Prediction 1: smart cars are expected to become the world's largest entrepreneurial outlet after the Internet.

The birth of the Internet has given birth to a huge market opportunity.

In 1969, the predecessor of the Internet, Arpanet, was born in California. In the following decades, the development of the Internet has brought great business value and investment opportunities, and formed six types of business models: 1) traffic advertising; 2) member payment; 3) virtual props; 4) e-commerce transactions; 5) Internet finance; 6) ICT.

The representative companies under each business model have achieved rapid growth, such as: 1) Baidu, Inc., Alphabet Inc-CL C; 2) Himalayas, Sina; 3) Meitu, Tencent; 4) BABA, Amazon.Com Inc; 5) Ant Financial Services Group, Waterdrop Inc. chip; 6) Huawei, byte beating.

Now smart cars are expected to connect to the Internet and open a "wealth-making channel".

According to the IDC Global Intelligent Network Automobile Forecast report, the global smart car market shipments will reach 76.2 million units in 2024, and the CAGR will reach 16.8% from 2020 to 2024.

As one of the largest smart car markets in the world, China is making every effort to meet the trend of intelligent transformation, and has received strong support at the national level. The smart car industry chain opens from top to bottom, and a number of whole vehicle enterprises and technology enterprises have cut into the track.

At present, China is the largest automobile consumer market in the world.

In 2020, global car sales totaled 78.03 million, compared with 25.27 million in China, ranking first in the world and accounting for 32 per cent of the world.

The domestic smart car industry has a large scale, rapid growth and rising penetration: in 2020, the scale of China's intelligent car industry has increased to 255.6 billion yuan, and it is expected that the industrial scale will reach 585.9 billion yuan in 2026, with a CAGR of 14.8%. According to the National Development and Reform Commission, the number of smart cars in China will reach 28 million in 2025, with a penetration rate of 82%, and about 38 million in 2030, with a penetration rate of 95%.

With the whole vehicle manufacturing as the core, there are a large number of incremental innovations in intelligent vehicles.

Upstream enterprises include perception, control, communication system manufacturing, the main products include chips, radar, maps, etc.; mid-stream enterprises include executive system manufacturing main products including intelligent central control screen; downstream is mainly for development, testing and operation of the service industry.

Traditional car companies, new forces and technology giants are investing heavily in the whole car track: the coordinated development of smart city, smart car, smart travel and intelligent transportation has become the inevitable demand for the sustainable development of the automobile industry; in addition, the core technology of smart car can not be separated from the development of AI, big data, cloud computing and system. This will be the main direction of the transformation of traditional automobile giants, and it will also be the entry point for new forces and technology giants to enter the car-building track.

The decline in car-building costs and the era window brought by the business model provide opportunities for start-ups, and the entry of intelligent electric track enterprises is basically at the same starting line.

New energy vehicles take "three electricity" as the core, and the proportion of electronic components is increasing rapidly: the core components of fuel vehicles are engines and transmission systems, accounting for 25% of the total cost of the vehicle, while the core components of new energy vehicles are batteries, electric controls and motors, accounting for more than 50% of the cost. In the future, the cost share of electronic components in automobiles will continue to rise rapidly to more than 50%.

Cars will be the biggest market for volume and change after smartphones. Intelligence has opened a new window for "software-defined cars" and become a key factor in the fate of technology giants. After the "software-defined car" has become a consensus, the imagination brought by software is even more striking.

Prediction 2: China will become the intelligent car center of the world.

Reason 1: China has the advantage of ICT technology.

ICT technology, the full name of information and communication technology, is the foundation of intelligent vehicles. In 2020, China's ICT technology maturity curve covers 24 technologies and practices. The exponential growth of Internet users over the past few years has accelerated the launch of their own data platforms by major technology companies, accelerating the digital transformation. The strong accumulation of ICT technology represented by Huawei has laid a solid foundation for the development of intelligent driving in China.

Reason two: the diligence of the Chinese people

Chinese labor force participation ranks first in the world. According to the data of the US National Bureau of Statistics on the labor force participation rate of various countries in the world, China ranks first in the world, the total labor force ranks first in the world, and the labor force participation rate ranks first in the world. In the initial stage of smart cars, the diligence of Chinese people will accelerate China's smart car technology breakthroughs.

Reason 3: Chinese enterprises invest heavily.

In 2019, Chinese companies raised $2.3 billion in autopilot financing, second only to the United States. In 2019, the top two of the global self-driving financing are the United States and China. Of these, the United States leads the world with $4.5 billion in financing, followed by China with $2.3 billion. Together, China and the United States account for 94% of total global financing.

ICT corporate giants cut into the smart driving track by partnering with traditional car companies. Autopilot is one of the most promising fields among many commercial targets of artificial intelligence, so it is also the field with the earliest layout time and a large number of enterprises. In addition to traditional complete vehicle and parts companies in China, technology companies, such as Huawei, BAT and DJI, are also accelerating their entry through industrial collaboration or independent research and development.

China has become the country with the largest number of patents in the field of smart cars. Globally, China accounted for 37 per cent of the 32000 patents related to smart cars in 2017, followed by Japan, the US, Germany and South Korea, accounting for 20 per cent, 16 per cent, 12 per cent and 7 per cent, respectively. Benefiting from the government's policy support for patent applications, the number of patent applications of Chinese enterprises in the field of intelligent Internet connected vehicles has exceeded that of Europe and the United States.

The proportion of intelligent cars listed in China is high in 2020, and the intelligent configuration rate is on the rise. In 2020, smart vehicles (including non-full-vehicle OTA) accounted for 34% of the total. Among them, intelligent cockpit as a new field, the equipment rate is as high as 86%; the intelligent driving equipment rate is 68%; the OTA equipment rate is 43%.

Prediction 3: independent brands are expected to beat joint venture brands at home and start the global march.

The advantages of joint venture brands are no longer obvious, and some of them have withdrawn from the Chinese market.

In recent years, the sales of joint venture brands such as French, Italian and Korean are depressed and showing a downward trend. Opel and Suzuki have withdrawn from the Chinese market one after another. In addition to not being close to the Chinese market, the rapid technological accumulation of independent car companies is also one of the reasons for this phenomenon. As the halo of joint venture brands is slowly fading, there is still much room for independent brands to improve their market share.

Independent brands cling to the context of the times, the national tide attracts Z-generation consumers.

In recent years, with the rapid development of China's automobile industry, independent brands have experienced years of deep ploughing and precipitation, relying on hard power such as manufacturing technology and national culture and art and other soft power, gradually catching up with and surpassing international brands in the fierce global automobile market competition. The "Generation Z" born between 1995 and 2009 has become the main consumer group. At the moment when the young people of Generation Z take over the consumption, the new cars with rich sense of technology are expected to gain the recognition of the youth of Generation Z.

In recent years, independent brands such as Red Flag and LinkedIn have continued to impact the high-end market in the Chinese market, making up for the shortcomings of the market range. After the accumulation of scale advantages, it is going global, breaking through the global high and low end market. With technological advances, new product launches, and the failure of joint ventures, we expect our own brands to have a domestic market share of more than 70% by 2030, while bicycle prices are expected to double and start to compete in the global market.

Forecast 4: personalized needs of thousands of people, a large number of innovations, many market segments, industries or accommodate more than 10 independent car companies

The consumer demand in the intelligent electric era is changing to the direction of customization and precision.

The consumer demand in the intelligent electric era is mainly divided into: 1) driving assistance and travel service demand; 2) vehicle digitization, online function extension demand; 3) daily social service function; 4) work-related service function. The intelligent cockpit can meet the needs of consumers in these four aspects.

In the aspect of intelligent assisted travel, improving user efficiency and convenience is the fundamental starting point. The intelligent cockpit will satisfy the services related to travel and location, so as to satisfy the search for nearby scenes such as food, clothing, housing and transportation before users even put forward their needs. The existing functions will be more intelligent, the images will be clearer, the navigation will be automatically updated on the real-time network, and the customized navigation represents the future trend.

The extension of vehicle digital and online service function will be realized with the application of 5G. In the context of the Internet of everything, automotive O2O services, multi-equipment interconnection, in-vehicle online payment and other functions make the use of cars more convenient and efficient.

Seven major trends of intelligent cockpit, the automobile market is divided into more details, so that many vehicle enterprises have living space.

The intelligent cockpit will enrich the social functions of the car. Accurate service can be achieved in ticket purchase, seat selection, hotel reservation, route planning, making friends in car, etc. This kind of social migration to the car side will have higher user stickiness.

In terms of office and entertainment, the intelligent cockpit first needs to meet the real-time requirements of users, so as to support users to work on the road. The entertainment function is relatively minor, and it is mainly audio. For drivers, listening, uninterrupted and personalized non-depth audio will not interfere with driving and play a role of companionship. For passengers in the car, there are no restrictions on the types of entertainment, but they are relatively independent and will not affect driving.

The scale of the automobile market is large enough, personalized demand and the emergence of a large number of innovations, so that many vehicle enterprises have room for survival, traditional independent car enterprises and new car-building forces have opportunities.

Companies entering the smart cockpit are divided into two categories: hardware and software. In terms of hardware, companies such as Horizon and Huawei Hayes have entered the production of AI chips; in terms of software, NIO Inc., the top three new forces in car building, has launched a voice assistant NOMI, XPeng Inc. launched a P7 smart seat, and ideally, the intelligent cockpit is also one of the core selling points.

Prediction 5: the final pattern of the whole vehicle is expected to divide the world by "3".

The final forecast of the whole vehicle: 3 traditional brands + 3 new forces + 3 technology companies.

With the accumulation of technology and the improvement of market concentration, the vehicle pattern will eventually form a "3-3-3" situation, which is divided into three parts of the world. Among them, pay attention to the leading enterprises in various fields: 1) traditional autonomy: great Wall, Geely, SAIC, Guangzhou Automobile, Changan, BAIC, well-off, etc.

2) New forces of car building: NIO Inc., ideal, XPeng Inc., Weima, Gaohe, Tianjing, etc.

3) Technology companies: Huawei, XIAOMI, Baidu, Inc., DiDi Global Inc., OV, etc.

Entrepreneurship is not only the core resource of the enterprise for a long time, but also one of the necessary conditions for the final winner.According to Harvard Business School Christensen's innovative enterprise model, innovative entrepreneurs generally have the following four characteristics: 1) thinking about how to change the status quo; 2) observing widely with questions; 3) trial and error; and 4) talking to people in different fields and backgrounds to get information. The mode of thinking formed by these four characteristics enables entrepreneurs to find solutions to problems quickly.

The ability of supply chain integration is the core competitiveness of the final winner of the vehicle.In information integration, coordination and resource sharing and organizational interconnection, excellent supply chain integration capability is one of the most necessary characteristics of the whole vehicle, and it is also one of the criteria to stand out and achieve the final result.

Full-stack software and hardware R & D operation and development capability is one of the goals of the whole vehicle.Full-stack development means that car companies complete most of the R & D tasks themselves, rather than assigning all the R & D work of core systems and components to suppliers. Huawei already has the strength of full stack research and development, and the new power and independence are also striving to become the XIAOMI and OV brands in mobile phones.

Intelligent automobile products have been well known by users, and consumers generally prefer three types of products. According to the consumer preference matrix composed of data such as car purchase concern, range preference, charging preference, autopilot and machine preference, the consumers of intelligent vehicles prefer: 1) early warning auxiliary driving and basic; 2) control auxiliary driving function and basic car machine function; 3) early warning auxiliary driving function and intelligent vehicle machine function.

Forecast 6: the whole car "the king returns, the value is revalued", the market value still has a lot of room for growth.

In terms of subdivision, the representative chip layer listed companies in the control system include Renesas Electronics, Texas Instruments Inc, Siwei Tuxin, Horizon, etc., while unlisted companies include Deep reference Technology, Core Microelectronics, Core Sheng Intelligent Technology, Silicon Valley digital semiconductors, etc.; among algorithm companies, listed companies include Cambrian, iFLYTEK, etc., and unlisted companies include Huawei, fire technology, and so on.

Among the listed companies of vehicle manufacturing, BAIC, Jianghuai, Great Wall, Changan, SAIC and so on have layout in domestic and foreign markets. The new car-building forces represented by NIO Inc., XPeng Inc. and ideal also have the ability to manufacture complete vehicles.

The core of the whole car factory: from manufacturing + brand to technology + brand.

Manufacturing and supply chain management capabilities are the core of the traditional automobile manufacturing industry.There are still many deficiencies in the development of China's auto parts industry, such as large but not strong, lack of high-end, low-end surplus, and there are many shortcomings and breakpoints in the upstream and downstream of the industrial chain. The deficiency of the automobile industry chain reflects the deficiency of China's manufacturing industry. For a long time, the overall level of China's manufacturing industry has hovered in the middle and low end, especially the three key links such as industrial special materials, industrial software and control system, special production equipment and testing system.

The ability of science and technology is the core of car building in the new era.For example, Great Wall Motor, Geely Automobile, and Guangzhou Automobile Group have successively released new strategies and new technologies of enterprises, driving innovation with science and technology, accelerating into a new era of "building cars on platforms" and "building smart cars", and launching a positive technological showdown with world brands. And at present, the new cars launched by major car companies all take the sense of science and technology as the core selling point.

The market capitalization of Tesla, Inc. and the new forces of car building has risen all the way, especially Tesla, Inc. has far exceeded the traditional automobile giants. As of June 21, 2021, Tesla, Inc. 's market capitalization was $598.1 billion, more than twice that of Toyota, while NIO Inc. 's market capitalization was as high as $71 billion, indicating that investors are optimistic about the prospect of smart electric vehicles.

When the market value of domestic car companies was revalued, as of June 21, 2021, Great Wall Motor's market capitalization reached more than 300 billion yuan. BAIC Blue Valley, Xiaokang shares and so on accompanied by the wave of automobile electric intelligence, the market capitalization has also increased significantly in the past two years.

Prediction 7: independent brand hybrid large-scale alternative fuel vehicles

The parallel Management measures for average fuel consumption of passenger car Enterprises and New Energy vehicle credits (double points Policy) was officially issued on September 28, 2017 and implemented in April 2018. The method applies to vehicles with a maximum total design mass of no more than 3500 kg produced by domestic passenger car production enterprises and imported passenger car supply enterprises, including traditional energy passenger vehicles and new energy passenger vehicles. Double integral: "fuel consumption integral" + "new energy vehicle integral", which puts forward higher requirements for traditional vehicle fuel consumption and new energy vehicle output.

The new double integral method has made great changes to the "hybrid vehicle", including the definition of integral vehicle, the definition of low fuel consumption passenger car, double integral accounting and carryover rules and so on. In particular, with the introduction of the concept of "low fuel consumption vehicles", low fuel consumption vehicles using advanced electrification technology will enjoy the benefits of integral calculation and become the beneficiaries of the new deal.

At the annual meeting of the China Society of Automotive Engineering in 2020, Li Jun, chairman of the Society, released the "Roadmap of Energy Saving and New Energy vehicle Technology 2.0". Hybrid passenger vehicles account for more than 50% of traditional car sales by 2025; by 2035, all traditional energy-powered passenger cars have been replaced by hybrid vehicles, new energy vehicles have become the mainstream, energy-efficient vehicles and new energy vehicles account for 50% each, and the automobile industry has realized electrified transformation.

By 2035, the average fuel consumption of new passenger cars (including new energy vehicles) will reach 2L/100km, while that of traditional energy vehicles will reach 4L/100km.

By 2035, there will be more than 150 million slow-filling ports and 1.46 million public fast-charging ports (including the field of special-purpose vehicles).

Forecast 8: secondary market investment pays more attention to R & D costs, technology, products, FOTA, experience, followed by sales volume and market share.

The main components of new energy vehicles are three electricity (motor, electric control, battery) + Sanzhi (intelligent network connection, intelligent cockpit, intelligent driving).

The amount of investment in R & D will directly affect the future of car companies. The more car companies invest in R & D, it means that they can obtain more patents and fruits, and it is also more conducive to their future sustainable development. The proportion of investment in R & D will undoubtedly affect the future development of automobile companies.

Automobile electrification is unstoppable, and the technical routes of automobile enterprises are different. The new forces of car building generally choose the pure electric route, and the old traditional car companies, whether German or Japanese, Korean or American, are starting the electrification transformation one after another while iterating the engine technology.

FOTA can bring the upgrade of the whole vehicle machine system level, and it is a kind of software update function which is higher than OTA. FOTA generally refers to long-distance vehicle software upgrade, which is an important index to judge intelligent electric vehicles. Vehicles with FOTA capability will be able to upgrade the vehicle electronic control unit (ECU), vehicle engine system firmware, etc.; users do not need to go to the offline service center or connect external equipment, etc.

Car sales are more concentrated to the head enterprises, and the rise of head independent brands is still the main opportunity for vehicle investment in the future. In terms of sales concentration, the market share of the top 15 has reached 77.5%. Compared with 2019, the market share of the top 15 car companies in 2020 has increased by 3 percentage points, and the sales volume and brand acceptance of the whole market are further on a par with those of the leading car companies.

Forecast 9: the secondary market investment will transition from the traditional demand cycle to the technological innovation-driven supply cycle.

Affected by cost, product cycle, epidemic situation, chip supply and other factors, the auto market has entered a downward cycle since 2017. After more than a decade of rapid growth, domestic car sales peaked for the first time in 2017. From 2017 to 2020, domestic narrow passenger car sales dropped from 23.7644 million to 19.288 million.

Smart car penetration has increased more than nine-fold in four years, from 5.2% in 2016 to 51.6% in 2020.

According to the Gartner technology maturity curve in 2019, vehicles with three levels of autonomous driving hardware capability will be widely produced. Sensor technologies such as detection and ranging (Lidar) are mainly used to achieve self-driving and will be popular components in the automobile industry in the next five years.

Autopilot levels 4 and 5 will be implemented with more mature software and more powerful computing. With the continuous introduction of new technologies and new models, the automobile industry will change from consumer demand-driven to technology product supply-driven.

Prediction 10: the vehicle valuation method needs to go from PB to PE, and PS or other valuation may be adopted in the future.

In the near future, low profits or even no profits in 3-5 years will not become the focus of science and technology enterprises and hinder their development.

Tesla, Inc. was also unprofitable for many years. Since 2011, Tesla, Inc. only made his first annual profit in 2020, but Tesla, Inc. 's market capitalization is much higher than that of traditional auto giants such as Toyota and Ford.

The new power of car building has not yet made a profit. NIO Inc. and XPeng Inc., the top three new car-building forces listed in the United States, and the ideal 2020 financial results show that the three companies are still at a loss, with Li Auto Inc. losing 152 million, NIO Inc. losing 5.61 billion, and XPeng Inc. losing 2.732 billion. However, in terms of market capitalization, as of June 26, 2021, the ideal market capitalization is 28.7 billion US dollars, NIO Inc. 's market capitalization is 68.8 billion US dollars, and XPeng Inc. 35.7 billion US dollars. Profit will no longer be the only criterion to measure the success of an enterprise.

The traditional valuation methods of automobile stock are mainly PE and PB. The production, operation and profit of traditional automobile enterprises are relatively stable, so the traditional valuation PE and PB methods are more suitable.

The valuation methods of auto stocks in the new era will be more diverse, and it may be PS or more in the future. Profit is no longer the only standard, sales revenue is more stable, less volatile, PS or more will gradually apply.