CITIC Securities: "Carrot Run" Nationwide Promotion Market Space Can Reach 155.3 Billion, Corresponding to a Profit of 51.6 Billion

Baidu's "RoboRun" has maintained a service volume of over 800,000 times per quarter in the past three quarters, demonstrating initial commercialization capabilities. Currently, it mainly stimulates consumer spending by offering low prices and novelty after subsidies, boosting consumer sentiment. Through medium to long-term cost reduction, we believe that "RoboRun" is expected to achieve a daily profit per bike of 25.40 yuan in the medium term, with a payback period of 6.17 years; and a daily profit per bike of 133.04 yuan in the long term, with a payback period of 2.72 years. If "RoboRun" can be promoted in pilot cities/first and second-tier cities/nationally, the market space under neutral expectations could reach 42.6/52.9/155.3 billion yuan, corresponding to profits of 14.2/17.6/51.6 billion yuan.

Baidu's "RoboRun" Demonstrates Initial Commercialization Capabilities

Baidu Apollo Go has been opened to more than ten cities, with a cumulative ride volume exceeding 6 million times. In the past three quarters, it has maintained a service volume of over 800,000 times per quarter, showing initial commercial capabilities. In Wuhan, the proportion of "true" autonomous driving has exceeded 70%. In terms of costs, "RoboRun" has different prices in different regions, with higher prices in first-tier cities like Beijing in pilot cities; compared to taxis and ride-hailing services, the pre-subsidy prices of "RoboRun" are significantly higher, mainly stimulating consumer spending through subsidized low prices and novelty.

Difficulties in Profitability Under Current Subsidies, Profitability Improves After Medium to Long-Term Cost Reduction

RoboTaxi costs mainly include vehicle, operation, and maintenance. Based on existing information in Wuhan, under the assumption of unit price (excluding subsidies), a single vehicle can achieve breakeven at 91.95 kilometers per day, corresponding to an average of 8 rides per kilometer. Currently, the order volume in Wuhan has reached this level; under the assumption of unit price (including subsidies), a single vehicle can achieve breakeven at 593.28 kilometers per day, corresponding to an average of 8 rides per kilometer, which is difficult to achieve. Considering medium to long-term cost reduction, it is estimated that in the medium term, "RoboRun" will achieve a daily profit per bike of 25.40 yuan, with a payback period of 6.17 years; in the long term, a daily profit per bike of 133.04 yuan, with a payback period of 2.72 years.

Market Space of 155.3 Billion and Profit of 51.6 Billion with National Promotion of "RoboRun"

In the national passenger car market, the capacity of ride-hailing cars is approaching saturation, while overall cruising taxis are declining. We have calculated the market space for "RoboRun" business in 2030. If Robotaxi is only promoted in existing pilot cities, the market size under pessimistic/neutral/optimistic expectations would be 21.286/42.573/63.859 billion yuan, with profits of 7.08/14.16/21.24 billion yuan respectively; if Robotaxi is promoted in first and second-tier cities, the market size under pessimistic/neutral/optimistic expectations would be 26.44/52.881/79.321 billion yuan, with profits of 8.794/17.588/26.382 billion yuan respectively; if Robotaxi is promoted nationwide, the market size under pessimistic/neutral/optimistic expectations would be 77.636/155.273/232.909 billion yuan, with profits of 25.822/51.644/77.466 billion yuan respectively

"Luobo Express" has seen a surge in popularity, with full-time coverage achieved in Wuhan

Open to more than a dozen cities, the proportion of "true" autonomous driving in Wuhan has exceeded 70%. Currently, Apollo Go has been launched in 12 cities in China, including Beijing, Shanghai, Shenzhen, Guangzhou, Wuhan, Chengdu, Chongqing, Hefei, Changsha, Fuzhou, Jiaxing, and Yangquan. In terms of full autonomous driving, Apollo Go obtained the license to charge for unmanned driving services on public roads in Beijing on July 20, 2022, and obtained the first license to test vehicles without drivers or safety operators in Beijing on December 30 of the same year, starting to charge fees from August 10, 2023; in Wuhan and Chongqing, Apollo Go started to provide fully autonomous ride-hailing services and charge fees on August 8, 2022, with the proportion of fully autonomous orders in Wuhan reaching 70% in April 2024, expected to increase to 100% in several quarters; Apollo Go also obtained the license to provide fully autonomous ride-hailing services in Pingshan, Shenzhen in May 2023; and started fully autonomous driving tests on open roads in Pudong, Shanghai in July 2023.

"Luobo Express" has different prices in different cities, with higher prices in first-tier cities. "Luobo Express" has different charging standards in different cities. Compared with Wuhan and Beijing, which have landed faster, the starting fee in Wuhan ranges from 15-16 yuan, lower than Beijing's 16-20 yuan; the mileage fee in Wuhan ranges from 2.40-3.50 yuan/km, higher than Beijing's 1.95-2.25 yuan/km; the overtime fee in Wuhan ranges from 0.20-0.40 yuan/minute, lower than Beijing's 0.70-0.80 yuan/minute; in terms of long-distance fees, Wuhan charges an additional 1.00 yuan/km for distances over 12 km compared to Beijing. We calculate that for a weekend trip at 17:00 covering 8 km and taking 20 minutes, the fee for "Luobo Express" in Wuhan (before subsidy) is 38.9 yuan, while in Beijing it is 46.4 yuan, with Beijing having relatively higher prices as a first-tier city.

The price of "Luobo Express" in Wuhan is higher than taxis and ride-hailing services before subsidies, with a clear price advantage after subsidies. Currently covering the entire area of Wuhan city and operating around the clock, we still compare the cost of a weekend trip at 17:00 covering 8 km and taking 20 minutes, assuming that taxis do not charge waiting fees At this time, in Wuhan, "RoboTaxi" charges (before subsidies) 38.9 yuan, taxis with a displacement of less than 2.0L charge 19.0 yuan, taxis with a displacement of 2.0L and above or pure electric passenger taxis charge 22.0 yuan, and ride-hailing cars (express) charge 23.9 yuan. The price of "RoboTaxi" is significantly higher. However, under the current platform subsidies, the price of "RoboTaxi" in Wuhan can be as low as around 1 yuan per kilometer, stimulating consumer spending with low prices and novelty.

II. Based on the current situation of "RoboTaxi" in Wuhan, calculate the long-term profitability of this business

The cost of RoboTaxi mainly includes vehicle, operation, and maintenance. Considering the business model and business nature, safe operation and reducing unit costs are the core points for the commercialization of the business. Based on the joint release of "Commercialization Trends of Autonomous Driving Taxis (RoboTaxi) by Roland Berger and Ruqi Travel in 2024," the total operating cost of RoboTaxi throughout its lifecycle mainly includes vehicle manufacturing, safe operation, and operational capacity:

Vehicle manufacturing cost: Mainly includes the procurement cost of the vehicle and autonomous driving modules. The former generally depends on cooperation with the main manufacturers and is expected to reduce costs through economies of scale in the future. The latter mainly includes costs of hardware such as chips, LiDAR, and intelligent driving software, with the potential to reduce costs through technological maturity.

Safe operation cost: Mainly includes training costs for safety personnel, salary costs, and platform operation-related expenses. On one hand, safety personnel are gradually transitioning from one person per car to multiple cars per person in the cloud, reducing costs and expanding coverage. On the other hand, with the increase in platform coverage and the maturity of dispatch algorithms, medium to long-term costs are expected to decrease.

Operational and maintenance cost: Mainly includes post-sales maintenance of RoboTaxi, charging and battery swapping costs, as well as other operational costs related to licenses and insurance. This cost is relatively essential, and there is a possibility of a decrease in battery maintenance costs in the future.

The rapid increase in operational volume drives a sharp increase in revenue for "RoboTaxi," and it is expected that the Wuhan region will achieve a break-even point in 2024. On May 15, 2024, Baidu Apollo Day 2024 was held in Wuhan. Chen Zhuo, General Manager of Baidu's Autonomous Driving Business Unit, stated, "By early 2024, with a significant improvement in spatial coverage and operational efficiency, the revenue of 'RoboTaxi' in Wuhan has increased by 9 times year-on-year, and losses have been reduced by more than half." Chen Zhuo also predicts, "Subsequently, with the gradual deployment of the sixth generation of unmanned vehicles, the revenue growth rate of 'RoboTaxi' will be faster. The goal is to achieve a balance of income and expenditure in Wuhan by the end of 2024 and enter a full profit period in 2025."

Based on the existing information in Wuhan, we have conducted a calculation and analysis of the future profitability of the "Luobo Kuai Pao" business:

Fixed Cost Side:

(1) Vehicle Cost: Currently, Baidu's sixth-generation autonomous vehicle Apollo RT6 (Yi Chi 06) is priced at 204,600 yuan (excluding the intelligent driving kit). We assume that including the intelligent kit required for autonomous driving, the total vehicle cost can be controlled within 250,000 yuan in 3 years and 200,000 yuan in the long term, depreciated over an 8-year mandatory scrappage period for ride-hailing vehicles.

(2) Labor Costs (including safety personnel and other operations): In 2023, the average annual wage of urban employees in Wuhan is 110,100 yuan; according to the "Guidelines for Autonomous Vehicle Transport Safety Services (Trial)", fully autonomous vehicles engaged in taxi passenger transport can use remote safety personnel in designated areas with a ratio of no less than 1:3 with the approval of the local government. We assume that safety personnel work in three shifts around the clock in Wuhan, receiving wages based on the average annual wage of urban employees. Additionally, we estimate that the ratio of remote safety personnel to vehicles will reach 1:5 in 3 years and 1:10 in the long term.

(3) Insurance Costs: According to Car Owner's Guide, the annual insurance cost for online ride-hailing vehicles is around 7,000-15,000 yuan. Taking reference from compulsory traffic insurance at 1,150 yuan, vehicle damage insurance at 1,800 yuan, third-party liability insurance with a limit of 500,000 yuan at 4,500 yuan, personal injury insurance for 5 seats at 120 yuan, theft insurance at 500 yuan, standalone glass breakage insurance at 120 yuan, scratch insurance at 480 yuan, no-deductible insurance at 400 yuan, totaling 9,550 yuan. We use 9,000 yuan for calculation.

(4) Maintenance Costs: According to data from F6 Automotive Technology Big Data Research Institute and Forward-looking Industry Research Institute, the average annual maintenance cost for new energy vehicles in 2022 is 1,210 yuan, while for traditional vehicles it is 2,570 yuan. The gap in maintenance costs between new energy vehicles and traditional vehicles widens with the difference in vehicle prices. We use 1,200 yuan for calculation.

Variable Costs/Revenue Side (Related to Daily Mileage):

(1) Mileage Electricity Costs and Other Electricity-related Operational Costs: According to data from DCD, the Yi Chi RT6 is equipped with a 56.06 kWh lithium iron phosphate battery with a comprehensive range of 380 kilometers. In terms of electricity costs, based on a report from Changjiang Daily in August 2023 on centralized delivery of battery-swapping taxis in Wuhan, drivers spend 48 yuan for a single battery swap covering 260 kilometers, resulting in an electricity cost of 0.185 yuan per kilometer. According to the TeLaiDian APP, the charging price at charging stations in Wuhan is generally around 1.3 yuan/kWh. Calculated based on the capacity and mileage of the Yi Chi RT6, the electricity cost per kilometer is 0.192 yuan We calculate based on an electricity cost of 0.2 yuan/km, assuming that other electricity-related operational costs (such as battery swapping operations, vehicle power consumption, etc.) are equivalent to the mileage electricity cost.

(2) Average Order Value (excluding subsidies): Based on the charging standards of "Luobo Express" in Wuhan, weighted calculations are made based on the charging prices during regular days and rest days. The starting fee on regular days is 15.19 yuan, the weighted average mileage fee is 2.85 yuan/km, and the weighted duration fee is 0.24 yuan/minute; the starting fee on rest days is 15 yuan, the weighted average mileage fee is 2.94 yuan/km, and the duration fee is 0.2 yuan/minute. According to data from the Guangzhou Municipal Transportation Bureau (Wuhan did not disclose the average daily mileage per bike, calculated based on Guangzhou data), in May 2024, the city's average daily orders for online car-hailing services are about 12.22 per bike, with an average daily operating mileage of about 99.49 km per bike, and an average daily revenue of about 311.63 yuan per bike, resulting in an average mileage per order of 8.14 km. We calculate based on 8 km per order for online car-hailing services, corresponding to a travel time of 20 minutes, weighted for weekdays and weekends, resulting in a cost of 4.92 yuan per km.

(3) Average Order Value (including subsidies): According to an article by The Paper on July 12, 2024, a netizen in Wuhan shared that a 28 km taxi ride costs only 26 yuan, averaging 0.93 yuan per km; a Wuhan resident shared that a 7.1 km trip cost a total of 5.07 yuan, averaging 0.71 yuan per km; according to an article by 36kr on July 13, a reporter from "Everyday Economic News" took a 3.9 km trip in Wuhan using Luobo Express for 6.2 yuan, averaging 1.59 yuan per km. We calculate a simple average based on the above data, assuming a cost of 1.1 yuan per km.

Current Breakeven Point: Based on the above calculations, under the assumption of the average order value (excluding subsidies), a bike needs to travel 91.95 km per day to break even. In the calculation process mentioned above, with an average order mileage of 8 km, 11.49 orders are needed. According to data cited by Sina Finance from Hubei Province, "Luobo Express" in Wuhan peaks at over 20 orders per bike per day, already achieving breakeven. Under the assumption of the average order value (including subsidies), a bike needs to travel 593.28 km per day to break even. In the calculation process mentioned above, with an average order mileage of 8 km, 74.16 orders are needed, which is clearly unrealistic.

Medium to Long-term Profitability Calculation:

(1) Cost Assumptions: Similar to the above calculation process, it is estimated that the total vehicle cost, including the intelligent kit required for autonomous driving, will be controlled within 250,000 yuan within 3 years and 200,000 yuan in the long term, depreciated over an 8-year mandatory scrappage period for online car-hailing services. It is expected that the ratio of remote safety personnel to vehicles will reach 1:5 within 3 years and 1:10 in the long term. Daily insurance costs, maintenance costs, mileage electricity costs, and other electricity-related operational costs are the same as mentioned above （2）Revenue Assumptions: Assuming that the average price per kilometer remains at 2.00 yuan/km, achieving profitability while being competitive with ride-hailing services. In terms of daily mileage, we assume that robotaxis operate 24 hours a day with a three-shift system for safety officers, resulting in a daily operating mileage twice that of ride-hailing services. Based on average data in Guangzhou, the daily service mileage per vehicle is estimated to be 200 kilometers.

（3）Profitability: Based on the above assumptions, in the medium term, "Luobo Express" generates a daily revenue of 400 yuan per vehicle, with a profit of 25.40 yuan, a profit margin of 6.35%, total profit over an 8-year lifecycle of 74,100 yuan, and a payback period of 6.17 years per vehicle. In the long term, "Luobo Express" generates a daily revenue of 400 yuan per vehicle, with a profit of 133.04 yuan, a profit margin of 33.26%, total profit over an 8-year lifecycle of 388,500 yuan, and a payback period of 2.72 years per vehicle.

Based on the current situation of national rental passenger transport vehicles, we have conducted a calculation and analysis of the future market space for the "Luobo Express" business.

Basic Assumptions:

（1）Number of Ride-Hailing Vehicles: According to data from the Ministry of Transport, by 2023, the number of ride-hailing vehicle transport certificates in China will reach 2.792 million, a year-on-year increase of 31.82%. Entering 2024, many regions have issued warnings about capacity saturation, leading to the suspension of related document processing in some areas. We assume that the development pace of ride-hailing vehicles in cities across the country is consistent, showing a slowing growth trend in the issuance of ride-hailing vehicle transport certificates, with a CAGR of approximately 5.22% from 2023 to 2030, corresponding to 3.9187 million ride-hailing vehicle transport certificates by 2030.

（2）Number of Taxi Vehicles: According to data from the Ministry of Transport, by 2023, the number of taxi vehicles in China will reach 1.3674 million, a year-on-year increase of 0.40%. Due to the impact of ride-hailing services on taxi vehicles, we assume that the number of taxi vehicles will decline by 1% annually, reaching 1.2745 million by 2030.

（3）Penetration Rate: If factors such as public opinion, policy constraints, and technological development affect the pace of commercialization of Robotaxi, a pessimistic assumption gives a 10% penetration rate by 2030. If the commercialization of Robotaxi progresses steadily, a neutral assumption gives a 20% penetration rate by 2030. If the government strongly supports the commercialization of Robotaxi, the construction of vehicle-road cloud, and breakthroughs in autonomous driving technology to promote industry development, an optimistic assumption gives a 30% penetration rate by 2030 Scenario 1: If Robotaxi is only promoted in existing pilot cities, the market size under neutral expectations is 425.73 billion, with a profit size of 141.60 billion.

If Robotaxi is only promoted in the existing pilot cities, based on the number of online ride-hailing cars and licensed taxis in each city, combined with national growth estimates, by 2023, there will be approximately 878,700 online ride-hailing cars and 200,900 licensed taxis in the pilot cities. Based on the basic assumptions mentioned above, the market size of Robotaxi under pessimistic expectations is 212.86 billion, with a profit size of 70.80 billion; under neutral expectations, the market size is 425.73 billion, with a profit size of 141.60 billion; under optimistic expectations, the market size is 638.59 billion, with a profit size of 212.40 billion.

Scenario 2: If Robotaxi is promoted in first and second-tier cities, the market size under neutral expectations is approximately 528.81 billion, with a profit size of 175.88 billion.

If Robotaxi is promoted in first and second-tier cities, we select the first-tier cities, new first-tier cities, and second-tier cities from the "New First-tier City Charm Ranking" by Yicai, and exclude cities with heavy winter snowfall such as Shenyang, Changchun, and Harbin, totaling 46 cities. Estimated based on the proportion of the total population of these cities to the national population in 2023, these cities will have approximately 950,900 online ride-hailing cars and 465,700 licensed taxis in 2023. Based on the basic assumptions mentioned above, the market size of Robotaxi under pessimistic expectations is 264.40 billion, with a profit size of 87.94 billion; under neutral expectations, the market size is 528.81 billion, with a profit size of 175.88 billion; under optimistic expectations, the market size is 793.21 billion, with a profit size of 263.82 billion.

Scenario 3: If Robotaxi is promoted nationwide, the market size under neutral expectations is 1552.73 billion, with a profit size of 516.44 billion.

If Robotaxi is promoted nationwide, there will be a total of 2,792,000 online ride-hailing cars and 1,367,300 licensed taxis in 2023. Based on the basic assumptions mentioned above, the market size of Robotaxi under pessimistic expectations is 776.36 billion, with a profit size of 258.22 billion; under neutral expectations, the market size is 1552.73 billion, with a profit size of 516.44 billion; under optimistic expectations, the market size is 2329.09 billion, with a profit size of 774.66 billion

Author of this article: Ying Ying from CITIC Securities (S1440521100010), Source: CITIC Securities Research (ID:gh_79ce9c666738), Original Title: "CITIC Securities: How to Calculate the Profitability of 'Radish Running'?"