China Securities Co., Ltd.: Independent automobile brands continue to impact the million-level market, focusing on the opportunity of low configuration of physical AI.

China Securities Co., Ltd. released a research report stating that independent brands continue to impact the ultra-high-end and niche market dividends, with internal technology driving the improvement of product competitiveness. This week, automobile sales showed characteristics of domestic demand pressure and strong exports. Large-capacity batteries are accelerating in popularity in plug-in hybrid/extended-range vehicle models, while the threshold for pure electric range has significantly increased. The automobile sector has been significantly pulling back since the end of April, and current domestic demand pessimism may have already been priced in. The outlook for the high-end and overseas market in the automobile industry remains positive for the whole year. At the same time, Siasun Robot & Automation and the smart driving sector bottom alpha targets have high cost performance, and mid-term industrial trends are likely to continue to materialize. Key points from China Securities Co., Ltd.: Passenger vehicles According to the China Association of Automobile Manufacturers statistics from June 1-21, 913,000 passenger vehicles were sold nationwide, a year-on-year decrease of 23%, a week-on-week increase of 7%, and the penetration rate of new energy vehicles maintained a high level of 63.8%, gradually recovering from low levels on a weekly basis. This week, there were many new car releases, with independent brands continuing to impact the million-level high-end market and niche markets such as high-end MPVs and large five-seat SUVs. "Big battery + super charging + high-end smart driving" has become a standard configuration for models priced above 200,000. The Zunjie S800 high-end version is priced at 1.388 million yuan, the MPV models V800/V680 have pre-sale prices of 650,000-900,000 yuan/800,000-1.2 million yuan. Pre-sales for the V800/V680 reached 3,200 units in the first hour, with the V800 accounting for 84%. The new L8 is priced at 369,800-429,800 yuan, with a pure electric range of 430 km and equipped with the M100 Mach chip. The Zero Run D99 is priced at 249,800-319,800 yuan, with upscale configuration such as air suspension, CDC, high-end smart driving, etc. The company recommends focusing on leading car companies with high-end pricing power and mid-to-high-end/export scale effects, shifting from traditional market share competition to profit elasticity brought by high-end and overseas market trends. Commercial vehicles Core undervalued stocks with strong performance characteristics continue to stand out, with an optimistic outlook for performance growth sustainability and valuation recovery after liquidity easing. In terms of heavy-duty trucks, the company continues to favor Weichai, the leader in the AI shortage electricity theme. The main electric gas engine is about to be approved, and compared with leading valuations in North America such as CAT and CMI, there is a significant upside benchmarking space; industry data for June is about to be released, with export growth expected to continue to be robust, helping to boost the valuation of heavy trucks. In terms of buses, considering the obvious easing of negative risks such as Sino-European trade and conflicts in the Middle East, as well as the certainty of export growth and performance realization throughout the year, leading stocks such as Yutong and King Long are at relatively low valuations with limited downside, highlighting investment odds. Physical AI 1) This year, Siasun Robot & Automation will focus on the "T-Chain mass production pace & capitalization of domestic main engine factories". Optimus mass production is approaching, with suppliers already receiving production guidance for the T-chain, and the Fremont car production line officially shifting towards Siasun Robot & Automation is a substantive pre-production action. Optimus V3 is expected to be released & enter production as scheduled in mid-2022, fermenting the 4-5 year Siasun Robot & Automation industry towards a turning point. The company recommends focusing on Tesla chain with high win rate, direction of technological iteration and upgrade, and undervalued with expected deviation; other domestic chains such as Yushu with volume capacity. 2) This week, there was a flurry of policy implementation in the smart driving field, with the draft of the National Standard for "Intelligent Connected Vehicles Automatic Driving System Safety Requirements" made public, set to be implemented in July 2027. The standard mandates that L3/L4 models must be equipped with a data recording system (DSSAD), and submit a complete safety file before market launch. L3 models must be equipped with a backup user and request takeover when out of boundaries, while L4 must have independent escape and parking capabilities, with remote assistance only as auxiliary, not replacing the system's independent execution of all dynamic driving tasks. This will put an end to the current chaos of using "pseudo L3" for marketing purposes, with hardware redundancy and real algorithm capabilities becoming core barriers for carmakers. Future market core triggers may include the entry of Tesla FSD (supervised version) into China, continuous increase in global subscription rates, and further deployment of Robotaxi, indicating a clear trend towards high-end driving in the medium to long term, with current bottom configuration cost performance. Recommended portfolio: Weichai Power, Sinotruk Jinan Truck, Yutong Bus Co., Ltd., Xiamen King Long Motor Group, Loncin Motor, Hesai, GEELY AUTO, Anhui Jianghuai Automobile Group Corp., Ltd., Jiangsu Xinquan Automotive Trim, Wuxi Best Precision Machinery. Risk warning 1. Industry prosperity lower than expected; 2. Policy implementation effects lower than expected; 3. Export sales lower than expected; 4. Deterioration in industry competition landscape; 5. Customer expansion and progress of new projects into production lower than expected.