CITIC Securities: Where is the incremental growth in intelligent driving in 2025?

According to the Zhitong Finance APP, CITIC Securities has released a research report stating that smart cars are one of the key growth lines (AI edge, smart cars, commercial aerospace) that are highly favored. It is expected that 2025 will be a critical node for the transition of intelligent driving chips, with self-developed chips likely becoming an important variable. It is estimated that the sales of new passenger cars equipped with the NOA (Navigation on Autopilot) solution will strive to reach 5 million units in 2025, corresponding to a penetration rate of over 20%; among them, the sales of new cars equipped with the urban NOA solution are expected to strive for 3 million units, corresponding to a penetration rate of 10%-15%. The incremental growth of high-speed navigation is expected to mainly come from BYD and Huawei's pure vision, while urban navigation is expected to accelerate penetration and double the shipment volume of lidar.

CITIC Securities' main viewpoints are as follows:

How to judge the penetration rate of intelligent driving in 2025?

It is estimated that the sales of new passenger cars equipped with the NOA solution will strive to reach 5 million units in 2025, corresponding to a penetration rate of over 20%. Looking further ahead to 2026, the sales of new cars equipped with the NOA solution are expected to grow by 60%-100% compared to 2025.

It is expected that the sales of new cars equipped with the urban NOA solution will strive to reach 3 million units in 2025, which is 2-2.5 times the estimated value for 2024. The firm estimates that the total sales of domestic urban NOA models in 2024 will be approximately 1.2-1.3 million units, with a penetration rate of over 5% in new passenger car sales. Looking ahead to 2025, the firm expects the sales of new cars equipped with the urban NOA solution to strive for 3 million units, with a penetration rate expected to reach 10%-15% in new passenger car sales.

Specifically, the incremental growth of urban NOA next year is expected to come from three aspects:

1. The expected increase in sales from car manufacturers such as Huawei, Li Auto, XPeng, Nio (Ledo), and Xiaomi;

2. It is expected that leading car manufacturers will successively launch end-to-end models and "parking space to parking space" functions, further enhancing the optional rate of advanced intelligent driving;

3. According to BYD Chairman Wang Chuanfu's statement at BYD Dream Day in January 2024, BYD will begin to offer advanced intelligent driving systems as options for models priced above 200,000 yuan, with models priced above 300,000 yuan likely to be standard.

Corresponding to the product diffusion curve, urban NOA is expected to cross the chasm from "early adopters" to "early majority" in the second half of next year. Additionally, if Tesla's FSD officially enters China next year, it is expected to further enhance the recognition and acceptance of urban navigation functions among domestic consumers.

It is expected that the sales of new cars equipped only with the high-speed NOA solution will strive to reach 2 million units in 2025, compared to an estimated 800,000 units in 2024. BYD is likely to be the largest increment and variable. The firm expects that the basic version of BYD's models priced above 200,000 yuan will be standard equipped with DiPilot 100, while the high-end version will be equipped with DiPilot 300; models in the 100,000 yuan price range will offer DiPilot 100 as an option (100 corresponds to high-speed navigation, 300 corresponds to urban navigation). Considering the time cycle required for the launch of updated models, the firm assumes that nearly half of BYD's total sales of 5 million units next year (as predicted by CITIC Securities Research Department's automotive team) will offer the option of DiPilot 100/300. At the same time, assuming that the optional rate for the high-end version of BYD's models priced above 200,000 yuan is 20%, and the optional rate for the intelligent driving version of models in the 100,000 yuan price range is 20%-30%, it is roughly estimated that the sales of BYD models equipped only with high-speed navigation (i.e., DiPilot 100) in 2025 will be approximately 800,000-1 million units Apart from BYD, Huawei's pure vision solution is also expected to provide some incremental growth. In August 2024, Huawei will further release the ADS SE version based on ADS, which implements high-speed navigation functions using a pure vision solution. Currently, the Deep Blue L07/S07 Qian Kun version has been launched with the ADS SE solution, starting at only 174,000 yuan. As Huawei's "car-making circle" continues to expand, more models priced at 200,000 yuan or even below are expected to be equipped with the ADS SE solution in the future.

In 2025, intelligent driving chips are expected to undergo a new round of upgrades, with self-developed chips likely becoming an important variable.

Mainstream chip manufacturers are gradually introducing new products, and 2025 is expected to be a critical turning point for intelligent driving chips. In high-speed navigation solutions, the firm expects BYD to be the main contributor in 2025, while in the short term, BYD may still primarily use NVIDIA Orin N (computing power 84T). In addition to NVIDIA Orin N, Horizon J6E/M (with computing power of 80 and 128T respectively) is also expected to become a strong competitor in high-speed navigation solutions. According to Horizon's 2024 intelligent driving technology product launch conference, the first batch of mass production partner car companies includes not only BYD but also SAIC, Volkswagen, Li Auto, GAC, Deep Blue, BAIC, and others.

In urban navigation solutions, it is expected that the NVIDIA Orin X solution will still dominate in 2025, and the single Orin X solution is becoming increasingly common. However, this does not mean that the computing power required for urban navigation is decreasing; on the contrary, the firm believes that with the introduction of end-to-end single models and Li Auto's VLM, the computing power required for urban navigation will further increase. It is recommended to pay close attention to the mass production progress of NVIDIA Thor, Horizon J6P/H, and Huizhi Intelligent R1.

Self-developed chips are expected to become an important variable in 2025, with leading domestic intelligent driving companies likely to initiate integrated hardware and software development. Currently, companies including Nio, XPeng, BYD, Li Auto, and Momenta all have self-developed chip plans. Among them, Nio and XPeng started the earliest and progressed the fastest, having begun team building in 2020. According to various company product launch conferences, chips are expected to be mass-produced and deployed in vehicles by 2025. Self-developed chips can help car companies complete an ecological closed loop, achieve higher computing and development efficiency, and further build a moat for intelligent driving through integrated hardware and software.

According to Hezhima Intelligent, the research and development cycle for a single chip is about three years. Referring to the investments of third-party chip companies, as of the end of 2023, Horizon and Hezhima Intelligent had 1,478 and 950 R&D personnel respectively, with total R&D investments from 2021 to 2023 being 5.39 billion and 2.72 billion yuan respectively. For leading car companies like BYD, achieving self-developed chips is highly feasible. In the long run, intelligent driving chips are expected to be comparable to mobile phones, with self-developed chips and third-party chips likely to coexist for a long time, and leading players are expected to initiate integrated hardware and software to lead industry development.

Urban navigation is expected to accelerate penetration and drive growth in lidar shipments, with product prices potentially dropping to the "thousand yuan" level.

The firm estimates that lidar shipments in 2025 are expected to exceed 2.5 million units, aiming for 3 million units, compared to an estimated 1.5 million units in 2024. The firm estimates that the domestic automotive lidar shipment volume in 2024 will be around 1.5 million units, including Hesai Technology with about 400,000 to 500,000 units, Suteng Juchuang with about 500,000 to 600,000 units, Huawei with about 300,000 to 400,000 units, and Tudatong with about 200,000 units Looking ahead to 2025, the bank estimates that the domestic automotive lidar shipment volume is expected to exceed 2.5 million units, with a neutral outlook of about 2.7 million units and an optimistic outlook of over 3 million units; among them, the most significant increase may come from Hesai, which is expected to exceed 1 million units in shipments by 2025.

In addition to continuously benefiting from the volume production of core customers such as Li Auto and Xiaomi, according to information from Hesai Technology's official website, Hesai has successfully obtained exclusive cooperation for new platforms with Leapmotor and Chang'an. In contrast, the performance of Suoteng in 2025 may be somewhat affected by XPeng's pure vision solution and Huawei's self-developed lidar launch, but the overall shipment volume is still expected to strive for 1 million units, with BYD and ZEEKR expected to become its main incremental contributors.

It is expected that due to technologies such as chip integration, the unit price of lidar is likely to drop to the "thousand yuan" level by 2025, supporting further medium- to long-term growth in lidar shipment volume. Currently, the unit price of mainstream automotive lidar products is around 3,000 yuan, which is still relatively high for most vehicle models. With the help of technologies such as chip integration, Suoteng and Hesai released "thousand yuan" level lidar products MX and ATX in April 2024, both priced around 200 USD, and both plan to start mass production for vehicles in 2025. The core technology of Hesai ATX is the company's self-developed fourth-generation chip architecture, while Suoteng MX has also achieved a full-stack chip reconstruction of the scanning, processing, and transceiver systems.

It is expected that with the launch of ATX and MX products in vehicles starting in 2025, lidar is likely to penetrate into intelligent driving models priced between 150,000 to 200,000 yuan, thereby supporting further growth in lidar shipment volume in 2026. In the medium to long term, chip integration technology is expected to put lidar on the path of "Moore's Law," achieving sustainable cost reduction and efficiency improvement, while all-solid-state technologies such as silicon photonic chips are also expected to open up greater imaginative space in the long run.

Investment Strategy:

In 2025, the bank recommends focusing on three investment tracks: high-quality growth, domestic consumption, and mergers and acquisitions, with intelligent vehicles being one of the key main lines under the high-quality growth track. The bank expects that the penetration rate of new cars for high-speed/city navigation in China will double compared to 2024, and suggests focusing on:

1. OEMs; 2) Autonomous driving chips; 3) Lidar; 4) Domain controllers; 5) Steer-by-wire chassis.

Risk Factors: Risks of technology and product iteration; product promotion speed lower than expected; risk of declining automobile sales; support policies for intelligent vehicles being weaker than expected; occurrence of serious accidents in intelligent driving, etc