Intelligent driving industry has great development potential and is the development trend in the future: intelligent driving assistance system (ADAS) can provide assistance to drivers in complex traffic environment and vehicle control process, and finally realize unmanned driving in the future, which can effectively reduce the incidence of accidents. In 2021, the insurance coverage of China’s front mounted ADAS standard new cars was 8.0789 million, with a penetration rate of 30.78% and a year-on-year increase of 29.51%. We believe that the front mounted penetration rate of intelligent driving system will continue to increase, which is a deterministic development trend of the industry in the future and worthy of strong investment by manufacturers in the industrial chain. With the upgrading of front mounted L1 intelligent driving to L3, the value of single vehicle is expected to increase from 1000 yuan to 10000 yuan. We estimate that the industry scale of L1-L3 intelligent driving in China will be about 30.2 billion yuan in 2021, but it will reach about 86.2 billion yuan in 2025, and the industry CAGR will be 30%, which will maintain high-speed development.
Intelligent driving covers multi-disciplinary contents, including perception, planning, decision-making, execution and other links, with high technical difficulties. High-level intelligent driving technology is expected to promote the change of business model: in terms of intelligent driving technology, perception involves AI algorithm, high-power chip, laser radar, millimeter wave radar and high-resolution and high dynamic camera, The planning decision-making end involves domain controllers and control algorithms, and the execution end involves braking by wire and steering by wire. The configuration of intelligent driving sensors from low-order to high-order and the performance of domain controllers need to be improved. Software algorithms are the top priority. At present, both new car manufacturers and traditional car manufacturers are making high-intensity investment in intelligent driving. We believe that high-level intelligent driving technology has its own operation attributes. The landing scenarios include: port, logistics park, mining area, airport, trunk logistics, terminal logistics, robotaxi, etc. from low speed to high speed, from cargo to passenger, and from closed park to open road. It is expected to be applied on a large scale in the future, so as to reduce labor cost and improve operation efficiency and safety. We believe that the reason why car manufacturers and intelligent driving suppliers are investing heavily in intelligent driving technology is that high-level intelligent driving technology is expected to promote the transformation of its business model, help it cut into the field of subscription charging or terminal operation, explore new profit models, and realize the purpose of transformation to science and technology enterprises.
Intelligent driving at L2 level and below is a relatively standardized scheme, which will be dominated by suppliers. L2 + level high-level intelligent driving head car factory has the trend of self-development, but there will still be many tier 1 suppliers: under the great changes in the industry upgrading to intelligent vehicles, intelligent driving is the core point of technology research and development of car factory. With the support of hardware platform, software standard and API interface, the trend of software and hardware separation of intelligent driving technology appears. We believe that the intelligent driving scheme of L2 level and below is relatively standard, and the car factory has high requirements for cost, and the supplier may be the main supplier in the future. The L2 + level scheme, because of its wider and more complex working range (odd), is the cornerstone for the depot to upgrade to L3 & L4 and other high-level intelligent driving in the future, and its core algorithm head depot has the trend of self-development. However, we believe that there will still be tier 1 with more core technologies in the supply of L2 + intelligent driving. Once the products are standardized, the third-party supply is inevitable under the pressure of cost and delivery cycle.
At present, overseas giants occupy a high market share, but Chinese manufacturers are growing at a high speed: at present, the standard configuration of ADAS is mainly focused on the models of joint venture enterprises, and in-depth cooperation with joint venture manufacturers. In 2020, overseas parts giants, China’s forward-looking ADAS system supplier, will occupy more than 90% of the market share. However, the capability of Chinese manufacturers has been greatly improved in recent years. System integrators include: Jingwei Hengrun, Huizhou Desay Sv Automotive Co.Ltd(002920) , Bethel Automotive Safety Systems Co.Ltd(603596) , Millie Zhixing, Hongjing Zhijia, minieye, Zongmu technology, Zhixing technology, furuitek, Zhijia technology, Jimu technology, etc. we can see that Chinese companies have made rapid business development and obtained more projects. We believe that under the general trend of the rise of independent brands, Chinese manufacturers are expected to expand market share by virtue of cost performance and service advantages, and are expected to further expand overseas markets in the future.
[investment suggestion] we are optimistic about the long-term development of the intelligent driving industry and believe that the investment should focus on the system supply capacity, data acquisition and algorithm iteration ability of manufacturers. We suggest paying attention to system integration suppliers, such as Jingwei Hengrun, Bethel Automotive Safety Systems Co.Ltd(603596) , Huizhou Desay Sv Automotive Co.Ltd(002920) , as well as primary market companies such as Millie Zhixing, Hongjing Zhijia, minieye, Zongmu technology, etc.
Risk tips: there are downside risks in the prosperity of the automobile industry, the improvement of intelligent driving penetration is less than expected, the competition in the intelligent driving industry is intensified, the lack of core affects the automobile output, the supply is limited, and the risk of technology and product iteration.
