Open source securities: passenger car demand in December hits record high, autonomous driving expected to accelerate penetration by 2025.

Open Securities released a research report, stating that in December, the automotive market was affected by the approaching policy deadline, the acceleration of the old-for-new policy, the high popularity of new cars, etc., which pushed sales to grow rapidly on a month-on-month basis. Both new energy and fuel vehicles are expected to see growth, with an estimated retail electrification rate of 52%. Looking ahead to 2025, there may be some pressure at the beginning of the year, but in the second half of the year, there will be a high base due to the policy stimulus in 2024. However, the Ministry of Commerce has previously indicated plans to strategize for 2025 with a continuation of the old-for-new policy, along with other consumer stimulus policies, which is expected to provide some support to sales. Looking at the structure: (1) New energy vehicles are expected to continue to penetrate; high-end intelligent driving is expected to see accelerated penetration. The entry of Tesla's FSD into China may trigger a ripple effect, pushing leading car companies like Huawei, Xiaopeng, and Li Xiang to accelerate their technological advancement and gradually gain consumer acceptance for intelligent driving. At the same time, the key to accelerating the penetration of intelligent driving lies in cost reduction, and BYD Company Limited/Xiaopeng are expected to vigorously promote the equal rights of intelligent driving in 2025; (3) Exports may slow down in the short term, but the easing of EU tariff policies is a positive development, and overseas production capacity deployment will still take time. BYD Company Limited adopts a strategy of combining "cooperation + self-research" in intelligentization. In terms of cooperation, the Leopard is equipped with Huawei ADS 3.0, collaborates with Momenta for algorithm development and has been installed in multiple cars such as the Han, while the collaboration with DJI controls the cost of smart driving, taking an important step towards "equal rights for smart driving"; in terms of self-research, the high-end smart driving "God's Eye" has been iterated to BAS 3.0+, and the city navigation function without maps began to be gradually rolled out from December 24th; smart driving is now the field that Wang Chuanfu values the most, with plans to invest 100 billion yuan, smart driving models leading in China, and a rich database; the scale effect/vertical integration of the industry chain promotes cost reduction of intelligent driving, consolidating the dominant position in the mainstream price segment. November review: Policy stimulus continued to boost "golden September and silver October", with both passenger car wholesale and retail reaching new highs. In November, retail and wholesale reached new highs thanks to policy stimulus, with the retail penetration rate of new energy vehicles breaking 50% for five consecutive months. In terms of intelligence, Huawei added D2D (Beta), while BYD Company Limited's "God's Eye" opened the city navigation NOA without maps. Looking forward to new cars: BYD Company Limited's mainstream/high-end brands are all making efforts, and Changan's new energy brand is embarking on a strong new car cycle. BYD Company Limited's Qin PLUS DM-i has been filed for registration, and the DM 5.0 price is expected to further dip; the new Seagull has added many cameras, with the potential for significantly enhanced intelligent driving capabilities; the Titanium 3 enters the home-use tough market, enriching the Leopard product matrix. Changan's Deep Blue S09/Qiyuan C798/Avita 06 have all made appearances, and the strong new car cycle is expected to improve profits. Investment advice: Policy support is expected to continue, with demand supported, and intelligent driving penetration accelerating, focusing on leading intelligent companies Open Securities believes that policy support will continue to provide demand, with a focus on the development opportunities of leading intelligent companies. The preferred companies include leading companies such as Huawei, Xiaopeng, and Li Xiang, while BYD Company Limited is expected to complement its shortcomings and consolidate its leading position in new energy after the launch of intelligent initiatives: (1) The technological dividend of BYD Company Limited's DM5.0 continues to be released, with the introduction of new technologies such as the second-generation blade battery, enrichment of high-end brand products and channels continuing, and smartization expected to become an important incremental change for the company by 2025, with overseas market capacity deployment expected to accelerate rapidly by the end of 2025; (2) Changan Deep Blue/Qiyuan/Avita's new car cycle has begun strong, with the potential to gradually reverse losses, and forward-looking layouts in areas such as Siasun Robot & Automation; (3) GWM's Tank Hi4-Z and overseas expansion bring incremental benefits, with the Wey brand's new car cycle opening up significant opportunities. (4) The sales performance of WEY M7/M9 is impressive, the M8 is expected to be listed, JAC's Junjie luxury sedan increases profitability, BAIC BluePark New Energy Technology's Ji He sells climb, and the expected listing of the Enjoy S9 extended-range version and other models; (5) SAIC's strong government support and top-down reforms are expected to accelerate its transformation to electric intelligence through collaboration with excellent suppliers; (6) Geely's Galaxy creates the "E5+ Star" hit model, the LeiShen EM-i competes with DM5.0, and Lynk & Co/Evane demonstrate the scale effects through integration; (7) Xiaopeng and other new forces are expected to continue to promote hit models. Recommended targets: BYD Company Limited (002594.SZ), Chongqing Changan Automobile (000625.SZ), Great Wall Motor (601633.SH), XPENG-W (09868), and benefiting targets: SAIC Motor Corporation (600104.SH), Chongqing Sokon Industry Group Stock (601127.SH), Anhui Jianghuai Automobile Group Corp., Ltd. (600418.SH), LI AUTO-W(02015), BAIC BluePark New Energy Technology(600733.SH), GEELY AUTO(00175), LEAPMOTOR(09863), NIO-SW(09866). Risk warning: Industry demand/electric smart transformation/overseas expansion/policy support falling short of expectations, intensification of competition, etc.