Bank of America Securities: Preferred choices for the automotive supply chain are LIDAR, autonomous driving chips, and wire-controlled chassis. Bullish on Horizon Robotics (09660) and others.

Bank of America Securities releases research report focusing on the Chinese smart car industry, pointing out that intense competition is driving industry transformation. Companies such as BYD Company Limited are accelerating the application of autonomous driving technology, with a projected penetration rate of L2+/L3 reaching 80% by 2030, sales CAGR of 25%, and Robotaxi sales CAGR of 176% from 2025 to 2030. In the smart car supply chain, laser radar, autonomous driving chips, and steer-by-wire chassis are preferred options, with companies like Hesai, Horizon (09660), and NEXTEER (01316) worth paying attention to. Bank of America also lists the latest ratings and target prices for several car companies and component suppliers. The report states that while BYD Company Limited surprised the global market in February by integrating its "SkyEye" advanced driver assistance system (ADAS) into even mass-market models, China has actually been advancing in the smart car field much earlier. In 2021, Xiaopeng launched its highway automatic navigation assistance (NOA) solution, with major electric vehicle brands gradually applying autonomous driving (AD) solutions to high-end models from 2022 to 2024. Li Auto, Inc. Sponsored ADR Class A and Huawei are widely regarded as leading brands in this category. BYD Company Limited's move is prompting more OEM manufacturers, such as Geely, Chery, and Leapmotor, to follow suit, accelerating the application of autonomous driving technology in China. The penetration rate of autonomous driving in China is driven by the coordinated development of electric vehicles and artificial intelligence technology. Algorithms have upgraded from rule-based models to end-to-end (E2E) + visual language model (VLM) / visual-language-action (VLA) models, and advancements in sensors, chips, chassis, and other hardware enable vehicles to better perceive complex scenarios and process data faster. Bank of America Securities predicts that the penetration rate of L2+/L3 in China will increase from 27% in 2025 to 80% in 2030. Passenger car sales with L2+/L3 capabilities are expected to grow from 6.1 million units in 2025 to 18.4 million units in 2030, with a compound annual growth rate of 25%. Bank of America analysts believe that Xiaopeng, Huawei, and Ideanomics are currently leading in the L2+/L3 field. Bank of America Securities points out in the report that Tesla, Inc., Waymo, and Pony.ai are making Robotaxi a reality. On June 25, Tesla, Inc. (TSLA) launched Robotaxi service in Austin, based on a "pure vision" autonomous driving solution. Waymo's Robotaxi fleet has surpassed 1,500 vehicles, with plans to reach 3,500 vehicles by the end of 2026. In China, Pony.ai plans to launch its seventh-generation Robotaxi in the third quarter of 2025, reducing the cost of vehicles and autonomous driving kits (ADK) by 60% to $40,000 per vehicle. The company expects to expand its fleet to 2,000 vehicles by the end of 2026. Bank of America Securities believes that with the support of tech giants, Robotaxi will transition from the concept verification stage to a strong expansion phase by the end of 2030. In China, Robotaxi sales are expected to increase from 2,500 vehicles in 2025 to 400,000 vehicles by 2030, with a compound annual growth rate of 176%. Bank of America notes that the smart car supply chain mainly consists of smart driving systems and smart cabin systems. Autonomous driving functions depend on integrated systems for sensing, processing, and control, while smart cabin systems include cabin domain controllers, in-car infotainment systems, head-up displays (HUDs), streaming rearview mirrors, among others. Bank of America Securities estimates that the value of smart car components per vehicle for entry-level / high-end models is $2,400 / $6,000. Among smart car components, Bank of America Securities is bullish on laser radar, autonomous driving chips, and steer-by-wire chassis: (1) Driven by considerations of autonomous driving safety and the decreasing cost of laser radar, Bank of America Securities predicts that the penetration rate of laser radar in Chinese passenger cars will increase from 6% in 2024 to 40% in 2030. (2) With the increasing penetration rate of autonomous driving and the rising value of individual vehicle components, Bank of America Securities predicts that the Chinese market for autonomous driving / advanced driver assistance system chips will grow at a compound annual growth rate of 25% from 2024 to 2030. (3) With the emergence of electronic mechanical braking (EMB) and steer-by-wire (SbW), Chinese steer-by-wire chassis suppliers are expected to gain market share - although the current penetration rate is low, OEM manufacturers have a high willingness to adopt. Bank of America Securities' top picks are Hesai Group Sponsored ADR, Horizon, Bethel Automotive Safety Systems, and NEXTEER. Detailed target prices and ratings can be seen in the table below: