China Securities Co., Ltd.: Investment prospects in the smart driving industry chain

China Securities Co., Ltd. released a research report stating that 2025 is a key node for the leapfrog development of intelligent driving from 1 to 10. Early pioneers such as Tesla FSD, Huawei ADS, Xiaopeng, and Li Xiang have already paved the way for advanced intelligent driving technology. With the gradual increase in penetration rate, industry giants like BYD Company Limited are officially entering the field of intelligentization, and the scale effect of intelligentization is beginning to emerge. Chinese strong self-owned brands are expected to further replace joint venture shares through mature electrification and low-cost intelligentization. The main points of view of China Securities Co., Ltd. are as follows: There have been many recent catalytic developments in intelligent driving. BYD Company Limited will hold an intelligentization strategic conference on February 10, marking the official entry into the second half of intelligentization, with the potential to expand the coverage of intelligent driving to the price range of 100,000 yuan. At the same time, Tesla plans to launch a fully unmanned version of FSD in Austin in June, with the expectation to land in cities like Austin by the end of the year, and is currently communicating with other car companies on FSD licensing matters. It is optimistic about the valuation reshaping of the entire vehicle and intelligent driving industry chain in 2025. The investment opportunities for entire vehicles lie in the enhancement of sales and profits after intelligentization, while the investment opportunities for components lie in the steady realization of performance of hardware companies in stages 1 to 10, as well as the increase in valuation of suppliers with new technology and business models in stages 0 to 1. Passenger cars: Optimistic about the democratization of intelligent driving from stages 1 to 10 in 2025, further increasing the market share and valuation of self-owned brands. There have been many recent catalytic developments in intelligent driving: BYD Company Limited will hold an intelligentization strategic conference on February 10, marking the official entry into the second half of intelligentization, with the potential to expand the coverage of intelligent driving to the price range of 100,000 yuan. At the same time, Tesla plans to launch a fully unmanned version of FSD in Austin in June, with the expectation to land in cities like Austin by the end of the year, and is currently communicating with other car companies on FSD licensing matters. 2025 is a key node for the leapfrog development of intelligent driving from stages 1 to 10 Early pioneers such as Tesla FSD, Huawei ADS, Xiaopeng, Li Xiang, etc., have already paved the way for advanced intelligent driving technology. With the gradual increase in penetration rate, industry giants like BYD Company Limited are officially entering the field of intelligentization, and the scale effect of intelligentization is beginning to emerge. In 2025, Chinese strong self-owned brands are expected to further replace joint venture shares through mature electrification and low-cost intelligentization. In terms of AI applications, Tesla's financial report has emphasized FSD and Siasun Robot & Automation. The breakthrough in AI application at the end is likely to be in automatic driving and Siasun Robot & Automation. The super-large-scale industrial advantages from the automotive industry chain are conducive to achieving a Davis double-click in the sector. Risk warning: 1. Industry prosperity is below expectations. The stabilization and recovery of the domestic economy in 2024 needs to be observed, and the demand in the automotive industry may fluctuate as a result. The slowdown in consumer income growth or expected fluctuations will affect the effectiveness of trade-in promotions, and the insufficient demand in the passenger and freight markets may restrict the replacement ratio of commercial vehicles, ultimately affecting the recovery process of automotive industry demand. 2. The effect of policy implementation is below expectations. It takes time for policies on trade-ins and equipment updates to be fully implemented, and policy promotion and information dissemination also require a certain amount of time. Whether subsidy funds can continue to be disbursed in the fourth quarter, and whether substitution demand can be smoothly released, both need to be continuously observed. 3. Export sales below expectations. Factors such as international situations, national policies, and exchange rates may affect exports, leading to fluctuating risks in overseas sales growth. 4. Deterioration of industry competition landscape. Under the trend of automotive electrification and intelligentization, domestic automobile manufacturers and component suppliers are actively deploying. With changes in factors such as technological progress and the introduction of new production capacity, future industry competition may intensify, leading to fluctuations in the market share and profitability of entire vehicle and component enterprises. 5. Customer expansion and the progress of mass production of new projects are below expectations. Under the trend of automotive electrification and intelligentization, the existing landscape of entire vehicle and component supply chains is undergoing a reshaping. Component companies that gain new customers and experience incremental growth in new projects are expected to benefit, while the market share of some component companies may be affected.