Today, one of the most prominent features of a modernized economic system is innovation, which can help nations break through development restriction, increase total factor productivity, and propel economic growth.

This paper finds that the though the mood in the world economy has brightened since 2017, it is still struggling to find a durable recovery, and the international trade still has a long way to pick up. Against this backdrop, the transport industry needs to identify a new driving force for its own sustainable development and meanwhile, address several immense societal challenges which goes along with the development of the transport industry, such as, how to make sure that accessibility of transport goes beyond mobility, how to mitigate transport’s future environment impact, and how to reduce the influence of human factors thus improve road safety.

This paper argues that technology is transforming the transport industry, and the pace of innovation is accelerating it. There are three disruptive trends within commercial transport, namely, electromobility, automation and connectivity, challenging our assumptions about how they will operate and interact for our benefit in the future, providing us with possible innovative solutions to address the societal challenges.

As one of the world’s largest manufacturers of commercial vehicles and a leading pioneer and major driver of innovation in the three disruptive trends, the Volvo Group is in a unique position to drive this transport revolution and will be more than happy to initiate a dialogue between industry and policymakers on how to overcome obstacles and make sure that economic and social development can reap the benefits of innovations within the transport industry.

At a general level, this paper provides the following policy recommendations for China’s innovation-driven development of the automobile industry in the modernized economic system:

1. A holistic manner is crucial. In the process of making transport planning, policy and investment decisions, it is crucial to take into full account of the three sustainable development dimensions—social development, environmental (including climate) impacts and economic growth—and take a full life cycle analysis, as it promises an improved economic and environmental performance in both the short and long run, while considering the social impact at all times.

2. A broad coalition is fundamental. To find, develop and deliver sustainable transport solutions, it is fundamental to engage all stakeholders, be it the governments at all levels, industry, policy and research institutes, and sector organizations. A broad collation must be formed to challenge the status quo, and push for real progress. Meanwhile, an informed, engaged public must be fostered, who will in turn serve as a crucial partner in advancing sustainable transport solutions.

3. A right innovation eco-system is the key. To advance technological innovation for sustainable transport, a right eco-system is much needed to encourage private sector involvement and actions through various incentive structures. Thus it’s highly important to build technical capacity of transport planners and implementers, meanwhile, promote diversified funding sources and coherent fiscal frameworks.

4. Policy coordination is a must. To improve the transport innovation, a coordinated political and policy environment across the line ministries and regions should be established, and harmonization of transport policies and homologation should, in particular, be facilitated.