China Galaxy Securities: Popularization and Promotion of Intelligent Driving, Continued Increase in Concentration of Leading Automotive Companies.

China Galaxy Securities released a research report stating that by 2025, advanced intelligent driving will enter an accelerated popularization period. "Intelligent driving equality" will bring about accelerated product iteration on the supply side, continuously enriching the market supply. Large models of intelligent driving will demand higher research and development investment, leading to a potential increase in industry concentration. The top-tier teams will begin to widen the generation gap in advanced intelligent driving capabilities, making market competitive advantages more apparent. With the dual driving forces of technology and policy, emerging industries are expected to experience rapid development, bringing about trillions of dollars in new market size, creating growth opportunities for the entire automotive industry chain including vehicle manufacturing, intelligent driving components, and chassis components. Key points from China Galaxy Securities: 2024 Review: Domestic consumption driven by trade-ins and exports maintain a high growth rate From January to November 2024, China's automobile market achieved sales of 27.94 million vehicles, a year-on-year increase of 3.7%. The domestic market saw over 5.8 million trade-in purchases, significantly boosting domestic demand for passenger cars. It is expected that in 2024, domestic car sales will increase by 0.7% to 25.352 million vehicles. On the export front, there was a sustained high growth rate, with the expected export sales of cars in 2024 increasing by 18.9% to 5.839 million vehicles. The combined effect of domestic demand and export growth will drive steady growth in car sales in 2024, with an expected year-on-year increase of 3.6% to 31.192 million vehicles. 2025 Outlook: Consumption encouraging policies are expected to continue, driving accelerated product iteration with intelligent driving equality In terms of total volume, consumption incentives policies are expected to continue in 2025 to support domestic demand. It is anticipated that domestic car sales will increase by 0.04% to 25.362 million vehicles in 2025, with passenger car sales reaching 22.647 million vehicles, a 1.0% increase. Policies favoring new energy vehicles over traditional fuel vehicles, continued improvements in the competitiveness of domestic brands, and the gradual phasing out of traditional fuel vehicles are expected to accelerate the adoption of new energy vehicles in 2025, with new energy passenger car sales reaching 14.805 million vehicles and a penetration rate of 65.4%. In terms of structure, the growth momentum of the new energy segmented market in 2025 is expected to be: A-level PHEV > B + level PHEV > B + level EV > A00 + A0 level EV > A level EV. Regarding intelligent driving, advanced intelligent driving will enter an accelerated popularization period. "Intelligent driving equality" will accelerate product iteration on the supply side, continuously enriching the market supply. Large models of intelligent driving will demand higher research and development investment, potentially increasing industry concentration. Leading companies will begin to widen the generational gap in advanced intelligent driving capabilities, making market competitive advantages more apparent. ShenZhen New Industries Biomedical Engineering: With the dual driving forces of technology and policy, a trillion-dollar market is emerging, nurturing new opportunities in the automotive industry chain New energy vehicle hardware and software technologies have fostered many emerging industries such as Robotaxi, V2X, low-altitude economy, and humanoid Siasun Robot&Automation. Since 2024, technological innovation and policy support have formed a dual driving force for emerging industries, such as the large-scale promotion of RoboTaxi in Wuhan, accelerated progress in the V2X project in pilot cities, local government plans for low-altitude economic industry development, and the continuous improvement of Tesla's Optimus technology. With the dual driving forces of technology and policy, emerging industries are expected to experience rapid development, bringing about a trillion-dollar market size, creating growth opportunities for the entire automotive industry chain, including vehicle manufacturing, intelligent driving components, and chassis components. Investment Recommendations Passenger cars: Recommend BYD Company Limited (01211), Chongqing Sokon Industry Group Stock (601127.SH), Ideal Auto (02015), Great Wall Motor (601633.SH), Chongqing Changan Automobile (000625.SZ). Benefiting stocks include GEELY AUTO (00175), XPeng Motors (09868), LEAPMOTOR (09863). Commercial vehicles: Recommend Weichai Power (000338.SZ), and benefiting stock Sinotruk Jinan Truck (000951.SZ). Intelligent component manufacturers: Recommend Huizhou Desay SV Automotive (002920.SZ), Bethel Automotive Safety Systems (603596.SH), Keboda Technology (603786.SH), RoboSense (02498), and Weimeng Hengrun (688326.SH). Low-altitude economy beneficiaries: Zhejiang Wanfeng Auto Wheel (002085.SZ), Chongqing Zonsen Power Machinery (001696.SZ). Humanoid Siasun Robot&Automation: Recommend Ningbo Tuopu Group (601689.SH), and benefiting stocks Shanghai Beite Technology (603009.SH), Wuxi Best Precision Machinery (300580.SZ). Risk Warning Risk of domestic car market sales falling below expectations; Risk of increased market competition; Risk of export growth lower than expected; Risk of slower-than-expected development of emerging industries.