2024 will become a turning point in China's semi-autonomous driving market

Komo released a research report saying that advanced autonomous driving in China will usher in commercialization, that future models without semi-autonomous driving functions may be difficult to sell, and that 2024 is expected to be an important turning point in the development of China's semi-autonomous driving market (L3/4 level). Komo said that automakers are optimistic about $BYD COMPANY(01211.HK)$ and $LEAPMOTOR(09863.HK)$, followed by $GWMOTOR(02333.HK)$. The bank is also optimistic about $XPENG-W(09868.HK)$'s leading technology position in the autonomous driving business, but has reservations about its valuation, so it will seek a more attractive buying point.

Komo pointed out that the Ministry of Industry and Information Technology announced a trial plan to allow approved vehicles with semi-automatic or advanced autonomous driving functions (L3/4 level) to drive within a limited area starting in 2024. At the same time, Huawei plans to split smart car-related business divisions, reflecting that future marketing strategies will shift to young people. At that time, the L3/4 semi-autonomous driving function will not only be a "icing on the cake," but a "essential function."

Komo divides the number of Chinese automakers listed on the market into 2 categories:

1) Internally developed, developing autonomous driving technology and capabilities internally, including data and algorithms, such as Xpeng;

2) Outsource to external suppliers or turnkey solution providers (such as Huawei, Mobileye, Horizon), or work closely with them, such as BYD, Geely, and Great Wall.

Furthermore, Komo expects that as Huawei enters new energy vehicles, it will have several major impacts on the Chinese NEV market:

1) It is estimated that in 2025, the share of plug-in hybrid/extended-range electric vehicles in total demand for new energy vehicles will increase from 30%/23% in 2023/2022 to 40%. Among them, extended-range electric vehicles may reach high single digits in total demand for new energy vehicles in 2025.

2) The autonomous driving function may change from a "icing on the cake" to a "must-have function," and from an investor's perspective, automakers with leading internal technology may enjoy valuation premiums.

Komo: 2024 will become a turning point in China's semi-autonomous driving market, optimistic about BYD (01211) and Leapmotor (09863)