CICC International: Advanced driver assistance systems are expected to open up independent growth paths in 2026. Third-party and cost-effective enterprises are expected to benefit from it.

Bank of China International released a research report stating that by 2026, advanced intelligent driving is expected to open up an independent growth track, unaffected by the pressure on automobile industry sales volume. Currently, advanced intelligent driving technology is gradually iterating towards stable mass production, with policy support continuing to drive industry growth and the industrial chain presenting a gradually improving development trend from top to bottom. With the advent of the era of intelligent driving equality, the bank believes that third-party intelligent driving system companies and companies focusing on cost-effective intelligent driving solutions are expected to benefit from this trend. Key points from Bank of China International are as follows: In 2026, the automobile industry is expected to be weak, but the penetration rate of intelligent driving is decoupled from sales volume. By 2025, the penetration rate of intelligent driving in the automobile industry is expected to reach around 60%, becoming the main driver of sales. However, the reduction of subsidies, increased competition, and rising costs are weakening the prospects for the automobile industry in 2026. In this context, advanced intelligent driving, which adds more value and can further enhance the user driving experience, has become an important growth highlight for the automobile industry in 2026, changing from an "add-on" to a "must-have". With the significant increase in the penetration rate of advanced intelligent driving and the value of the industrial chain, commercial vehicles and commercial applications in special scenarios are being implemented, opening up an independent growth track for advanced intelligent driving, unaffected by the pressure on automobile industry sales volume. With advanced intelligent driving technology approaching maturity, policies are providing support for high growth. Intelligent driving technology is gradually iterating from basic ADAS to high-speed NOA, urban NOA, and Robotaxi, with the industrial cycle entering a stable mass production phase. Policies continuing to support high growth in intelligent driving act as a hedge against the overall volatility in the automobile industry. By 2029, the market size of China's L2+ level intelligent driving solutions is expected to grow to over 150 billion yuan, with a CAGR of 33.7% from 2024 to 2029, providing ample room for growth. There is a significant difference in single vehicle value between L2 and L3 level intelligent driving, mainly due to L3 achieving a qualitative change from "assistance" to "substitution", requiring hardware with high-performance perception, high computing power decision-making, and system redundancy. The intelligent driving industrial chain is gradually improving from top to bottom. The intelligent driving industrial chain consists of upstream core technology, midstream vehicle manufacturing, and downstream application scenarios, showing a trend of gradual improvement from top to bottom. Among them, intelligent driving chips, data collection, and Robotaxi operation are essential links in the technological aspect. By 2028, the market size of China's ADAS SoC is expected to grow to 49.6 billion yuan, with a CAGR of 28.6% from 2023 to 2028. In the field of Robotaxi, the market size of China's Robotaxi is expected to grow to 8.655 billion US dollars by 2033, with a CAGR of 74.0% from 2025 to 2033. With the increasing localization rate and decreasing prices of hardware such as LiDAR, Robotaxi operational costs are expected to have a competitive advantage compared to traditional taxis and ride-hailing services. The era of intelligent driving equality has begun, benefiting two types of companies. In February 2025, BYD Company Limited announced that all its models will be equipped with advanced intelligent driving, bringing advanced intelligent driving to models priced below 100,000 yuan. Domestic brands such as Changan, Chery, and Geely have followed suit, heralding the beginning of the era of intelligent driving equality, with the penetration rate of L2 and above expected to increase across the board. As intelligent driving equality is a long-term trend, two types of companies are expected to benefit from it: 1) third-party intelligent driving system solution companies. These companies' intelligent driving solutions can adapt to vehicles at different price points, directly helping customers save on research and development costs; 2) companies adopting cost-effective strategies. These companies mainly provide high cost-effective intelligent driving solutions and bind them to high-volume vehicle enterprises, focusing on enterprises in the supply chain of mainstream affordable vehicles priced below 100,000 and 100,000-150,000 yuan. Main risks faced by the rating Risks of policy and legislative pace falling short of expectations, risks of systemic safety incidents, and risks of cost reduction speed failing to keep up with the intensity of price wars.