SHANGHAI -- One of China's newest autonomous vehicle makers, Neolix, recently put self-driving microvans into action as it looks to scale up its solution to the country's logistics puzzle made more complex by a surge in online shopping.

The Beijing-based startup, barely a year old, has already deployed the vehicles in the capital and other cities, but it faces stiff competition from a crowded field where other players, especially e-commerce groups, are racing to develop similar robovans.

"Operating 10,000 units will be an industry milestone and it is crucial [for us] to achieve it," said Yu Enyuan, 45, Neolix's founder and chief executive.

Neolix's ambition is to replace the roughly 40 million vehicles providing so-called last-mile logistics in China, a market projected to be 3 trillion yuan ($428 billion). These home deliveries are now handled mainly by two- and three-wheel electric motorbikes, zigzagging through neighborhoods to carry everything from milk tea to mattresses.

But the startup still must clear hurdles before its robovans can hit city streets.

Technology companies such as China's Pony.ai and Baidu, as well as U.S.-based Google and Nuro are racing to make self-driving robotaxis a reality. But robovans running on fixed routes at slow speeds in protected areas represent the "easiest" application in autonomous driving, according to Egil Juliussen, of research company IHS Markit.

Based on industry standards, Neolix's camera and sensor-guided vans have reached level 4, which means the car can handle the majority of driving situations independently.

The vehicles have passed 500,000 km of test runs and are now deployed in gated theme parks in Beijing and 10 other Chinese cities for use as mobile convenience stores stacked with drinks and snacks.

Consumers need to stand in front of an approaching robovan to stop it. To make a purchase, they choose from the touch panel on the vehicle and pay using a mobile phone by scanning a QR Code.

Beyond retail, they could be mobilized as surveillance vehicles and freight carriers in enclosed environments, such as residential estates or warehouses.

Unlike passenger cars, Neolix's job does not end when its microvans roll off the production line.

Yu Enyuan, Neolix's founder and CEO, concedes the startup's robovans are not yet ready for public roads. (Photo courtesy of Neolix)

The vans are linked to a vehicle management platform that can take control of a unit when it is cornered, in addition to collecting data. The idea is to provide mobility as a service, a concept that regards autonomous vehicles as an internet-enabled devices.

The startup's founding can be traced back to 2009 when Yu dabbled in logistics software. It was only toward the end of 2015 when he became serious about developing self-driving vans. Last year, Neolix attracted 100 million yuan in angel and Series A fundraising from local investors. When asked about Neolix's valuation, Yu declined to comment, adding that the company has no plans at present to go public.

Neolix kicked off mass production in May. Its wholly owned factory in Changzhou, about 185 km west of Shanghai, has an annual production capacity of 10,000 units.

"Robovans will play an important role in logistics, replacing human labor in the future," Yu said. Each Neolix robovan has a maximum weight of 850 kg when its 2.4-cu.-meter space is full. Guided by the remote sensing method Lidar, which uses lasers to measure distances, it moves at a speed limit of 20 kph out of a maximum speed of 50 kph, suitable for use within a 5 km radius in gated areas.

The automotive grade robovan is powered by swappable Panasonic battery cells, capable of covering 110 km per charge.

For now, China and the U.S. are leading the autonomous logistics segment, IHS Markit's Juliussen said.

Regulators are likely to be more accommodating to robovans than robotaxis because of passenger safety issues, said Tu Le of Sino Auto Insights, an advisory firm in China that focuses on the automotive industry.

Even so, Tu said it will take another three to five years before a significant percentage of freight is moved autonomously as it takes time to map out routes.

So far, Neolix has delivered 150 units and it is expecting to sell a total of 1,000 units in 2019.

It counts Alibaba Group logistics arm Cainiao as a customer along with the Xi'an provincial government, which is promoting the robovans for retail deliveries in selected areas.

Neolix's robovans come with a price-tag of about 400,000 yuan, which is in the price range of high-end electric cars sold in China.

In its plan, Neolix is hoping to ramp up sales to 7,000 next year and 10,000 in 2021. Such an ambitious plan has to be matched by sufficient funding, if not customers. "We have began another round of fundraising, hoping to procure tens of millions yuan from both local and foreign investors," Yu said.

Though the company is currently focusing on the Chinese market, Yu said Neolix will position itself as a global company through partnerships. It recently partnered Noon.com, an e-commerce company in the United Arab Emirates, to conduct test runs with an eye on last-mile delivery in Abu Dhabi and Dubai.

Scaling up production could be relatively easy, as long as there are investors and buyers, but the real test of autonomous vehicle companies such as Neolix is the deployment beyond a closed environment.

"We are not road-ready yet," Yu conceded although Neolix is working with regulators on relevant rules and regulations.

"Nobody knows when autonomous vehicles can hit the road," said Richard Windsor, founder of Radio Free Mobile, a research company in the UAE. The analyst, who specializes in digital and mobile ecosystems said automakers were "overconfident" when the autonomous vehicle boom took off two years ago. "But it turns out that this problem is much difficult to solve than anybody thinks."

Unless the uncertainty surrounding the ability of autonomous vehicles to navigate the open road is resolved, investors would be careful before placing bets, Windsor added.

For now, Neolix is determined to push ahead and hopes to be on the world stage in a few years. "We will promote the use of the microvans during the 2022 Winter Olympics in Beijing," Yu said.