Huachuang Securities: FSD entry into China attracts more attention, optimistic about the main trend of automotive intelligence.

Huachuang Securities released a research report stating that recently, Tesla, Inc. (TSLA.US) officially included China in the "FSD Available Region" list, in addition to a series of recent actions such as recruiting and renaming, the market's attention to the entry of FSD into China continues to heat up. The overall valuation of the intelligent driving sector is currently at a historically low level, and the pace of FSD entry into China is expected to constitute a stage-specific catalyst in the future, and the mainline of smart car production is expected to be good. In addition, it is recommended to focus on autonomous driving solutions and the Robotaxi track. Key points of Huachuang Securities are as follows: Market attention to FSD entering China is increasing, and Q3 is officially approved as the latest target Recently, Tesla, Inc. has been active in China: Starting May 18th, Tesla, Inc. China opened about 90 Autopilot R&D positions in cities such as Beijing, Shanghai, Guangzhou, and Shenzhen, with more than 70% of them related to smart driving testing, and the responsibilities of the positions explicitly covering "tracking changes in Chinese certification and regulatory laws," which are seen as an important signal of Tesla, Inc. accelerating the localization adaptation of its smart driving solutions; On May 21st, Tesla, Inc. officially included China in the "FSD Available Region" list; On May 24th, the official website renamed the "FSD Intelligent Driving Assist Function" to "Tesla, Inc. Driving Assist," with the function and price (64,000 yuan) remaining unchanged, speculated to be a response to regulatory requirements in China that L2-level driving assistance systems should not use misleading terms such as "fully automatic" or "automatic driving". Previously, the 26M2 Shanghai Lingang Holdings AI Training Center has been officially put into use, achieving a localized closed loop of "data storage - local training - algorithm optimization", providing a data compliance foundation for subsequent iterations. In terms of the official timetable, Tesla, Inc.'s CFO clarified during the 26Q1 earnings call that FSD has not yet received comprehensive approval from Chinese regulators and is in close communication with regulatory authorities, aiming to obtain comprehensive approval in 26Q3. V14.3 achieves a leap in underlying architecture, global commercialization continues to accelerate Technically, Tesla, Inc. began pushing the V14.3 version in the United States in 26M4, with core upgrades mainly reflected in: (1) AI neural network completely replacing approximately 300,000 lines of handwritten C++ rule code responsible for controlling steering, throttle, braking, etc.; (2) The AI compiler and runtime environment were rewritten based on the MLIR compiler framework, comprehensively reconstructing the efficiency of neural network inference, and speeding up system response by around 20%; (3) The network parameter volume has increased by about 10 times compared to the previous generation, equipped with self-regressive Transformer technology, with the ability to remember spatial and temporal information for 3-5 seconds and predict road conditions for 5-10 seconds. As of the end of 26Q1, the global subscription user base for FSD reached 1.28 million, a year-on-year increase of 51%, adding 180,000 more than the end of 25Q4, with most markets switching to a subscription model of $99 per month, and 26Q1 FSD annualized recurring subscription revenue reaching $546 million. As of early 26M5, the global cumulative mileage of the FSD supervised fleet is approximately 16.1 billion kilometers, with a major collision rate of about 1 in every 8.53 million kilometers, significantly lower than the approximately 1 in every 1.06 million kilometers for human drivers. Significance of entering China: short-term sector sentiment repair, long-term valuation revaluation possible In the short term, the market significance of the accelerated entry of FSD into China is more reflected in the emotional repair level. Due to market style preference shifts and industry sales concerns suppressing, the overall valuation of the intelligent driving sector is currently at a historical low, and the progress of FSD entering China is expected to become a catalyst for the systemic sentiment repair of the sector. In the long term, the core value of FSD entering China lies in its potential "catfish effect", which is expected to further drive the industry competition focus from hardware configuration to user real experience transition, while strengthening consumers' perception and discernment ability of the quality of smart driving products. Once the quality of the smart driving experience begins to truly affect consumer car purchasing decisions, the commercialization path of smart driving is expected to shift from passive growth driven by whole vehicle sales to active growth through user choice and quality payment, thereby fundamentally strengthening the valuation support of the entire sector. Risk warning: Domestic approval time is later than expected, progress of localization adaptation is below expectations, intensified industry competition suppresses profits, GEO Group Inc political uncertainty.