Core point of view
The trend of electrification and intellectualization under the new energy cycle and 5G technology cycle
In the past 5-10 years, the development of new energy technology and information technology has gone hand in hand. We have made money for industrial expansion and profit growth in the stock market. In the next 5-10 years, new energy technology and information technology are expected to further resonate. We are expected to make profits and valuation Davis double-click money in the stock market. Drawing lessons from the experience of the smart phone industry chain, we think that we can pay attention to two major investment lines: 1) the breakthrough of superior components companies; and 2) the rise of innovative software and hardware companies.
Industry trend: electrification is the necessary trend of automobile, and intelligence is the optional trend of automobile.
Electrification under the new energy cycle is a necessary trend: automobile consumption is already a trillions of RMB market, terminal electrification as one of the important paths of carbon neutralization, electric vehicles have become the common direction of policy support and industrial trends. Intelligence under the 5G technology cycle is an optional trend: first, domestic ICT giants have laid out automotive business one after another, and some of them are strategically positioned as "incremental parts suppliers (including software and hardware)"; second, some overseas vehicle giants are positioned as travel services, extending to the back end of the smile curve to increase added value; third, parts giants have both software and hardware capabilities and are expected to become service providers of industry chain solutions.
Industry chain: from production-consumption-application, automobile is expected to become the next important intelligent terminal.
Production side: the intellectualization of traditional automobile giants begins to transform. Consumer side: the boundary of the whole ecological field from hardware to software is broadened, in which the upstream link includes: perception system, decision system, execution system, communication system, involving the core technology of hardware and software, such as sensor, ICT, software, etc., in which the perception system is the core bottom technology; the middle link includes: intelligent cockpit, intelligent network connection vehicle, through V2X mode to achieve human-car, car-car interaction. Application side: involving various scenarios such as travel, logistics, urban traffic management and so on. Smart car is expected to become the next important terminal after mobile phone in the future.
Vertical comparison: from traditional car to electric vehicle to intelligent car, our country gradually accumulates its advantages.
The era of traditional cars: China started late but developed rapidly. by 2009, China had caught up with Japan and became the largest country in automobile production in the world. The era of electric cars: China has gradually gained an advantage. In 2019, China has become the world's largest market for new energy vehicles, and China occupies four seats in the top 10 list of global sales. Smart car era: smile curve back-end market service link may further extend outward, while the back-end added value is expected to be greatly increased. China is expected to occupy a favorable position at the back end of the curve with a relatively complete hardware and software industry chain foundation and a huge downstream consumer market, or further accumulate advantages.
Horizontal comparison: analogy smart phone industry chain, software may become the main battlefield of smart car competition
With the systematic ecology of its smartphones, Apple has greatly increased the added value of a series of products, and raised the gross profit margin of its overall assets through more "software" in the structure of operating income. Compared with smart phones, the update cycle of smart car hardware is slower, and software upgrade is more likely to become the main battlefield of giant layout. Learn from Apple, the future smart car faucet may transfer non-core hardware and contract manufacturing to other suppliers; on the other hand, it is committed to its own automotive software system and ecology. rely on long-term sustainable software services in the future to achieve high-quality profits.
Investment logic: the target screening logic of traditional components is different from that of innovative hardware and software.
Drawing lessons from the smart phone industry chain, leading companies are expected to enable hardware companies to obtain the primitive accumulation of the first stage of growth, and lay the foundation for the expansion of domestic customers in the later stage and the expansion of market share after the mature period of the industry. in the final ecology: the companies with low gross margin and high consumption in Apple's industrial chain have a higher probability of becoming the white horse leader in the final segment. Mapped to the smart car industry chain, we think that in the choice of priority of investment targets: 1) low gross margin, high frequency sub-hardware investment priority; 2) higher gross margin or higher unit price priority; 3) core software system companies or need to wait for later domestic brands to accelerate penetration, investment opportunities may be gradually highlighted.
Risk hint
The penetration process of smart cars is not up to expectations; the promotion of Tesla smart cars is not up to expectations; the pace of the rise of domestic brands of smart cars is lower than expected; the risk of persistent inflation of industrial products squeezing the profits of hardware manufacturers; systemic risks caused by the spread of the epidemic, liquidity tightening and other factors.
Introduction: smart car under the resonance of new energy cycle and 5G cycle
Since 2000, automobile consumption has been the key support direction of China's industrial policy. since 2019, domestic support policies on automobile consumption (including new energy vehicles) have been frequent, and the potential market scale of the automobile industry is large and the added value is high. we focused on the smart car industry in the industry configuration section of the 2021 Strategy Outlook report "Reinflationary" and "New Manufacturing" (2020.11.20). We believe that the domestic new energy cycle in the next 5-10 years is expected to resonate with the 5G technology cycle, in which the new energy cycle starts the trend of automobile electrification, and the vehicle networking under the 5G technology cycle makes the car more intelligent. the intelligent vehicle standing on the basis of electric vehicle is an important combination of the resonance of the two cycles.
In terms of the new energy cycle, domestically, the new energy industry represented by electric vehicles and photovoltaic has gone through the stage of extensive development, entered a mature development stage, and began to have significant economies of scale; from a global point of view, China proposed a commitment of carbon peak in 2030 and carbon neutralization in 2060 in 2020.12; European countries successively put forward a timetable for phasing out fuel vehicles in 2020.05 (for example, Norway is 2025 at the earliest). The United States formally rejoined the Paris Agreement in 2021.2.19; under this background, the global new energy cycle of China, Europe and the United States is expected to begin, and automobile electrification is an important part of it. In terms of technology cycle, 2020-2025 China's 5G base stations have entered the main construction period, superimposed with the support of new infrastructure policies, with the continuous improvement of information technology infrastructure, the technical characteristics of 5G Internet of everything superimposed AI algorithm began to empower various industries, and the trend of digitization and intelligence of the automobile industry is also expected to open.
Judging from the layout of the domestic science and technology giants, in 2020, the two domestic technology giants Ali and Huawei have clearly put forward the intelligent vehicle strategy, or it indicates that the industry is still in the initial stage. At the resonance inflection point of the information technology cycle and the new energy cycle, according to the smile curve effect, first, the added value of the upstream manufacturing and design of the traditional automobile industry chain is expected to increase, and the industrial chain may be further expanded. The added value of the whole industry from hardware to application is expected to expand continuously. Second, the growth curve of back-end market services in the automobile industry is expected to expand outward, and extend the business model of new travel services. With the advantages of relatively complete software and hardware supply chain and infrastructure, superimposing the vast demand market downstream, we believe that China is expected to usher in the opportunity to overtake developed countries in the field of smart cars.
The core content and main framework of this report are as follows: (1) as a complex system and industrial chain, smart car needs to clarify the relationship between the upstream and downstream of the industrial chain, as well as the competition pattern and core suppliers in each subdivision; (2) draw lessons from the development law of the smart phone industry chain, deduce the development path of smart vehicles in the future, as well as the value-added space and order from hardware to software applications, and further select from the industry chain according to logic. it is expected to grow into the potential target and priority of the leading companies with large market capitalization in the supply chain.
Electrification is a necessary trend for automobiles, and intelligence is an optional trend.
The split of the value chain of the smart car industry: a significant increase in the proportion of back-end value
From the perspective of the value chain, the front-end value is significantly improved, and the back-end value is expected to extend. The intelligent network connection automobile has changed the product form and service mode of the traditional automobile, and it is expected to bring about profound changes in the value creation activities of each link in the value chain of the automobile industry in the future. The value chain of traditional cars shows the shape of "smile curve", that is, the added value of the front-end design and back-end service links is relatively high, while the middle-end manufacturing links are relatively low, while in the era of smart cars, on the basis of the original hardware links such as chassis, frame and parts design, software integration such as system, network connection and application is further added, so the added value of the front-end design and development link is expected to be further improved. In the back-end market, smart car, as a new intelligent terminal, fully excavates and uses the value of big data, such as road driving data and human-vehicle interaction data, and compares with the smartphone era, new applications and new business models are expected to emerge. bring broad back-end value to the industrial chain.
We think that in the era of smart cars, the industrial ecological value chain is expected to be reconstructed: 1) the technological revolution and the reconstruction of the relationship between self-driving and software; 2) the innovation of channel and sales integration: new retail has a profound impact on the further development of new cars, second-hand cars, auto finance and other businesses; 3) e-commerce leads to post-market innovation: the entry of e-commerce giants brings innovation in automobile post-market distribution and retail end; 4) the rise of the new back-end business model: the business model, the focus of value, and the competition and cooperation of players are expected to change, which is expected to bring new business models for car services such as shared travel. According to Roland Berger data, it is estimated that by 2030, compared with the traditional car era in 2017, the revenue from the front-end vehicle R & D and manufacturing sector is expected to increase by 1.5 trillion yuan compared with the 2017 traditional car era; spare parts are expected to increase by 1.6 trillion; circulation and extension services are expected to increase by 3.5 trillion; and after-sales service is expected to increase by 740 billion yuan. Car service is expected to increase by 2.6 trillion. In terms of income share, the income share of car service in the value chain is expected to increase from 2% in 2017 to 13%, both in absolute space and relative range.
Comparison of the Development stages of Automobile Industry: China has a relative advantage in the era of Electric vehicles
The automobile industry has successively experienced the traditional car era, the electric car era and the smart car era, in which Europe is the birthplace of the traditional automobile industry, while the development of the global automobile industry has roughly experienced three stages:
The first stage: the rise of automobile industry in Europe and America. From the end of the 19th century to the 1930s, during this period, more than 20 automobile companies such as Mercedes-Benz, Ford and General Motors were set up one after another, cars entered the standardized assembly line production, and the production efficiency was greatly improved. While the automobile output has increased greatly, the automobile technology has also made great progress. Transmissions, four-wheel braking, independent suspension technology and pressure shock absorbers were all invented during this period.
The second stage: the heyday of the global automobile industry. After the end of World War II, European countries made great efforts to develop cars, and the output increased from 800000 before the war to 8 million in the late 1970s, an increase of nearly 10 times. During this period, Japan also rose rapidly, with its output rapidly surpassing that of the United States and ranking first in the world.
The third stage: the mature period of the industry with stable output. After the 1970s, the world automobile output has stabilized at about 50 million vehicles, the automobile market in developed countries has become saturated, and the competition among various companies has become increasingly fierce. at the same time, trade frictions between Europe, the United States and Japan have been continuous. South Korea has risen in the fierce competition, successfully achieved technological leapfrogging and become an important base of automobile production in the world.
China's automobile industry started relatively late, but developed rapidly. According to Wind data, the output of passenger cars in China was only 482000 in 1997, accounting for only 1.27% of the world. By 2009, China had overtaken Japan and became the largest country in global automobile production, while by 2020, the output had reached 19.9941 million, accounting for 35.8% of the world. During the period from 1998 to 2020, the average annual compound growth rate of passenger car production in China reached 17.6%.
Entering 2010s, the global new energy vehicle is in the stage of rapid development. On the production side, according to EV Sales data, from 2010 to 2018, under the policy constraints of low-carbon environmental protection, the trend of automobile electrification began, and the global production of new energy vehicles developed at a high growth rate, which slowed down in 2019. The global production of new energy vehicles was about 2.17 million vehicles, and the output in 2020 was about 2.55 million vehicles, achieving a year-on-year growth rate of 17.5%. At the same time, on the sales side, led by giants such as Tesla (TSLA), new energy vehicles continue to maintain a high boom. Global sales of new energy vehicles are about 2.21 million in 2019, an increase of nearly 10% over the same period last year. EV Sales estimates that global sales of new energy vehicles will be about 3.24 million in 2020, and the growth rate is expected to return to 46.6%.
In the era of electric cars, China has achieved a certain dominant position. Various regions of the world have made efforts to promote the development according to the current situation of the domestic new energy vehicle industry and the industrial chain in various countries. from the perspective of regional distribution, China is the world's largest new energy vehicle market in 2019, and new energy vehicles in Europe in 2020. China's share has declined slightly, and the overall market share is roughly the same as that of Europe. According to EV Sales data, the European new energy vehicle market accounted for 43.06% of the global market in 2020, China accounted for about 41.27%, the United States accounted for 10.12%, and Japan accounted for 0.96%. From the perspective of competition, Tesla of the United States became the most popular new energy passenger car in the global market in 2019, and among the top 10 car companies in the world, China's BYD, BAIC New Energy, SAIC and Geely respectively occupy four seats. Whether from the proportion of regional sales or the competitive pattern of leading car companies, we think that China has achieved a certain dominant position in the field of electric vehicles.
The development of electric vehicle industry in China has entered a mature stage.
Since 2000, China has made great efforts to support automobile consumption, and since 2012, the policy focus has gradually shifted to new energy vehicles. With the sustained and strong support of the policy, the development of China's new energy vehicle industry has roughly experienced three complete stages since 2012:
Extensive development (2013-2015): in 2012, the State Council issued the Energy Saving and New Energy vehicle Industry Development Plan (2012-2020), which accelerated the development of China's electric vehicle industry. In 2013, China began to implement a strong subsidy policy for electric vehicles. The electric vehicle industry has entered a period of rapid development. In 2013.09, the Ministry of Finance issued the "Circular on continuing to promote the subsidy Policy for New Energy vehicles from 2013 to 2015"; in 2014, it issued a series of important documents such as "guidance on accelerating the Promotion and Application of New Energy vehicles". The government's active call to increase subsidies has opened a wave of new energy vehicles in China, while the major new energy vehicle companies ushered in an "extensive" development process in the initial stage, with both production and sales booming.
Overcapacity (2016-2018): with the decline of subsidies in 2016, new energy vehicles began to experience capacity clearance. In 2016 04, the Ministry of Finance and other four ministries jointly issued the Circular on the Financial support Policy for the Popularization and Application of New Energy vehicles from 2016 to 2020, explicitly requiring manufacturers of new energy vehicles to strengthen the quality assurance of key parts in order to curb the over-extensive development model in the past, the scope of subsidies was expanded to the whole country from 2015 to 2020, and the rate of slope decline was accelerated, and the subsidy from 2017 to 2018 decreased by 20% on the basis of 2016. The period from 2019 to 2020 is 40 per cent lower than in 2016.
Industrial maturity (since 2019): the "double points policy" in 2018.04 has been officially implemented. China's attitude towards the renewal of traditional fuel vehicles into new energy vehicles has changed from encouragement to vigorous promotion, and the new energy vehicle industry has ushered in a short repair, but after 2019, the growth rate of new energy vehicle sales continues to decline, and the industry is moving towards a mature period of stable industry pattern.
According to the above development stages, we review the excess income performance of the whole new energy vehicle industry chain relative to the CSI 3000.We find that: 1) in the extensive development stage (2013-2015), the excess income of the whole new energy vehicle, lithium battery, charging pile, vehicle networking and other sectors showed the characteristics of the same rise and fall, and in the end, there was little difference between the rise and fall, but fluctuated greatly (fell sharply during the period from 2014.06 to 2015.02). The beta attribute is stronger than the alpha attribute, and the representative leading stocks with large increases include: Ganfeng Lithium Industry (002460CH, lithium battery material), Trent (30001 CH, charging pile), and four-dimensional Tuxin (002405 CH, car networking). Relatively speaking, the lithium battery material link is relatively more flexible because it is upstream and has the periodic attribute of both volume and price. 2) in the capacity clearing stage (2016-2018), the expectation of new energy vehicles has dropped, and the stock price of the industrial chain company as a whole has also adjusted sharply, but relatively speaking, the callback range of lithium battery index relative earnings is relatively small. And during the period there have been many periodic rebounds, and the excess return range of the 2016.05-2018.12 lithium battery index is also relatively larger. 3) in the mature stage of the industry (from 2019 to now), the industrial chain index began to differentiate significantly, in which the performance of lithium battery index is the strongest, while the performance of charging piles and car networking is relatively weak, among which the representative leaders with large rise and fall in lithium battery index, such as Ganfeng lithium industry (002460 CH, lithium battery material) and Ningde era (300750CH, battery) are all varieties with relatively mature and stable industry pattern.
To sum up, in the process of the evolution of the investment logic of the electric vehicle industry chain from 2013 to 2020, the companies that eventually grew into the leader of the 100 billion market capitalization industry are mainly lithium battery industry links, such as Ningde era, Ganfeng lithium industry and so on. although the car networking and charging pile industry links also have their own leading birth, such as four-dimensional Tu Xin (map navigation), Truid (charging piles), but the overall income performance is weak. We believe that the main reasons are: 1) Lithium battery is located in the upper reaches of the electric vehicle industry chain, on the left side of the smile curve, the value of the industrial chain is higher, and it is also the first to benefit from it. At the same time, the cycle attribute of raw materials is superimposed, which is expected to rise in both quantity and price when the industry is booming. Bring greater profit flexibility, so the relative rate of return is stronger 2) the car network is located in the lower reaches of the electric vehicle industry chain, on the right side of the smile curve, the value of the industrial chain is higher, but the benefit rhythm is relatively late, so the early enterprise profit is difficult to cash quickly, so the beta attribute is strong and fluctuates greatly; 3) the charging pile belongs to the middle link matched with the electric car, which is in the middle position of the smile curve, and the added value of the industrial chain is relatively low, so although there is a leader born, there is little room for overall market value growth.
The smart car industry is still in its infancy, and the three forces have begun to make a strategic layout.
ICT giant: committed to becoming a core basic hardware and software supplier
The automobile strategy of the representative leading technology enterprises in China is defined as "incremental parts suppliers (including hardware and software)", rather than competing directly with traditional automobile enterprises. Represented by Huawei (unlisted) and Alibaba (9988 HK), the domestic technology giants have laid out the automobile business one after another since 2020, but different from the traditional automobile business, the Internet giants are based on automobile intelligence and focus on software and services. improve car business processes and vehicle networking technology.
Huawei's Hi-Car Strategy: realizing the connection of people, cars and families in the whole scene
In 2019, HiCar, one of Huawei's important strategies, was officially unveiled. On the one hand, based on the super distributed ability of the operating system, Hi-Car builds a mutual resource pool between mobile phone and car through the connection between mobile phone and car, extends the service ecology of mobile phone to the car, and realizes the optimal human-computer interaction experience of "mobile phone + car". On the other hand, HiCar builds an open ecological platform for one-stop development, which continuously creates value, ensures the wisdom and safety of consumers' travel experience, and makes development and innovation more efficient.
Ali's automobile strategy blueprint: vehicle-road coordination V2X model
Ali's blueprint is to develop from bicycles to vehicle-road collaboration (V2X), and finally to create an ecological pattern of the Internet of everything. In the aspect of vehicle intelligence, Ali focuses on the automobile operating system and the zebra system based on AliOS to build the world's largest Internet car platform across the factory. In terms of self-driving, Ali AI Labs studies driving technology, independently develops intelligent logistics vehicles, retrofits MKZ Lincoln self-driving test cars, and is currently studying self-driving technologies above the L4 level. In terms of the combination of cars and roads, Ali has a certain technical basis to create a high-precision map of Gao de and its main attack in the system. In the aspect of upgrading the automobile strategy, we should deeply cultivate the "intelligent highway plan". In terms of strategic cooperation, Ali successively signed cooperation agreements with SAIC to make strategic investments in Xiaopeng Motor and Evergrande Motor, and gradually improve the layout. Divided into three major business modules: (1) independent research and development of the automotive version of the YunOS operating system; (2) independent vehicle service O2O system, covering novice / second-hand car sales, auto finance, beauty decoration, maintenance and other business; (3) investment in maps and intelligent travel companies, including Yitutong, Gaode and other map companies, Didi, Lyft ride-hailing and pick-up, car came and other online buses.
Vehicle giant: Toyota's downstream mobile travel service market
Toyota, the world's largest vehicle manufacturer, has set its sights on the future mobile travel service market, coining a new term Autono-MaaS, which means mobile travel services using self-driving vehicles. In 2018, Toyota (TM US) unveiled new cool techs products such as the new generation electric car (EV) "e-Palette Concept" and the new generation of self-driving test car "Platform 3.0" at the CES in the United States, of which the e-Palette Concept is a product that can cover more demand and value of travel services. E-Palette Concept is a new generation of electric vehicle for mobile travel service, which applies advanced technologies such as electrification, interconnection, self-driving and so on. It is suitable for all kinds of service scenarios such as mobile, logistics and product sales, so as to provide new mobile solutions for people's daily life. Toyota will open up the vehicle control interface to carry self-driving control components developed by other companies and expose the API required by service providers on the mobile service platform, according to the e-car website.
For the Chinese market, Toyota and Horse Zhihang carry out self-driving strategic cooperation. According to the China Automotive Network, in 2019.11, Horse Zhixing was the first to launch its first Robotaxi service for the general public in California, laying the foundation for providing self-driving services around the world. at the same time, it opened the regular operation of Robotaxi on roads in the pilot city of Guangzhou, becoming the first company to provide Robotaxi services in the Chinese market. As of December 2019, Horse Zhixing had completed more than 70, 000 Robotaxi taxi orders. In 2020.02, Toyota invested $400 million in domestic autopilot head start-up Xiaoma Zhihang, which is mainly focused on high-level self-driving, to further improve its autopilot layout in China.
Parts giant: Bosch drives the whole industry chain through IOT software and hardware
As a leading global parts manufacturer, as early as 2014, Dr. (Volkmar Denner), CEO Dunnell of Bosch Group, was the first in the industry to put forward "Automation, Interconnection, electrification" in the future development direction of automobiles. At the same time, Bosch issued a "3s" strategy, that is, sensor (Sensors), software (Software) and service (Services), around this strategy. Bosch Automotive Technology Business Department was named Automotive and Intelligent Transportation Technology Business Department. In addition to the increase in the "intelligent transportation" business, Bosch has two chip manufacturing plants in Stuttgart and Dresden (under construction). Through the manufacture of MEMS chips, more sensing functions are provided. According to the speech given by Dr. Xu Daquan, executive vice president of Bosch China in October 2019, the current layout of Bosch in the automotive field is as follows: traditional power-chassis control system + new power: smart car networking.
First, the layout of IOT vehicle networking software and hardware. In 2019, Bosch revolves around the three technical directions of "digital twinning, intelligent penetration and safety enabling": 1) in the aspect of digital twinning, Bosch helps the whole vehicle factory to build the whole digital management platform of intelligent vehicles, including FOTA aerial software brushing, remote diagnosis and remote calibration. 2) in terms of intelligent penetration, promote the landing of the fully automatic valet parking solution in China, build the experience field of Beijing and Daimler Wangjing in September 2019, and officially operate the fully automatic valet parking lot in Shanghai in June 2020. At the same time, it is also promoting solutions related to battery cloud management, as well as working with the internal division to promote scene-based V2X application solutions.
The second is to serve the field of automobile manufacturing. Bosch Changsha plant is one of the production bases with the largest use of intelligent modules in Bosch Global Industrial 4.0. at the beginning of 2016, the construction of Industrial 4.0demonstration base was officially launched, including the commissioning of a brand new ninth generation automobile anti-lock brake system (ABS9) motor demonstration production line and the first phase intelligent upgrading of the existing production line in full accordance with the concept of Industrial 4.0. After the transformation of the industrial 4.0 production line in addition to the introduction of robots in the manufacturing, the biggest difference is that the equipment can be interconnected, and uploaded to the cloud through the network, the data can be processed to analyze the production situation in time. In addition, the software system can transmit the rights of monitoring and control devices to PC or mobile devices through the network.
The third is the layout of future mobile travel services. 2019.07, according to Automotive News of the United States, the automatic valet parking system jointly developed by Bosch and Daimler and applied in the Mercedes-Benz Museum parking lot in Stuttgart, Germany, has become the world's first approved L4 self-driving system, and it is estimated that more than a dozen parking lots around the world will be equipped with this service by the end of 2021. In terms of automotive technology and solutions, driver and ride management, vehicle management and other value-added services, Bosch can provide comprehensive cross-domain solutions for mobile travel service providers, for example: in the field of self-driving, Bosch can provide mobile travel service providers with core technologies or system solutions in the areas of self-driving awareness, decision-making and implementation. In the field of electrification, Bosch can provide advanced and diversified powertrain solutions; in driver and vehicle management, Bosch can provide in-vehicle monitoring solutions to avoid and solve the danger of violence, keyless entry, fleet management during driving control, automatic emergency call system, predictive vehicle maintenance system in maintenance control, etc. In the field of value-added services, Bosch information security solutions can ensure the network security of interconnected shared vehicles and so on.
To sum up, technology giants, vehicle giants and parts giants all rely on their original advantages to develop intelligent networked vehicles, among which the scientific and technological giants may devote themselves to the upstream of the smile curve, providing core basic software and hardware for intelligent networked vehicles, expanding the original business boundaries of enterprises, and laying out incremental markets. The vehicle giant may gradually expand to the travel service market downstream of the smile curve, increasing the value-added space of the final product, and then improve the gross profit margin and ROE level; because the parts giant has a broad customer base, or become a service provider for automobile manufacturers, it is expected to gradually focus on the software and hardware service providers of the whole industry chain to provide software and hardware services for industry chain customers, thus greatly expanding the original customer range and user boundary.
From production-consumption-application, automobile is expected to become the next important intelligent terminal.
Production side: modular platform is expected to accelerate the iterative frequency of vehicles and parts
In terms of production, Volkswagen of Germany and Toyota of Japan are the traditional leaders in the automotive field, transforming to intelligence in recent years. Volkswagen has launched a series of advance layouts in the areas of MEB electric modular platform, battery and charging infrastructure, while Bosch adheres to the concept of "Internet of everything" by revamping the production line so that devices can be interconnected, and after uploading data to the cloud, production can be monitored around the world. We believe that the transformation of the traditional leader will drive the transformation of various automobile companies and the development of the intelligent automobile industry chain. In the future, the transformation of the global automobile industry to intelligence has become a trend.
SAIC-Volkswagen MEB new energy vehicle plant-model development and production cycle is shortened. SAIC-Volkswagen's MEB plant is equipped with stamping, body, paint, final assembly and battery assembly workshops, as well as car body distribution center, automated three-dimensional viaduct warehouse, test lane and other facilities. With the power of a number of leading intelligent technologies, each workshop has achieved a high degree of automation, especially the car body and battery workshop, basically realizing unmanned fully automatic production.
Toyota TNGA architecture concept-standardization and generalization of parts and components. In 2010, Toyota (TM US) formally put forward the concept of "Toyota new global architecture (TNGA)". TNGA is not a specific platform, but a brand-new architecture of Toyota. According to Toyota's TNGA architecture concept, Toyota can directly make the same platform model, while using a large number of common parts, and the degree of parts commonality will rise from 20% in 2010 to 30% in 2019, and may reach 70% or even 80% in the long term in the future. In platform production, Toyota will integrate the production of A0 class, A class, B class (front drive), electric vehicle, hybrid and other models. In terms of resource conservation, the TNGA architecture will eventually reduce resources by more than 20%, and the saved resources will be further invested in product research and development, forming a virtuous circle, and finally achieving the goal of "making better cars" and achieving vehicle quality and no price increase.
Overall, Volkswagen's MEB modular platform to some extent solved the past vehicle manufacturers' vehicle development restrictions, at the same time, Toyota TNGA architecture makes the use of parts more standardized and universal. Based on this, we believe that in the smart car era, under the demonstration effect of the modular transformation of the production side of the vehicle giant, the iterative frequency of the whole vehicle and parts is expected to be accelerated in the future.
Consumer side: the boundary widening of the whole ecological field from hardware to software
In all previous industrial changes, automobile is an important application carrier of technological progress. In the context of the 5G technology cycle, the Internet of everything is expected to become a new trend, with more automobile parts, which is expected to involve many industries in the process of changing from traditional cars to intelligent Internet-connected vehicles. Intelligent Internet connected vehicle as an application platform, the future may carry mobile Internet, artificial intelligence, big data, cloud computing, Internet of things, 5G and other technologies. We believe that compared with traditional cars, which are "mechanical products with electronic functions", cars will become "electronic products with mechanical functions" in the future, and smart cars are expected to become after smart phones, an important mobile smart Internet terminal in the Internet of things.
Upstream: perceptual system is the underlying core technology link
(1) perception system
At present, there are two main technical routes of self-driving environment perception, one is the vision-oriented scheme dominated by the camera and cooperated with low-cost sensors such as millimeter wave radar, and the other is dominated by lidar. Cooperate with cameras, millimeter wave radar and other sensing end components. The cost of pure vision scheme is lower and the feasibility of commercialization is higher; the current cost of lidar scheme is higher, but it is more accurate in information acquisition.
According to data from ICVTank and the forward-looking Industrial Research Institute, the global market size of the vehicle camera industry is about US $11.2 billion in 2019 and is expected to reach US $27 billion in 2025. The CAGR is about 15.8% in 2020-2025. The market size of the car camera industry in China is about 4.7 billion yuan in 2019, is expected to reach 23 billion yuan in 2025, and the CAGR is about 30.3% in 2020-2025. The global market for car cameras is mainly occupied by international giants such as Panasonic, Faore and Fujitsu, while domestic manufacturers have a low market share.
According to iResearch, China's 24GHz millimeter wave radar market is about 3 billion yuan in 2020 and is expected to reach 34 billion yuan in 2030, while China's 77GHz millimeter wave radar market is about 1 billion yuan in 2020 and is expected to reach 30 billion yuan in 2030. From the perspective of competition pattern, the key technologies of millimeter wave radar are monopolized by foreign businessmen with a high degree of concentration, and the global millimeter wave radar market is mainly occupied by international giants such as Bosch, mainland, Hella and so on. Millimeter wave radar loaded with high-end cars in China mainly depends on foreign imports.
According to the Sullivan website, the global lidar market is expected to grow from $680 million in 2019 to $13.54 billion in 2025, with CAGR of about 64.6 per cent in 2020-2025. The suppliers of vehicle lidar market are mainly concentrated in foreign countries, including Velodyne, Quanegy and IBEO. At present, the market competition is fierce, the chip giants Nvidia (NVDA US) and Mobileye have entered the lidar market, and the main domestic participating manufacturers are Wesai Technology (unlisted), Suiteng Juchuang (unlisted), Beike Tianxiu (unlisted), Radium God Intelligence (unlisted), Huawei (unlisted), Dajiang Shiwo (unlisted) and so on. 2021.1.1, according to TechWeb, Xiaopeng (XPEV US) has announced that it will use lidar on its new mass production model to be launched in 2021, with the supplier of DJI incubated Livox Shevo Technology. At present, the competition pattern of lidar market has not yet been formed, and the enterprises that can accelerate mass production and reduce lidar cost in the future will have competitive advantages.
In addition to sensors, the perceptual system also requires two important technologies: high-precision mapping and high-precision positioning. Among them: high-precision positioning can provide self-driving vehicles with the spatial coordinates of the vehicle and the relative position coordinates of the current scene, as well as position-related information, usually achieved by the fusion of RTL, GNSS sensors and so on. Due to the robustness defects of traditional sensors, the use of high-precision positioning can further improve the positioning accuracy. Through the data of "high precision + high dynamic + multi-dimension", high-precision map can quickly identify the changes of road information and provide instructions for autopilot, which requires high real-time performance. High-precision positioning is the premise of high-precision maps. first of all, the data needed for high-precision maps need to be collected through the high-precision positioning framework, and inertia recursion or dead reckoning is used to obtain the positioning prediction value. At the same time, based on high-precision map, combined with perceptual matching to achieve high-precision autonomous navigation and positioning to ensure centimeter-level positioning. With the combination of the two, the vehicle can understand the possible road characteristics of the current position in advance, improve the recognition accuracy of the sensor and reduce the performance requirements of the sensor.
(2) decision system
The decision-making system can make decisions based on perceptual information, determine appropriate working models, formulate corresponding control strategies, and make driving decisions instead of human beings, which is similar to assigning corresponding executive tasks to intelligent vehicles. It is the brain of the intelligent car and the central processing unit of the car. In terms of hardware, decision-making system includes computing platform and chip; in terms of software, decision-making system includes operating system. Among them: the vehicle computing platform is a new generation of vehicle central computing unit gradually changing from traditional ECU to intelligent high-speed processor, including hardware such as chips, modules, interfaces, as well as drivers, operating systems, basic applications and other software. it can ensure the high-speed and reliable operation of intelligent network-connected vehicle perception, decision-making, planning and control. The vehicle operating system is not only the interface between the user and the vehicle hardware, but also the interface between the vehicle hardware and the upper software, which allocates resources and controls the operation of the program according to the resource request of the application program; improves the man-machine interface and provides support for the upper software.
Operating system is the key for automobile manufacturers to lay out and control the core technology. the main technical routes are developing independent operating system, customized development based on ROM and independent APP. Most mainframe factories generally choose to develop ROM operating system. The operating system is divided into two categories: autopilot operating system and intelligent cockpit operating system. QNX, Linux and Android are the three main intelligent cockpit bottom operating systems. Domestic AliOS, DuerOS and Huawei Hongmeng also have certain competitive strength. The pattern of the autopilot operating system is still unclear, and the cost of redeveloping the underlying operating system is high. Foreign mainframe factories mostly choose Linux as the underlying operating system, because the domestic Android application ecology is better, domestic independent brands and new forces of car construction are mostly based on Android customized vehicle operating system.
(3) execution system
On-line braking is the most critical and technically difficult part in the control and execution layer of self-driving vehicles. Wire-controlled braking is to replace the original brake pedal with an analog generator to receive the driver's braking intention, generate and transmit braking signals to the control and actuator, and simulate and feedback to the driver according to a certain algorithm.
From the perspective of the competition pattern, the enterprises involved in the executive end are mainly foreign Tier1 giants such as Bosch, and the domestic progress is the fastest in the control of the Bethel (603596CH) line. Foreign Tier1 giants have high technology accumulation in chassis and power system, and wire-controlled steering follows EPS technology. International giants such as Bosch, Zaifu, Jettaigt, Japanese Seiko, Nesite and other international giants rely on their accumulation in electric steering, and have a solid leading position in the field of on-line steering. In the field of online control, Bosch, mainland and ZF occupy a leading position in the industry, while domestic 603596CH, Nathan Electronics (unlisted) and 601689CH Group are also trying to catch up.
(4) Communication system
V2X communication system includes vehicle and vehicle (V2V), vehicle and road (V2I), vehicle and human (V2P), vehicle and cloud (V2C). This kind of multi-dimensional real-time and fast communication is the foundation of vehicle networking, self-driving and intelligent transportation. At present, China Automotive Engineering Society, China Communications Standardization Association, vehicle Information Service Alliance, Future Mobile Communication Forum, China Intelligent Transportation Industry Alliance, IMT-2020 (5G) Promotion Group C-V2X working Group and other research platforms have been formed to jointly promote the evolution and testing of vehicle networking technology standards. C-V2X standard is mainly divided into protocol specifications, security standards and corresponding technical requirements of each layer (message layer, network layer, access layer). At present, the relevant technical standards, equipment specifications and test method standards of domestic LTE-V2X standard system have been established.
To sum up, the development of China's vehicle networking industry is expected to go through three stages, which may be in the second stage: the first stage (LTE-V2X,4G), which aims at passenger cars and operating vehicles in urban roads and highways to achieve auxiliary driving safety and improve traffic efficiency; the second stage (LTE-V2X,5G eMBB), in specific areas and scenarios for medium-and low-speed self-driving of commercial vehicles; The third stage (NR-V2X,5G eMBB), all-weather, all-scene self-driving and highway vehicle formation driving. On the basis of fully considering the maturity of C-V2X technology, standard formulation, industry chain support, testing and verification, etc., various industrial alliances in China have worked together to put forward the path and timetable of C-V2X industrialization: 2019-2021 is the introduction period, deployed in specific areas, exploring commercial model; 2022-2025 is the development period, popularizing and applying in typical cities and roads; After 2025, there will be a period of rapid development, and national coverage will be gradually realized.
Middle reaches: intelligent cockpit and vehicle networking integrators may accelerate the development of industrial chain
(1) Intelligent cockpit
The intelligent cockpit integrates hardware, human-computer interaction system and system software to build a differentiated and personalized intelligent cockpit space. In the hardware, the cockpit is mainly composed of liquid crystal dashboard, HUD and streaming media rearview mirror. the infotainment system is developing to touch function integrated large-size display screen. Cockpit, infotainment system, including seats, air conditioning, audio and other human-computer interaction functions will be integrated into speech recognition, gesture recognition, visual recognition and other human-computer interaction functions, and the cockpit will be further simplified, integrated and intelligent. In terms of software, the operating system has become the core of the OEM intelligent network layout, so it is mostly independently developed by car companies based on the underlying operating system (Android,Linux,QNX,AliOS,DuerOS).
(2) Intelligent network connection vehicle
As the final integrator, the whole vehicle factory needs to centralize the roles of software and hardware, functions and ecological service providers to complete the delivery from vehicle manufacturing to long-term travel services. Traditional first-tier suppliers cooperate with vehicle manufacturers and IT technology companies in the field of artificial intelligence and software to promote the development of vehicle networking and strengthen their own R & D capabilities. ICT enterprise has the leading intelligent network connection technology, promotes the automobile intelligence and the network connection, lets the human-car interaction change to the human-vehicle relationship, lets the whole vehicle real-time online connect everything. Internet enterprises need to continuously excavate the application scenario of "people, cars, and life", and enhance the initiative and accuracy of services based on data analysis, so as to create Internet service ecology.
Application side: application and promotion of scenarios such as travel, logistics, urban traffic management, etc.
The physical structure of intelligent network connected automobile products is mainly divided into five levels: function and application layer, software and platform layer, network and transport layer, equipment terminal layer, basic and universal layer. In addition, the physical structure also includes two important components: functional security and information security, which are the reliable guarantee for the safe, stable and orderly operation of all kinds of products and applications.
In terms of functional application, V2X is the key technology of the future intelligent transportation system, which enables communication between vehicles and vehicles (V2V), vehicles and roads (V2I), vehicles and people (V2P), and vehicles and clouds (V2C). In autopilot mode, vehicles or RSU perceive the traffic environment through radar, cameras and other sensing devices, including surrounding vehicles, VRU, objects, road conditions, etc., and share their perception results with other vehicles through V2V/V2I. In the aspect of life and entertainment, V2X can obtain user data through human-computer interaction, such as voice, facial expression and gesture interaction, and then learn to increase the fit with users, and then recommend points of interest according to the preferences of users.
Travel scene: through the acquisition of big data to make people's travel more convenient and efficient. As the best practice application scenario of intelligent car self-driving, travel service can use self-driving vehicles to collect road test data and improve the efficiency of research and development at the same time. For example, Didi's dynamic control optimization system can receive the position information of the vehicle in seconds, obtain the vehicle trajectory timely and accurately, and then determine the delay time, parking time, queuing position and other information of the vehicle passing through the intersection through the trajectory position. at the same time, the real traffic scene is identified by the passenger carrying state, and the abnormal parking interference caused by non-congestion is eliminated.
Logistics scene: "Intelligent warehousing + vehicle network transportation + contactless distribution" improves the management efficiency. Unmanned logistics is a major trend in the development of automation and intelligence in the logistics industry. In the process of goods distribution, the application of intelligent sorting robot and other intelligent equipment in goods scanning, classification, transportation and other links improves the efficiency of logistics storage and delivery. In the link of freight transportation, with the help of wireless communication technology, Internet technology, GPS, GIS and other technologies, the vehicle network can real-time dispatch and dynamically monitor the online vehicles, and can check and grasp the vehicle condition, road condition, running position, speed, direction and other information at any time, so as to realize the automatic operation and efficient optimal management of the freight transportation process. In the process of distribution, logistics and distribution personnel deliver goods through intelligent express cabinets, post stations, collection points or places designated by users to avoid direct contact with the recipient, or directly through drones, driverless cars, and so on. "contactless distribution" is realized.
Traffic management scene: Changsha intelligent bus uses vehicle-road coordination to improve traffic efficiency. Changsha Intelligent bus Line 315 is loaded with on-board intelligent equipment, intelligent traffic lights and roadside intelligent network equipment are installed at the intersections along the line, and the operation and supervision platform of line 315 intelligent network digital transportation system is developed. With the support of vehicle-road coordination technology, the "road end" can obtain real-time data such as speed, position and driving status of intelligent network-connected bus in real time, and interact with the traffic signal control system in real time to adjust the time configuration of each phase of the signal light. by shortening the red light, prolonging the green light and other ways to achieve public transport priority.
Investment Logic: space, Rhythm and Stock selection Logic of Intelligent Automobile Industry chain
According to the above analysis, the smart car industry chain is a whole ecological industry chain including vehicles, parts, systems, software and applications, which can be regarded as the next important terminal after smartphones, and the representative leading company of its global wind direction is Tesla. The last whole ecological industrial chain, smart phone, has experienced more than 10 years of development since 2007 and has evolved into a mature ecology. From the perspective of ecological structure, it includes: a trend leading leader-Apple (AAPL US);, a number of domestic leading companies-Huawei, 1810HK and so on; Many hardware supplier leaders-Qualcomm (QCOM US, chip), Samsung (SSNLF US, storage and panel), Lixun Precision (002475CH, parts), etc.; many software leaders-Google (GOOGL US, system), Tencent (0700 HK, application) and so on. Finally, from the perspective of AH share investment, we think that we can learn from the path of the rise of software and hardware companies in the development process of the smart phone industry chain, as well as the mature ecological structure formed so far, so as to deduce the development path of the future smart car industry chain AH listed companies, as well as the final formation of the ecological model.
From the point of view of the development stage, the development of China's smart phone industry chain has roughly gone through three stages:
(1) before 2007, in the traditional mobile phone era, the investment logic of the industry chain was the communication module with higher value content, and the representative core beneficiary company was the communication leader (Nokia (NOK US), etc.).
(2) from 2008 to 2014, with the release of the first generation iPhone, the penetration of iPhone continues to increase, and the investment logic of the industry chain extends from communication modules to electronic suppliers such as processors, storage, panel display and other electronic suppliers, and the representative beneficiary company is the leading company in Apple's supply chain.
(3) from 2015 to now, with the rise of domestic terminal phones, the investment logic of the industrial chain has expanded from Apple's industrial chain to the whole field of consumer electronics, while the whole mobile Internet ecology has been gradually built. In terms of hardware, due to the rise of domestic smartphones (Huawei, etc.), the localization of hardware is gradually opened; In terms of software, based on the dividend of the mobile Internet technology revolution, the traffic App with outstanding business model has gradually grown into a giant, and the representative beneficiary companies are semiconductors (domestic substitutes) and traffic giants (Tencent, etc.).
Investment space: hardware update and upgrade requirements, the gradual formation of software ecology
In the process of the development of the smartphone industry, hardware and software promote each other. On the one hand, the improvement of hardware functions brings new software application experience and realizes new functional modules; on the other hand, the promotion of applications puts forward higher requirements for smartphone hardware computing and storage, which in turn promotes the continuous upgrading of hardware. Therefore, the investment space for hardware in this process lies in two aspects: one is the total demand for increasing smartphone penetration, and the other is the demand for hardware updates brought about by the continuous upgrading of mobile phones. In addition, in the field of software applications, the investment space lies in the aggregation effect of App traffic with different functions and the realization ability of the resulting traffic, until the final formation of mature software ecology.
Compared with Nokia, the traditional mobile phone leader, Apple's smartphones have greatly increased the added value of hardware and software. The traditional mobile phone only satisfies the communication function in people's daily life and realizes the connection between people, while the smartphone expands the function and application scene of the mobile phone in all aspects, making it a carrier of high added value. The main manifestations are as follows: (1) in the later period, with the rise of brands such as Samsung and Huawei, the smartphone market is fierce, but Apple has always maintained a high bargaining power in the upper and lower reaches of the industrial chain. According to the data on Apple's official website, the cost of iPhone from 2009 to 2018 increased by 126%, but the domestic selling price increased by 140%. (2) in addition to hardware, Apple relies on building its own ecosystem. According to IHS, Apple's software revenue (mainly App Store commission) increased from $4.2 billion to $64 billion in 2009-2020, and its share increased significantly from 11.5% to 23.3%.
Compared with Nokia, the traditional mobile phone leader, and Apple, the representative of smartphones, there are significant differences in revenue structure and gross profit margin: since Apple launched the first-generation iPhone in 2007, the market share of Nokia, the traditional mobile phone giant between 2007 and 2012, has been squeezed, and the gross profit margin has been falling until September 2013, when Microsoft announced that it would buy Nokia's devices and services division for $7.2 billion. This includes obtaining Nokia patent licenses and brand use, and completing the acquisition business in April 2014.
Drawing lessons from the innovation experience of smart phones compared to traditional mobile phones, in the stock market (through the original company's technological upgrading means, it does not significantly change the original industry pattern), it mainly includes three major alternative upgrades: (1) the communication module is upgraded from 2G to 3G; (2) the panel display is upgraded from low-resolution screen to high-resolution screen; and (3) the processor architecture and performance are upgraded comprehensively. In the incremental market (changing the landscape, it is possible to create new revolutionary software and hardware companies), it includes at least the following five aspects of innovation: (1) camera module; (2) storage module; (3) all kinds of sensors (gyroscope and other); (4) operating system; (5) all kinds of application software. In the stock market, although technological upgrading may lead to an increase in the unit price of products and strengthen the leading position of the leading companies, it is mainly dominated by the original companies and basically does not change the competition pattern of the original industry; while in the incremental market, the intelligent trend of mobile phones brings a number of new software and hardware requirements, under this driving factor, it may pull some small companies with unique technological paths to become leaders.
Therefore, compared with traditional cars, from the point of view of market scale, according to the average unit price of 10-200000 yuan, and according to the renewal cycle of 6 years, the average market size brought about by the annual upgrading of a car is about 25000 yuan, while the unit price of smartphones is about 2000-4000 yuan. according to the data of the Ministry of Industry and Information Technology, the number of smartphones shipped in China in 2019 is 3.72 / 296 million respectively. On this basis, we estimate that the size of the domestic smartphone market is about 1 trillion yuan (2.96 ~ 372 million * 3000 yuan); According to the data of the Ministry of Public Security, the number of cars in 2020 is 281 million. On this basis, we estimate that the size of the domestic automobile market is about 7 trillion yuan (25000 * 280 million). The automobile market is a relatively larger market. In the smart car era, according to the above analysis, the modular transformation of the vehicle giant at the production end and the generalization of parts are expected to further accelerate the vehicle renewal cycle and the frequency of parts replacement in the future.
We believe that: (1) the small increase in renewal frequency may lie in the replacement and upgrading of traditional parts, including motor, headlights, automobile decoration and so on; (2) the faster update frequency (or even analogical smartphones) may mainly lie in the incremental market innovation components, including at least: lidar, IGBT, CPU, GPU, visual sensors, central display screen, operating system, applications, artificial intelligence and other fields, these areas are expected to give birth to a number of new unicorn companies.
To sum up, Apple, with its own smartphone system ecology, has greatly increased the added value of a series of products, and raised the gross profit margin of the overall assets through more "software" in the structure of operating income. Compared with smart phones, smart cars themselves are a larger market, and after the production platform and modularization in the future, the frequency of replacement of complete vehicles and parts is expected to further increase, and the market space is also expected to further expand. At the same time, the iterative frequency of software may be higher than that of hardware, and it may become the main battlefield of giant layout. For vehicle manufacturers, on the one hand, the complexity of automobile manufacturing is much higher than that of mobile phones, and on the hardware side, we think that its core advantage lies in the standardization of parts after the transformation of the production platform. still maintain a high bargaining power to upstream parts manufacturers; on the software side, we can actively cooperate with information technology manufacturers to carry out software, system, application and other aspects of cooperation; On the service side, with the batch standardized vehicle production capacity, the travel service can be arranged downstream to improve the added value.
Based on the above, we believe that the traditional car manufacturers and new smart car manufacturers will coexist in the future. drawing lessons from the experience of Apple's industrial chain, we believe that the leading enterprises of the intelligent automobile industry chain, on the one hand, non-core hardware and contract manufacturing may be transferred to other suppliers, which may provide strong support to domestic smart car parts and battery manufacturers. On the other hand, it focuses on the construction of its own automotive software system and ecology, and relies on long-term sustainable software services in the future to obtain high-quality (high gross margin, light assets) profits. Tesla is expected to generate $1.9 billion in software revenue in 2020 and $21.6 billion by 2025, with an average compound growth rate of 62.6 per cent over a five-year period, according to IHS.
Investment rhythm: traditional parts-innovative hardware-system software-application software
In the process of the development of the smartphone industry, led by Apple's industrial chain, a number of leading companies in software and hardware were finally formed. in the AH share market, the representative hardware leader is Lixun Precision, and its growth process roughly goes through three stages: (1) from 2008 to 2015, with the continuous increase of iPhone shipments, the company's hardware shipments gradually increased, according to the company's annual report data disclosed by the company. Revenue has grown steadily from 630 million to 10.139 billion, with an annualized compound growth rate of 48.7%, and the company's total market capitalization has grown from less than 10 billion in 2010 to more than 40 billion at the end of 2015. (2) from 2016 to 2018, the overall penetration of smartphones gradually reached saturation, and with the rise of domestic mobile phone leaders (Huawei, Xiaomi, etc.), Apple's shipments declined and industry competition intensified. However, after years of scale and technology accumulation, the company's product advantages appear, the customer range is broadened, and the market share is expanded. At this stage, the company's revenue scale further increased to 35.85 billion in 2018. The average annual compound growth rate is 52.3%, and the total market capitalization has increased to 57.85 billion by the end of 2018. (3) from 2019 to now, with the start of the 5G technology cycle and the gradual opening of a new round of replacement, the company has become the absolute leader in the subdivision of the smartphone industry chain, with revenue once again expanding to 93.374 billion (Wind consensus in 2020), with an annualized compound growth rate of 61.4%, while the company's total market capitalization reached 392.8 billion at the end of 2020, which means that the market capitalization growth significantly exceeds the revenue growth. It means starting to have significant economies of scale (net profit growth is faster than income growth).
In terms of representative software application leaders, with the continuous improvement of smartphone penetration, traditional PC Internet companies such as Ali and Tencent began to actively transform to mobile, and application leading companies with new business models continue to emerge, such as Meituan, Didi, byte jump, etc., the whole application ecology of mobile Internet is gradually taking shape. Take Tencent as an example. From 2008 to 2015, Tencent gradually completed the process of migrating users from PC to mobile. From 2016 to 2018, as the mobile intelligent terminal market gradually reached saturation, traffic competition intensified, through the financing-subsidy model to attract traffic, the new business model of mobile Internet giant companies rise rapidly, the scale continues to expand, and valuation drives a substantial increase in market capitalization. From 2019 to now, the traffic competition on the application side has come to an end, and the industry pattern has basically been formed. there are traffic giant companies in various subdivisions, which begin to enter the current stage of traffic change, and corporate profits drive the growth of market capitalization.
To sum up, drawing lessons from the experience of Apple's industrial chain, the early hardware companies are driven by leading companies, and the early profit growth trend is relatively strong, but due to potential uncertain factors such as industrial competition, market value growth is slower than profit growth; on the one hand, the rise of software application companies needs to rely on terminal penetration to reach the middle and later stage; On the other hand, the investment in early drainage is relatively large, it is difficult to contribute to profits, the growth of market value depends on the improvement of valuation, and the flexibility is relatively large.
Mapped to the smart car industry chain led by Tesla, permeability is the key word that affects the rhythm of investment. According to the Ministry of Industry and Information Technology, the penetration rate of electric vehicles in China only exceeded 1% in the 11 years from 2005 to 2015, while from 2016 to 2020Q3, the penetration rate rose rapidly from 1% to about 4%, which is still in its early stage. Under the framework of the 14th five-year Plan, electrification is an important trend of automobile terminals. according to the permeability requirements of the guidelines of "Energy Saving and New Energy vehicle Technology Roadmap 2.0", the penetration rate of 2025max 2030 / 2035 new energy vehicles will reach 20%, 40% and 50%, respectively. We expect that by 2025 (penetration 20%), the sales of smart car leaders are expected to gradually increase. The investment logic of industrial chain companies is mainly driven by the growing scale of hardware companies, while application companies are still in the theme investment stage. Therefore, from the perspective of value investment, we believe that on the one hand, 2021-2025 hardware takes precedence over software. At the same time, the iterative rate of innovative hardware (such as sensors, etc.) is higher in the early stage, and its market space may be better than that of traditional parts and components hardware. On the other hand, system software (operating system, map navigation, etc.) also need faster iterations in the early stage, and companies in related industries may realize growth earlier, while application software invest at a relatively slow pace. We need to wait until the penetration rate reaches about 20% (the industry is basically stable), so we think we can start to pay attention to high-quality track application companies after 2025.
Investment target: compare the Apple industry chain and screen the potential hardware leaders.
Summing up the growth logic of the hardware leader in the smartphone industry chain, it is roughly divided into three stages: (1) the rise of Apple from 2009 to 2012, driving the industrial chain hardware companies to complete the primitive accumulation of technology and scale; (2) from 2013 to 2016, the rise of domestic smartphones leads the expansion of the industry scale and becomes the second round of growth logic. (3) from 2017 to now, the market tends to mature, and the leading companies have achieved the third growth due to the expansion of market share due to technological advantages and scale advantages. According to the data of the Wind industry chain, there are 13 hardware companies whose A shares have become the core suppliers in the Apple industry chain, of which only 7 companies reported revenue of more than 10 billion in 2019, and finally (as of 2021.4.16) only 5 companies have a market capitalization of more than 100 billion, and the rest have a market capitalization of less than 50 billion. This shows that it is difficult for most industrial chain companies to become white horse leading companies with stable industrial chain status and stable growth.
Considering the logic of the industrial chain, by supporting the supply chain model, Apple provides parts support for the company's core terminal products such as mobile phones, and in order to control the industrial chain and stabilize its own bargaining power, Apple tends to entrust supply chain OEM with industrial links with low technical barriers and easy replacement. Especially considering the actual situation of China's manufacturing industry (the broad market and relatively low labor costs are the core competitive advantages), the logic of long-term growth of seemingly low-end hardware suppliers is smoother. It is mainly reflected in: first, it is easy to be ignored by leading companies in the upper reaches of the smartphone industry chain, and the potential development space may not be limited; Second, due to the low gross profit margin, the barriers to economies of scale may be higher and higher, which is difficult for other competitors to cut into in the later stage. We use gross profit margin as a core alternative indicator to reflect the technical barriers and upstream and downstream bargaining power of products. We find that of the 41 listed companies in Apple's industrial chain, 2020Q3 reported a gross profit margin of more than 25%, and only one company with a market capitalization of more than 100 billion (as of 2021.04.16) (Lance Technology 300433CH); and only one company with a gross profit margin of more than 25% since 2013 (Lance Technology 300433CH). We think that this may represent a high gross margin trap. Capital markets generally think that high gross margin products show high technical barriers and stronger competitive advantages, but in the logic of industrial chain growth driven by foreign enterprises, high gross margin may be a disadvantage.
Apart from hardware, software has always been the core of Apple's business model, and it is a high, stable and continuous source of profits for Apple. Therefore, no software company has entered the Apple industrial chain from the beginning to the end. The rise of late application software companies does not depend on Apple's industrial chain, but is developed on the basis of the mobile Internet ecology and relying on the advantages of China's broad C-end user groups. It is relatively more inclined to capital-driven logic rather than industry.
Drawing lessons from the smart phone industry chain, leading companies are expected to enable hardware companies to obtain the primitive accumulation of the first stage of growth, and lay the foundation for the expansion of domestic customers in the later stage and the expansion of market share after the mature period of the industry. because we can see in the law of the Apple industrial chain that the hardware leader of the Apple industrial chain is usually the hardware leader of the entire consumer electronics. Mapped to the smart car industry chain, we think that entering the supply chain of smart car leading enterprises or a key step in the rise of potential auto parts or smart hardware companies in China, and in terms of investment logic, companies that seem to have low technical barriers, low gross margins and high consumption are more likely to become white horse leaders in the final segment.
Risk hint
The main results are as follows: (1) the penetration process of intelligent vehicles is not up to the expectation, which leads to the profit of the relevant industry chain falling short of the expectation;
(2) the leading competition of overseas traditional car companies has led to the failure of Tesla's smart car promotion to meet expectations;
(3) with the intensification of market-oriented competition, the rhythm and progress of the rise of domestic brand smart cars are lower than expected;
(4) the risk of continuous inflation of industrial products squeezing the profits of hardware manufacturers;
(5) systemic risks caused by epidemic spread, liquidity tightening and other factors.
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