Recently, the Ministry of Industry and Information Technology, the Ministry of Public Security and other five departments issued a notice on the pilot work of "vehicle road cloud integration" application for intelligent connected vehicles, proposing a series of policy measures for the coordinated development of "vehicle road cloud integration" for intelligent connected vehicles. As an important path to achieve the transformation and upgrading of the automotive industry, optimizing the supporting functions of intelligent connected vehicles plays a crucial role in cultivating new drivers of economic growth, promoting sustainable development of segmented industries, and accelerating the iteration of scenario applications. From the perspective of technology and industry development trends, intelligent connected vehicles are an inevitable result of the deep integration of digital technology and the real economy. With the maturity and improvement of the new generation of information technology, the application scenarios of intelligent connected vehicles are also constantly enriching. In addition, the trend of diversified, personalized, and high-quality demand is obvious, and many factors combine to give rise to strong development momentum in the industry. The global automotive industry is also undergoing rapid changes, and the maturity of the intelligent connected vehicle industry signifies high-level integration capabilities in manufacturing, technology, market, and supporting facilities. A new track of industrialization has been formed, and competition is also exceptionally fierce. Conducting large-scale demonstration applications is an inevitable trend in the development of the industry.

01 | Second half intelligence. Second half intelligence is the key to winning. Affordable intelligent driving is expected to launch intelligent driving as one of the application scenarios of artificial intelligence within the year. Advanced intelligent driving will liberate people from operating vehicles, significantly improving the driving experience, and is expected to have extremely high user stickiness; At the same time, the positioning of car companies has shifted from traditional manufacturing to the technology industry, and the charging model has shifted from a one-time vehicle trading model to a continuous payment model. The company has a strong willingness to invest. Tesla, Huawei, Xiaopeng and other companies are actively laying out, and ChatGPT style end-to-end large models may improve the speed of technological breakthroughs, stimulate an increase in user order rates, and improve domestic and foreign regulations for autonomous driving. The singularity of intelligent driving is approaching with the multi-dimensional catalysis of product, technology, and regulations. 23H2, Huawei and Xiaopeng educate consumers through high-end products; Starting from 24 years ago, the implementation of affordable smart driving is expected to drive ASP up to 200000.

Looking back at the global smartphone history review and summary of factors, looking back at the penetration rate of the smartphone industry and key time points of the company: 1) Apple stands at the starting point of the global smartphone industry explosion, with a penetration rate of about 10% (in 2007). From the perspective of software and hardware, it is defined as a "smartphone". 2) Samsung stands at the starting point of the global smartphone industry explosion, benchmarking Apple with continuous hardware iteration and upgrading and highly vertical supply chain integration, and continuing to follow. 3) Xiaomi stands at the starting point of the outbreak of China's smart phone industry, with a global penetration rate of about 15% (2010). With the founder's Internet operation ideas as the core, it defines what is "Internet smart phone". 4) OV stands in the early stages of the global smartphone boom, with a penetration rate of around 25% (2011). It quickly identified its own characteristics such as "photography/music/fast charging" and supplemented it with carpet marketing, defining it as a "distinctive and cost-effective smartphone". 5) Huawei stands at the fastest growing period of global smartphone growth, with a penetration rate of around 50% (in 2013). With hardcore technology as its endorsement, it has successfully intervened by combining cost-effectiveness, brand, and marketing. Analogous to smartphones, predict the pattern and growth logic of the smart car industry: Tesla, BYD, and Huawei have basically locked in three seats in the future domestic automotive industry. Tesla, as a leader, is similar to Apple, BYD's deep vertical integration of the industry chain is similar to Samsung, and Huawei's involvement in smart cars is earlier than that of smartphones, with a more anticipated upper limit. From the perspective of industrial niche, there is still 3-5 companies with the ultimate cost-effectiveness and differentiated experience, and 2-3 companies with survival space in overseas markets. Ultimately, the remaining 8-10 manufacturers will occupy the mainstream market. Growth logic: Connect points into lines, continuously integrate and present various new technologies and applications in the terminal product of automobiles. 

The penetration rate in terms of quantity has further increased. In 2022, the number of cars per thousand people in China was 226, compared to 629 in Japan and 837 in the United States. With economic growth and the trend of "smaller households", there is room for at least 400 cars per thousand people. With the addition of intelligent driving, the overall value center of the automotive industry is expected to shift upwards. The development of intelligent driving relies on policies and supporting infrastructure, and hardware products such as sensors have taken the lead in commercializing the implementation of intelligent driving. Essentially, it is the collaboration of the three core systems of perception, decision-making, and execution, responsible for environmental perception and positioning, intelligent planning and decision-making, and control execution. In terms of software, multiple giants such as Huawei have entered the market, leading startups with high valuations but difficult to commercialize and make profits in the early stages. Large host manufacturers also tend to focus on self-development, resulting in an overall downturn in the capital market; At the hardware level, sensors are quickly installed on the vehicle, and the penetration rate of intelligent chassis is not high, which is expected to become the next point of rapid growth. Intelligent cabins are expected to become standard equipment, with a focus on hardware upgrades and penetration opportunities. According to the Institute of Intelligent Automobile Research at Gaogong, 7.9505 million units of intelligent digital cabins (large screen+voice+vehicle networking+OTA) will be delivered as standard equipment in mid-2022, with a loading rate of 39.89%. It has developed from a leading new force to a leading position in the industry, with clear growth certainty, and is expected to further penetrate into models below 150000 yuan to become standard equipment. The penetration rate of multimodal interaction solutions such as vision, hearing, and touch in intelligent cockpit hardware continues to increase, driving the price and quantity of various types of hardware such as sensors to rise simultaneously; The AI big model is expected to significantly improve the performance of the intelligent cockpit. The value of automotive electronics continues to increase, and there are two investment logic for automotive semiconductors: market growth and domestic substitution. With the trend of electrification and intelligence of new energy vehicles, the value of vehicle chips will continue to rise. 

According to data released by Hisilicon at the 2021 China Automotive Semiconductor Industry Conference, it is expected that the proportion of automotive electronics in the total cost of automobiles will reach 50% by 2030. According to data from the China Association of Automobile Manufacturers, the number of automotive chips required for traditional fuel vehicles is 600-700, while the number of automotive chips required for electric vehicles will increase to 1600 per vehicle. The demand for chips for more advanced intelligent vehicles is expected to increase to 3000 per vehicle. Automotive chips can be roughly divided into five categories: main control chips, power chips, storage chips, analog chips, and sensing chips. Under the background of domestic substitution, the independent and controllable supply chain has further accelerated the development of the domestic automotive semiconductor market, and there are numerous opportunities for segmented tracks in the huge market increment.

02 | Jingtai Investment Suggestions: Whether it is electrification or intelligence, the main track is already very crowded, and the competitive landscape is basically determined or the entry threshold is extremely high. Based on the industrial characteristics of the strong rise of domestic brands under electrification, coupled with the huge increment brought by the trend of intelligent development, the upstream components of the automotive industry have three main logics: market growth logic brought by going abroad, penetration rate increase logic, and localization rate increase logic. Among them, the increment of going abroad is basically applicable to all components, and some segmented tracks are applicable to low penetration or low localization logic. Low penetration rate and low localization rate: mainly focused on new components brought about by electrification and intelligence, such as lightweight materials, air suspension, etc; As well as traditional overseas dominant fields such as intelligent chassis and automotive semiconductors, in addition to hard technological attributes, areas with high labor and manufacturing costs for domestic strengths are also worth paying attention to. Investment in leading strong binding projects: The automotive industry has entered the knockout stage, and binding with leading companies ensures performance stability. Huawei's industrial chain is greater than BYD's industrial chain.