BOCOM INTL: Smart technology is a key focus for the second half of the year in the new energy vehicle industry. Avita's investment is expected to accelerate the implementation.

BOCOM INTL released a research report stating that intelligence is a key focus for new energy vehicles in the second half, and it is also an important factor in whether new energy vehicles can break through the price range above 200,000 yuan. As the only carrier of Changan Group's upward strategy, the high-end positioning of Avita will inevitably pose higher demands on intelligence. This investment of Avita, along with the further deepening of cooperation with Huawei, is expected to gain support from Huawei in intelligence, brand value enhancement, and product marketing. With the continuous expansion of the business scale of Huawei's Intelligent Car BU new company, as an early investor, Avita is expected to enjoy the investment returns that follow. The main points of BOCOM INTL are as follows: With the tailwind of policies and an uncertain market structure, intelligence is a key focus for new energy vehicles in the second half. On the policy side: The Chinese government actively formulates and implements policies related to intelligent driving, marking the gradual commercialization of autonomous driving technology from concept to reality. In terms of market structure: the layout in the fields of batteries, motors, and electronic control of new energy vehicles is basically stable; in the intelligence field, especially in intelligent driving, as the new forces regard intelligent driving as the soul of new energy vehicle enterprises, and the current intelligent driving technologies of various companies have not yet opened up a gap, there are still many variables in the intelligent market structure, which is an important focus for the future. Avita is the only carrier of Changan Group's upward strategy, and its high-end positioning poses higher demands on intelligence. Chongqing Changan Automobile has laid out Avita, Shenlan, and Changan Qiyuan in the field of new energy. Each of the three major brands has a clear market positioning. Among them, Avita is the result of the cooperation between Chongqing Changan Automobile, Huawei, and Contemporary Amperex Technology, and is Changan's only sub-brand targeting the price range above 200,000 yuan, mainly targeting the high-end market and consumers with high requirements for intelligence. According to China Passenger Car Association data, the higher the price range of new energy vehicles, the higher the requirements for intelligence, so if Avita wants to achieve good sales performance in the price range above 200,000 yuan, its level of intelligence must not be inferior to the competitors in the same price range. Avita's proactive investment in Yingwang is of strategic importance and is expected to receive support from Huawei in intelligence, brand influence, and product marketing. This investment of Avita in Yingwang expands the cooperation from the technical level to the capital level. Since there are limited director seats for Yingwang and Huawei may need to retain director seats, it is not possible for all car companies that invest later to have director seats, so the bank believes that Avita's proactive investment in Yingwang takes the initiative to seize the strategic initiative under the new situation and has deeper strategic significance for long-term cooperation with Yingwang. In addition, under the technical empowerment and brand influence of Huawei, the bank believes that Avita's level of intelligence and brand influence are expected to be further enhanced, and marketing is also expected to receive further support from Huawei. In the long run, as the cooperation between models increases, Yingwang is expected to achieve profitability, and Avita is expected to gain investment returns based on this equity investment. Huawei empowers, but Avita still needs to focus on product, brand, and channel development. Under the empowerment of Huawei's Car BU, Avita has already been in the top tier in the domestic intelligent driving field. However, there is still room for significant improvement in monthly sales volume. The reasons for this are multiple: brand awareness and recognition need to be further improved, the marketing model has a certain impact on sales, prices are relatively high, and the product line needs to be enriched. At the same time, Avita's channel reform is underway, and the effectiveness of channel reform still depends on the management capabilities of the car company. Avita plans to launch the Avita 07 pure electric and extended-range dual models in the fourth quarter of this year, and introduce the Avita 11 and 12 extended-range versions. By accelerating the release of new models and extended-range versions and strengthening cooperation with Huawei's Car BU, the bank believes these efforts will boost sales.