Huajin Securities: The technical route is becoming clearer and advanced intelligent driving is at a turning point.

Huajin Securities released a research report stating that smart driving policies are accelerating and improving, while several car manufacturers are extending urban NOA to 100,000-200,000 vehicle models, with continuous convergence of technology routes gradually evolving towards VLA and world models. The firm believes that the development of high-level smart driving has reached a turning point, and the penetration rate is expected to continue to increase. It is recommended to focus on leading smart driving capabilities and strong product cycles of major manufacturers. In terms of components, the increase in penetration rate of high-level smart driving is driving the development of intelligent components, and related component manufacturers are benefiting from incremental opportunities brought about by industry upgrades. Primary viewpoints of Huajin Securities are as follows: Smart driving policies are accelerating and improving, with laws for L3/L4 implementation The regulations for intelligent assisted driving are gradually improving, with local pilot programs leading the way and national standards gradually being implemented. For example, in September 2025, the Ministry of Industry and Information Technology proposed mandatory national standards for L2 assisted driving for the first time. By February 2026, the Ministry of Industry and Information Technology proposed mandatory national standards for L3/L4 automated driving systems. Urban NOA penetration rate is increasing, high-level smart driving entering a new phase of mass penetration Urban NOA has completed the high-end taste testing phase and officially entered a new phase of comprehensive popularization and mass penetration. From January to October 2025, the penetration rate of urban NOA for passenger cars in China was 12.8%, an increase of 4 percentage points compared to the previous year. Several car manufacturers have extended urban NOA to 100,000-200,000 vehicle models. The firm believes that the trend of urban NOA popularization will continue in 2026, and the penetration rate of high-level smart driving is expected to continue to increase. Integration and unification of VLA and world models, smart driving capabilities expected to leap After the introduction of the end-to-end large-scale model in 2025, high-level smart driving algorithms have gradually evolved into two paths: VLA and world models. Both have their own advantages, with VLA suitable for complex semantic scenarios and human-computer interaction, and world models suitable for large-scale training/long-tail/extreme scenario generation. Looking at the current development trend, these two paths are highly complementary and are expected to deeply integrate in the future, jointly boosting smart driving capabilities. Independent research and open cooperation run in parallel, third-party suppliers helping to level the playing field for smart driving There are currently multiple smart driving solutions. Leading new energy car companies adhere to the full-stack independent research route, while traditional car manufacturers generally adopt a hybrid model of independent research as the foundation and multiple suppliers for validation through external cooperation to quickly fill in technology gaps and promote self-research capabilities. The firm believes that full-stack independent research requires high research and development investment and data closed-loop capabilities, which only top manufacturers can sustain in the long term; independent research combined with external sourcing, to balance efficiency and controllability, will be the choice of most car companies. Risk factors: Risks of smart driving technology development falling short of expectations, risks of new energy vehicle sales falling short of expectations, risks of regulatory progress falling short of expectations.