[Regulatory Republic] A 50 Trillion Won Market Opens in 10 Years... Delivery Robots That Can't Even Drive in India

<1>Technology Development, Government Hindering Global Competition
Global Delivery Robot Market Growing at 35.1% Annual Rate
Unlike Advanced Countries, Domestic Delivery Robots Are in 'Infancy' Stage
Virtually No Outdoor Spaces Allowed for Driving Under Road Traffic Act
Overseas Companies Also Entering Korea to Secure Market Lead

The outdoor delivery robot 'Dilly Drive,' developed by Woowa Brothers, the operator of Baedal Minjok, is undergoing a demonstration at the mixed-use apartment complex 'Gwanggyo Alleyway' located in Gwanggyo, Suwon, Gyeonggi Province.
[Photo by Woowa Brothers]

[Asia Economy Reporter Lee Junhyung] The delivery robot industry has entered a full-fledged growth trajectory since the COVID-19 pandemic. This is due to the rapid surge in demand for contactless orders, which has caused the food delivery market to expand explosively. The domestic food delivery market doubled in size from about 9 trillion won in 2019 to 20 trillion won last year. The industry expects the food delivery market to have grown at a similar scale last year as well. According to market research firms such as MarketsandMarkets, the global delivery robot market is projected to grow from approximately 251.7 billion won last year to 1.136 trillion won by 2026, at an average annual growth rate of 35.1%. By 2030, delivery robots are expected to handle 20% of all delivery volumes, with the related market reaching a scale of 50 trillion won.

Not only startups but also large corporations have rushed to secure a foothold in the delivery robot market. Until 2019, before the spread of COVID-19, domestic delivery robot developers were limited to a few, such as Woowa Brothers, the operator of Baedal Minjok, and Newility. However, in the past two years, mid-sized companies like Mando and large corporations such as LG Electronics have also jumped into delivery robot development. This is due not only to the explosive growth of the food delivery market but also to attractive factors such as the advancement of artificial intelligence (AI) technology through autonomous driving big data.

Growth Blocked by Regulations

The problem lies in regulations. Although Woowa Brothers began developing delivery robots for the first time in Korea in 2017, the market is still in its infancy. According to the industry, there are currently about 40 delivery robots operating domestically. Korean companies can only operate pilot services in limited areas through regulatory sandboxes that temporarily exempt or defer existing regulations for a certain period. While delivery robot services have already been fully launched overseas, domestically they remain at the proof of concept (PoC) stage.

The areas where services can be provided, as well as the scope and hours, are also limited. The delivery robots operated by Newility at the 7-Eleven Seocho I-Park branch can only operate within a 300-meter radius of the store. Service hours are limited from 11 a.m. to 11 p.m. This is because it is impossible to deploy an unlimited number of on-site personnel who must accompany the delivery robots during outdoor operation. Considering that delivery robots can basically provide 24-hour delivery service without labor costs, the service is being operated quite inefficiently.

Due to these regulations, Newility's business expansion has also been hampered. The company planned to produce more than 500 delivery robots this year. Since AI is the core of delivery robots, the more operational data they have, the better for advancing autonomous driving technology. However, under current laws, deploying 500 delivery robots on-site would require an additional 700 to 800 on-site personnel. Even if all on-site personnel were hired as part-time workers, a startup with about 40 employees would inevitably face a significant labor cost burden. This is why the industry complains that increasing the number of delivery robots in operation means diverting research and development (R&D) funds to cover labor costs.

Delivery robot startup Newbility operates a delivery robot service at the 7-Eleven Seocho I-Park store in Seocho-gu, Seoul. According to domestic regulations, a person must accompany delivery robots operating outdoors for safety reasons. The photo shows Newbility's delivery robot 'Newbee' and an on-site staff member.
[Photo by Joonhyung Lee]

The business period is effectively limited. The regulatory sandbox approval allows exemption or deferral of regulations for two years. If there is no change in current regulations after two years, the period can be extended up to two more years. However, if the regulations are not lifted after four years, the business must ultimately be shut down. To address this issue, the Ministry of Trade, Industry and Energy has allowed since last year that if the law is not revised after the four-year regulatory sandbox period, temporary permits can be issued and the period extended indefinitely until the law changes. However, most delivery robot companies have received approval under the Ministry of Science and ICT’s regulatory sandbox, which has a maximum period of four years. Startups participating in the regulatory sandbox must invest funds and time while anxiously awaiting the resolution of uncertain regulations.

Legal Obstacles Are Also Numerous

There are also many hurdles to commercialization. Under the Road Traffic Act, delivery robots are prohibited from operating on sidewalks, crosswalks, and even roadways. This is because the current Road Traffic Act, created before the advent of robots, does not include regulations for robots, which are neither humans nor vehicles. Additionally, under the Park and Green Space Act, powered devices weighing less than 30 kg and with a maximum speed under 25 km/h are allowed to enter parks. Although delivery robots currently developed, such as Newility’s and Woowa Brothers’ ‘Dilly Drive,’ travel at about 5 km/h, most weigh over 30 kg. Without going through the regulatory sandbox, there is effectively no outdoor space where delivery robots can operate. Other legal obstacles include the Personal Information Protection Act, which requires prior consent from unspecified pedestrians for filming, and the Living Logistics Act, which limits logistics transport to humans, all of which hinder delivery robot operations.

The government is not idle either. According to the ‘2021 Robot Industry Proactive Regulatory Innovation Roadmap’ announced in April last year, the National Police Agency and the Ministry of Trade, Industry and Energy are working to allow delivery robots to use sidewalks by 2025. The Personal Information Protection Commission proposed an amendment to the Personal Information Protection Act last September to ease video recording regulations for drones and delivery robots. The government intends to have the amendment passed by the National Assembly within this year.

Delivery robot from Yandex, a global information technology (IT) company known as the "Google of Russia." Yandex established a Korean branch in October last year to expand its delivery robot business.
[Image source=Yonhap News]

However, the industry’s response is skeptical. The government’s response has lagged behind advanced countries, and it is pointed out that fundamental innovation is difficult in a positive regulatory environment where only what is ‘allowed’ by laws and regulations can be done. An industry insider said, “Looking at the ‘Tada incident,’ laws tend to protect traditional domains,” adding, “There are arguments for switching to a negative regulatory system like in the U.S. and other advanced countries, but our laws differ from common law, making it difficult to adopt a negative approach.” The insider also said, “The Ministry of Land, Infrastructure and Transport may feel burdened by the appearance of non-human entities on sidewalks following social controversies over electric kickboards. From the government’s standpoint, which prioritizes public safety, it must approach delivery robot regulation relief cautiously.”

Concerns are also rising that domestic delivery robot companies may fall behind in global competition. While domestic companies wrestle with regulations, overseas companies are rapidly accumulating autonomous driving know-how and big data, the industry explains. For example, the UK delivery robot startup Starship Technologies operates over 1,000 delivery robots and surpassed 2 million deliveries last October. The U.S. delivery robot startup Coco plans to produce 1,000 delivery robots and deploy them in three cities including Los Angeles in the first quarter of this year.

There are also global companies aiming to capture the nascent domestic delivery robot market. Yandex, a global IT company known as the ‘Google of Russia,’ established a Korean branch last October to expand its delivery robot business. Another industry insider said, “Delivery robots are already a global megatrend,” and warned, “If Korea falls behind in competition, it is only natural that foreign companies will dominate the domestic market.”

This content was produced with the assistance of AI translation services.