Investment Rating - The report maintains an "Overweight" rating for the automotive industry, particularly focusing on the transformation of traditional car manufacturers [1]. Core Insights - FAW Audi collaborates with Huawei to enhance automotive intelligence, which is expected to address Audi's shortcomings in smart technology. This partnership is anticipated to bolster Audi's sales in the luxury car market [5][6]. - The report highlights key beneficiaries in the automotive parts sector, including Jifeng and Kobot, which are expected to gain from Audi's new models and their integration of Huawei's advanced driving assistance systems [5][6]. - By 2025, all new Audi models will feature jointly developed high-level intelligent driving systems, enhancing safety, efficiency, comfort, and luxury for Chinese consumers [5]. Summary by Sections Investment Highlights - Recommended companies in the Audi supply chain include Jifeng Co., Ltd. and Kobot, with Jifeng holding orders for three new energy models from Audi, projected to generate sales of 8-10 billion yuan over their lifecycle [5]. - Kobot is set to receive new orders for Audi's DCDC and thermal management smart actuators in 2024, while FAW Fuwi is expected to have nearly 33% of its receivables from Audi's new energy division by the end of 2024 [5]. Market Performance - Audi's annual sales in China reached 731,000 units at one point, with projections of 663,000 units for 2024 and cumulative sales of 91,000 units for January-February 2025. The growth potential for Audi in China remains significant, especially with the collaboration with Huawei [5].

Core Viewpoint - BYD's advanced intelligent driving solutions are expected to significantly penetrate the market, with projected sales of high-level NOA models reaching nearly 3 million units by 2025, indicating a penetration rate of 60% for highway NOA and 9% for urban NOA, leading to a total of 3.46 million units and a combined penetration rate of 69%, a substantial increase from 7.2% in 2024 [1] Summary by Sections Intelligent Driving Configuration - BYD's intelligent driving technology matrix includes three levels: 1) Tian Shen Zhi Yan A with three LiDARs and DiPilot 600, mainly used in the Yangwang brand for urban NOA 2) Tian Shen Zhi Yan B with one LiDAR and DiPilot 300, used in Tengshi and BYD brands for urban NOA 3) Tian Shen Zhi Yan C with high-definition three-camera setup and DiPilot 100, primarily in BYD models for high-speed NOA - All models priced above 100,000 yuan will be equipped with the Tian Shen Zhi Yan system, while models below this price, such as Qin PLUS DM-i, Sea Lion 0.5 DM-i, and Sea Gull, will also feature this technology, making advanced driving technology accessible at a starting price of 78,800 yuan [2] Upstream Hardware Supply Chain - The core incremental components in the hardware supply chain for intelligent driving include: 1) Main chips and domain controllers: Tian Shen Zhi Yan A uses dual NVIDIA Orin-X chips, B uses a single Orin-X, and C uses either Orin-N or Horizon J series chips 2) Cameras: All three configurations use 12 cameras, with a significant demand increase projected for 2024 and 2025, estimated at 10 million and 50 million units respectively 3) LiDAR: Tian Shen Zhi Yan A has three LiDARs, B has one, and C uses a pure vision approach, with demand expected to rise to 80,000 and 450,000 units for 2024 and 2025 respectively [3][4][5] Investment Strategy - The investment focus for 2025 is on edge AI, with BYD's automotive intelligent upgrade as a key direction. The hardware sector's core growth is anticipated in main chips, domain controllers, cameras, LiDAR, and connectors. - The investment tiers are categorized as follows: 1) First tier: Upstream components with potential supply-demand tightness and long-term product upgrade logic 2) Second tier: Components with volume growth logic, particularly in lens modules and LiDAR 3) Third tier: Components with volume growth logic and potential market share increase in connectors 4) Fourth tier: General automotive components and PCBs [7][8][9][10]