies: L3 Rush vs. L4 Leapfrog

While Huawei, XPeng, and Li Auto charge toward L3, XPeng founder He Xiaopeng recently declared "no L3—only L2 or L4," calling L3 awkward. Yet XPeng's new Guangzhou license suggests pragmatic hedging. Competitors like BYD and Zeekr hold earlier L3 test plates, but production approvals signal mass-market viability.

• Policy push: MIIT's guidelines and urban "car-road-cloud" pilots target L3+ by 2025.
• Challenges: L3's "embarrassing middle ground" between L2 (proven) and L4 (emerging) sparks debate—some skip it for direct L4 bets like XPeng's 2,250 TOPS G7 AI car.

Tech Ecosystem Boosts: Chips, AI, and Leadership Shifts

Supporting AV advances:

• Nvidia ramps H200 production for Chinese AI firms like Alibaba and ByteDance, post-U.S. approval (25% quota to U.S.).
• Huawei: Yu Chengdong named Terminal Ltd. chairman amid exec changes, bolstering smart auto push.
• Xiaomi open-sources MiMo-V2-Flash (309B params), rivaling DeepSeek-V3.2 for agentic AI in vehicles.
• Alibaba's Wanxiang 2.6: World's first role-playing video model for AV simulation, with multi-lens and audio sync.

BYD teases Ocean 8-series (Sealion 08 SUV, Seal 08 sedan) for Q1 2025, eyeing PHEV and EV growth.

Global Implications: Why This Matters for EV Market

China's L3 momentum challenges Tesla (eyeing FSD L3) and Western firms, with exports projected at 8M vehicles by 2026 (3.5M NEVs, 65% CAGR). Guangzhou's power grid plans integrate EV V2G, while EU softens 2035 ICE bans for PHEVs. Ford's F-150 Lightning halt underscores hybrids' appeal amid EV slowdowns.

This positions Chinese EVs—XPeng, Li Auto, Huawei—as AV leaders, pressuring global rivals. Overseas production could hit 1M units by 2026, with parts/batteries at $180B.

Looking Ahead: 2025 AV Tipping Point

Expect XPeng's Q1 L3 deliveries, Huawei's Shenzhen scale-up, and L4 pilots. Policy clarity could unlock billions in AV value, but execution on safety and regs is key. Chinese EV brands are redefining autonomy—watch for mass adoption reshaping global roads.