The trillion-dollar parts industry is reshaped

The second half of intelligence is expected to create a new batch of global auto parts leading enterprises in the next 10 years.

Special Author of this journal Wang Rui/Wen

Following the opening of the automotive vehicle beyond the industry cycle, the reshaping of the parts industry in 2022 will bring new investment opportunities.

The automobile cycle in the fourth quarter of 2019 bottomed out, and after experiencing passive destocking (recovery period) in the whole year of 2020 and active replenishment (overheating period) in the first half of 2021, the industry is currently in a passive replenishment (stagnation period).

In 2021, China's automobile production and sales reached 26.082 million units and 26.275 million units, respectively, an increase of 3.4% and 3.8% year-on-year, ending the three consecutive years of decline since 2018. It is worth noting that the annual production and sales of new energy vehicles exceeded the mark of 3.5 million units, reaching 3.545 million units and 3.521 million units respectively, an increase of 1.6 times year-on-year, and the market penetration rate reached 13.4%, 8 percentage points higher than that of the previous year. Among them, production and sales in December reached 518,000 units and 531,000 units, respectively, a record high, an increase of 1.2 times and 1.1 times year-on-year, respectively, and the market penetration rate reached 19.1%.

Compared with the soaring vehicle, due to the lack of core and the impact of multiple factors such as the increase in the price of upstream raw materials, the high cost of freight, and the reduction of customer production, the annual performance of the parts sector in 2021 has been suppressed to a certain extent, and the parts sector has also become the main stagflation sector during the stagnation period.

The auto research team of Pacific Securities believes that in 2022, the overall profit of the parts sector will usher in an inflection point with the promotion of favorable factors such as channel replenishment inventory, marginal improvement in raw materials and freight costs. Looking to the future, with the blessing of multiple favorable factors such as the continuous improvement of the penetration rate of new energy vehicles, the independent rise, and the intelligent transformation, the parts sector will benefit for a long time.

Minsheng Securities also said that auto parts are the main investment direction of the next round of production capacity cycle in the industry, and it is expected to give birth to global leading enterprises. In 2021, the penetration rate of electric vehicles will exceed 10%, and in ten years, the penetration rate of intelligent electric vehicles will increase rapidly and is opening a new round of Jugla cycle in the industry. The first half of electrification has created a number of global leading companies such as Ningde Times, and the second half of intelligence is expected to create a new batch of global auto parts leading enterprises in the next 10 years, and the auto parts sector will be the main investment direction of the next 10 years of production capacity cycle.

Wave of electrification

Guojin Securities said that at present, global electrification is gradually transitioning from an experiential market to an economic market, and with the development of technologies such as plug-in and mixing and fast charging, the general-purpose market will also be gradually activated. It is expected that in 2022, global electric vehicle sales are expected to enter the tens of millions level.

China's annual automotive passenger car market in 2021 was 26.275 million units, up 3.8% year-on-year, ushering in the first positive growth since 2018. From the perspective of new energy vehicles, the annual sales of new energy vehicles in China in 2021 reached 3.545 million units, an increase of 1.6 times year-on-year, an increase of nearly 10 percentage points over the penetration rate of 5.8% in 2020, and the development was extremely rapid.

China's new energy vehicles' high cost performance is not only recognized by the domestic market, but also pulled the overall level of China's automobile exports, in 2021, China's automobile exports of 2.015 million vehicles, an increase of 1 times year-on-year, the first export of more than 2 million vehicles, of which the international market performance of new energy vehicles is even stronger, in the fourth quarter of 2021, the export volume of new energy vehicles reached the highest of 25% of the total export volume of automobiles, showing a strong and good growth.

Europe's new energy vehicles in 2021 also have a good performance, sales are mainly concentrated in Germany, France, the United Kingdom, Norway, Italy, Sweden, Spain and the Netherlands these eight countries (CR8 market concentration of more than 90%), in 2021 the annual sales of new energy vehicles in about 1.95 million, an increase of about 65% year-on-year, the annual penetration rate of new energy vehicles is about 21%, about 13% in the same period of 2020. In addition, the top countries in the global new energy vehicle penetration rate are also concentrated in Europe, such as Norway, which has almost fully completed the new energy penetration (the annual new energy penetration rate is as high as 86%).

The rapid development of new energy vehicles in Europe is inseparable from its more aggressive emission policies and new energy subsidy policies, in July 2021, the European Union officially proposed the "Fit for 55" bill, which plans to reduce the average emissions of new cars by 55% from 2030 (compared with 1990), and all new car registrations require zero emissions from 2035.

In 2021, the annual sales of new energy vehicles in the United States reached 656,000 units, an increase of nearly 100% year-on-year, and the penetration rate of new energy vehicles in the whole year was 4.2%, an increase of 2 percentage points over 2020.

In general, the field of electric vehicles in 2021 is actually in the resonance of sales in Central Europe, and considering that the new new energy vehicle policy in the United States is coming in 2022, 2022 is very likely to be the resonance of China and Europe.

According to the china automobile association, China's total automobile sales in 2022 will be 27.5 million units, of which new energy vehicles are forecast to reach 5 million. The Association predicts that in 2022, new energy vehicles are expected to exceed 6 million, and the penetration rate of new energy vehicles will reach about 22%.

In the United States, US President Biden's reconstruction bill has greatly expanded the electric vehicle tax credit policy, which is still a great driving effect for new energy vehicles - not only will the maximum tax credit for bicycles be increased from $7500 to $12,500, but also the quota limit for a single car company to obtain a cumulative total of 200,000 vehicles is expected to accelerate in 2022 as China in 2021.

In 2022, the new forces of car companies and traditional car companies in the United States have begun to increase their efforts to enter pure electric or plug-in products, which will not only drive the rise of new energy models such as cars and SUVs, but also cause the outbreak of sales in the US electric pickup truck market, which is expected to drive the sales of new energy vehicles in the United States. Guojin Securities expects that the sales of new energy vehicles in the United States are expected to reach 1.2 million units in 2022. According to the growth target proposed by the Biden administration, the United States is expected to account for 50% of electric vehicle sales by 2030.

Compared with China's 30% decline, the subsidy for new energy vehicles in Europe in 2022 is not large, and the subsidies for new energy vehicles in Germany, Spain and Ireland in the main new energy vehicle markets have been extended to 2022 and 2023, and France and the Netherlands have only slightly declined, so the subsidy for new energy vehicles in 2022 is almost nothing.

In 2022, Europe will still maintain the rapid development of new energy vehicles, the new models of new energy vehicles to be listed are also carefully selected, with market recognition, once these explosive follow-up products are introduced to the market in 2022, it is expected to continue to drive the sales of new energy vehicles throughout Europe. Guojin Securities expects that the penetration rate of new energy vehicles in Europe is expected to exceed 25% in 2022.

Huafu Securities said that the global automobile industry is ushering in a century of unprecedented changes, China is expected to stand out, the rise of independent brands has been greatly recognized by the capital market, and global auto parts is a large market of more than 10 trillion yuan, considering that the current intelligent electric is accelerating, the core technology evolution of the automobile industry, supplier system, main engine factory pattern reshaping, domestic parts are ushering in a golden age of development, following the realization of value repair of the whole vehicle, domestic parts will also open a journey of value revaluation.

Zheshang Securities also believes that the domestic automotive industry is facing the change of electrification and intelligence, the future of the automotive industry competition pattern will undergo greater changes, the logic of independent rise is also applicable to parts and components enterprises, the traditional fuel vehicle era of the whole vehicle and parts supporting relationship is mostly foreign parts manufacturers to foreign capital, joint venture brand support, most of the domestic parts and components are mainly to domestic brands support. With the reshaping of the downstream vehicle industry pattern, domestic parts also ushered in the best era, the main reasons are the following three points: following the rise of independent brand vehicle companies; the track that failed to achieve import substitution in the past ushered in a breakthrough, and the track replacement that has achieved a breakthrough has accelerated; the transformation of automobile electrification, domestic enterprises are well prepared, and the high-quality enterprises in the electric vehicle industry chain are blooming.

Status quo and ideals

Ideal fullness, realistic bone feeling. At present, from the perspective of zero matching, the development of China's parts and components enterprises is still far behind the whole vehicle.

In June 2021, Automotive News released the 2021 Top 100 Global Auto Parts Suppliers List, and Bosch topped the list with $46.52 billion in revenue. Among the Top20 suppliers, the number of companies in Japan, the United States and Germany is 7, 4 and 3 respectively, far exceeding other countries; among the Top100 suppliers, the number of Japanese, American and German companies on the list is 23, 22 and 18 respectively, accounting for 28.3%, 14.0% and 26.4% of the revenue, respectively, which is also far ahead.

Among the Top100 suppliers, only 8 Chinese companies on the list are Yanfeng, Beijing Hainachuan, CITIC Dicastal, etc. From the ranking point of view, in addition to Yanfeng ranking 17th, other rankings are more low; from the perspective of revenue, the scale of revenue is generally small, and the revenue of 8 enterprises accounts for only 4%; from the perspective of business scope, 8 companies are concentrated in low value-added fields, such as Yanfeng, Hainachuan, Minshi Group, Wuling Industry and other companies Whose main business is internal and external decoration, and CITIC Dicastal is the hub.

Huafu Securities said that first of all, according to the data of the global parts supplier Top100 list, the number of Chinese parts and components companies on the list accounts for 8%, the revenue accounts for 4%, and China's vehicle production accounts for more than 30% of the global proportion, and the zero is seriously unbalanced; secondly, in the traditional automobile industry power, the output value of parts and components far exceeds that of the whole vehicle, such as the ratio of Japanese parts and vehicle output value is stable at about 1.5:1, while the ratio of China's parts and vehicle output value is only 0.76:1.

As for the reasons for the weak competitiveness of Chinese parts suppliers, Huafu Securities believes that from the perspective of core technology, foreign-funded and joint venture suppliers have first-mover advantages in powertrain, automotive electronics, chassis and other fields. According to the statistics of the World Automotive Research Association, foreign-funded and joint-venture parts suppliers have an absolute say in high-tech fields such as torque converters, engine starting devices, and automatic transmissions. According to the statistics of Gaogong Intelligent Vehicle, in the domestic ADAS market, the market share of foreign manufacturers such as Bosch and Mainland China exceeds 90%.

From the perspective of the supplier system, the supply chain of Japanese and German foreign-funded OEMs is relatively closed. From a global perspective, the supplier system of the traditional automobile industry power is relatively closed: Japan is the most closed, and the automakers in the system have equity relations with suppliers; German automakers require Chinese parts suppliers to process according to drawings, and the degree of closure is also higher; the United States is relatively open. After the joint venture factory enters the Chinese market, it generally gives priority to the use of the original supply chain, resulting in the difficulty of domestic parts to enter the supplier system of the joint venture factories such as Japan and Germany (especially the parts with higher added value). At present, domestic parts and components companies are mostly in the supplier system of the United States and Germany in their own brands and joint venture brands, and are less likely to enter the Japanese and global model platforms.

Most of the domestic parts manufacturers are low-level suppliers. The automotive industry is still a pyramid-type tiered supplier system, Tier 1 is generally larger in scale, strong in research and development, the value of bicycles supplied to OEMs is also large, and Tier 2/Tier 3 is generally weaker and has a lower voice. From the supplier level, domestic parts are mostly in the Tier 3 position, Tier 2 Chinese parts suppliers accounted for only 19% (2015); from the perspective of profits, in the field of high added value, the profitability of domestic parts accounted for only 1/9 of foreign capital/joint ventures.

From the perspective of the industrial chain, the lack of world-class vehicle companies restricts the development of domestic parts. Throughout the history of the development of the world's automobile industry, the automobile industry powers are all parts and components and the coordinated development of the vehicle industry, and it is difficult to have strong local parts and components enterprises without strong local automakers. China's own brand OEMs show a spiral upward development trend, but the overall is still not strong enough. The market share of Japanese and Ashkenazi, where the supplier system is relatively closed, continues to rise, and the relatively open independent brands and The Market share of the United States have declined continuously, which has formed a greater restriction on the development of domestic parts and components enterprises.

In the era of electric intelligence, Chinese parts companies are expected to reconstruct the global automotive supply chain. Anxin Securities said that on the one hand, the "three electricity" system replaces the traditional three major pieces, foreign suppliers in the era of fuel vehicles technical barriers and first-mover advantages disappear, electric intelligent new parts release new supply opportunities, domestic suppliers and foreign investors stand on the same running line; on the other hand, in the era of fuel vehicles, the supply chain is relatively closed, car giants and engines, transmissions and other core component suppliers long-term deep binding, electric intelligence gradually opens the closed supply chain, the core "three electricity" system supporting convergence, Car companies are more inclined to choose R & D service response, highly flexible development, high degree of cooperation suppliers, Chinese parts companies have more advantages than foreign capital, so electric, intelligent, interior and exterior and other subdivision track high-quality parts companies are expected to take advantage of the rise.

Tesla boosted

Tesla is expected to become the "first stage rocket" to promote the take-off of domestic parts.

In 2021, Tesla once again set a new record for sales, with a cumulative delivery of 936,000 vehicles in the whole year, an increase of 87.4% year-on-year. It is worth mentioning that Tesla's deliveries in China account for half of its global total, and in 2021, the Shanghai Gigafactory has produced and delivered 484,130 vehicles, accounting for 51.7%, especially in December, Tesla's deliveries in the Chinese market exceeded 70,000 for the first time.

Behind the Tesla miracle is a strong Chinese parts supply chain - Chinese brands almost cover Tesla's domestic models of batteries, vehicle stamping abrasives, body sheet metal, interiors, electronic equipment and other components. Tesla also said that due to the high intelligence, digitalization and the high 86% part localization rate, in the third quarter of 2021, the quarterly output of the Model 3 and Model Y of the Shanghai Gigafactory exceeded that of the Fremont plant in California for the first time.

According to the target of an average annual growth rate of 50%, Tesla's delivery volume in 2022 will be about 1.4 million units, and the Shanghai factory is expected to continue to expand production capacity and move towards the level of millions of annual production. In December 2021, Tesla announced the EIA of the second phase of the Shanghai Gigafactory (Phase I) production line optimization project, which reported that the total investment of the production line optimization project was as high as 1.2 billion yuan, and the project would increase production capacity by increasing working hours, increasing the number of employees, and increasing the frequency of material turnover, and the project is expected to be completed in April 2022.

According to related news, the production capacity of the Shanghai plant will be further increased in March 2022, with a monthly output of 25,000 Model 3 and 50,000 Model Y, and the annual production capacity will increase to 900,000 units, almost twice the current existing production capacity, but Tesla China has not confirmed this news.

Huafu Securities said that the iterative "consumer electronics" of smart cars, Tesla is expected to reproduce Apple's pull effect on domestic parts. With the development of automobile electrification, intelligence and networking, intelligent cars have gradually changed from mechanical transportation tools to intelligent mobile terminals, and are increasingly "consumer electronics". Compared with smart cars and smart phones, Huafu Securities found convergence between the two from the perspectives of product architecture, EEA architecture, iteration direction and ecosystem, and then judged that Tesla is expected to reproduce Apple's pull effect on domestic parts.

Product architecture: In the era of fuel vehicles, the car is a run-in product; with the electrification of the motor to replace the engine, the power battery is gradually standardized, the part of the mechanical combination of the car is gradually reduced, and gradually become a modular product, and the smart phone is a typical modular product.

Electrical and Electronic Architecture (EEA, Electrical/Electronic Architecture): EEA is the brain and nervous system of the car, which integrates sensors, ECUs, wiring harnesses, and electronic and electrical distribution systems to achieve the overall configuration and function of the car, and is the underlying hardware foundation of automotive intelligence. Tesla led the EEA from distributed to centralized, and eventually the trend of a central computing platform – similar to smartphones.

Iteration direction: Under the leadership of Apple, the iteration of smart phones revolves around the technological progress iteration of chips, screens and cameras; similarly, after Internet companies and smart phone manufacturers enter the car-making industry, the iteration of smart cars has gradually moved closer to this direction, such as cockpit chips, automatic driving chips Iteration speed significantly accelerated, central control screens, LCD instruments and other sizes gradually large screen, materials gradually from LCD to OLED/miniLED development.

Ecosystem: "Software-defined car" has gradually become the consensus of the industry, the value distribution of automobiles has gradually shifted from hardware to software, and new forces such as Tesla have led application software to become an important direction of automobile differentiation and the main source of profitability, which is very similar to the smartphone ecosystem led by Apple.

Huafu Securities said that Tesla's help domestic parts take off includes two models. The first is Tesla's own volume. At present, the first-tier suppliers of Tesla's Shanghai factory have been basically localized (including domestic parts companies and foreign-funded/joint venture factories in China), and some domestic parts companies are also Suppliers of Tesla in North America and Europe, which is expected to directly benefit from the explosive growth of Tesla's delivery volume. Second, the main engine factory has a strict supplier management system, and some domestic parts and components companies enter the Tesla supplier system and get "certification", which is conducive to opening up other main engine factories.

Huafu Securities believes that from the perspective of localization rate, market share and growth of industrial chain companies, Tesla's industrial chain has a large space for growth, and Tesla is expected to become the "first stage rocket" to promote the take-off of domestic parts.

From the perspective of localization rate, it is expected that tesla's localization rate will exceed 90% by the end of 2021, and Apple's mainland suppliers will account for about 20%, and Tesla's pull effect will be stronger. Localization here refers to the localization of Tier 1 level, but also includes the factories of foreign/joint venture suppliers in China, and it is expected that a large proportion of Tier 2 and below parts will still be imported. With the supply capacity of the Chinese mainland supply chain during the epidemic being rigorously verified, Tesla is promoting the localization of Tier 2 and below parts; compared with Apple, Tesla is expected to have a stronger pull effect on domestic parts.

From the perspective of market share, Tesla's market share has 20 times the room for improvement. After Apple released the iPhone 4 in June 2010, sales and market share increased rapidly, driving Apple's industry chain to usher in a golden decade. If you take the 2010 release of the iPhone and the 2017 of the Delivery of the Model 3 as the starting point (t-time), compared with the changes in the market share of Tesla and Apple, the Tesla market share in 2020 (t+3) is 0.6%, far lower than the 8.4% of the iPhone in 2013 (t+3), one is that the popularity of smart electric vehicles is slower, and the other is due to the fact that the iteration speed of cars is much lower than that of smartphones. In the long run, the competitive landscape of smart cars tends to be smart phones, with the iPhone market share of about 14% in 2020; in addition, volkswagen and Toyota's global market share in 2020 will exceed 10%. If Tesla's market share reaches the level of iPhone or Volkswagen or Toyota, Tesla's market share has 15-20 times the room for improvement.

From the perspective of growth, Tesla's industrial chain has a lot of room for expansion. Looking at the revenue expansion of 6 typical apple industry chain listed companies in t+1 to t+10 (2011-2020), it can be seen that the revenue of each company has increased by 5-38 times, maintaining a compound growth of 20%-50% in 10 years, with strong growth. In contrast, the typical Tesla industry chain listed companies are still in the initial stage of growth, and the follow-up space is large.

Continuous drive

Looking back at history, the market share of self-owned brand vehicles has shown a spiraling upward trend in recent years, and after the continuous increase in share, it has encountered greater challenges in joint ventures/foreign investments. Huafu Securities believes that the reason is that in the era of traditional fuel vehicles, independent brands still have greater deficiencies than other brands in terms of technology, products, brands, supply chain resources, and talent levels.

In terms of core technology, the gap between independent brands in product platforms, powertrains, automotive electronics, etc. is large; in terms of product strength, independent brands are still concentrated in the low-end, joint ventures/foreign monopolies of high-end brands; in terms of brand power, consumers' recognition of independent brands is relatively low; supply chain resources, major international parts suppliers are from Japan, Germany, the United States, domestic parts are generally small in scale, lack of research and development capabilities; in terms of talents, developed countries have accumulated more high-level technical and management talents in traditional automobiles.

This time is different: independent brands usher in a new round of rise! Since the second half of 2020, the market share of independent brands has continued to rise. According to data from the China Automobile Association, in 2021, the sales volume of self-owned brand passenger cars will be 9.543 million units, with a market share of 44%, up 6 percentage points year-on-year.

This round of rise coincides with the comprehensive transformation of the global automotive industry to intelligent electric vehicles, and China's new energy vehicle sales will exceed 3.5 million in 2021, leading the global market. Different from the traditional fuel vehicle era, within the underlying framework of intelligent electric vehicles, independent brands have a leading advantage after "lane change" in terms of core technology, product strength, brand, supply chain resources, talent level, etc. Therefore, the new round of independent rise is significantly different from the past: in China, the share of independent brands will usher in a leapfrog increase, thereby changing the competitive landscape of domestic automobile markets; on a global scale, independent brands will appear with global competitive car companies.

The core technology has been transformed from powertrain, automotive electronics, etc. to power batteries and intelligent driving software and hardware capabilities, and independent brands have ushered in a technological reversal. In the field of power batteries, among the world's top ten manufacturers in 2020, China occupies 6 seats, and the Ningde era ranks first; BYD, Great Wall Motors and other independent brands are one of the few enterprises with power battery production capacity in the world. In the field of intelligent driving, Huawei has a full-stack capability from chip to algorithm, and Baidu and other autonomous driving capabilities lead the world.

In terms of product strength, with the first-mover advantage, independent brands have achieved catch-up with joint ventures in the field of new energy vehicles. Benefiting from policy support, independent brands have a greater first-mover advantage in the development of new energy products. Driven by Tesla and new domestic forces, the domestic traditional independent brands have been significantly improved through continuous iteration. By comparing the appearance and styling, interior and exterior decoration, interior space, mileage, power performance, cockpit entertainment, safety, intelligent driving and other indicators of typical new energy models in the Chinese market, the product strength of the new forces has surpassed that of international/joint venture brands, and the product strength of traditional independent brands is no less than that of international/joint venture brands.

Taking intelligence as an example, according to J.D. Power's (2021) research on the intelligent experience of important new energy models in the Chinese market, Xiaopeng, Tesla, and Ideal ranked in the top 3.

In terms of brand power, independent brands in the field of fuel vehicles have gradually caught up, and the retention rate in 2021 has surpassed that of American and European cars except Germans; in the field of new energy vehicles, the reputation of independent brands has surpassed mainstream joint ventures, especially in young car buyers. According to the new energy vehicle product attractiveness index study (NEV-APEAL) released by J.D.Power in China in August 2021, the product attractiveness index score of independent new power brands is significantly ahead of international/joint venture brands and traditional independent brands. According to J.D.Power's survey of China's new car buying groups, the post-90s have the highest acceptance of new energy vehicles (24% after 95 and 15% after 90), and the highest recognition of independent brands after 90 (61%), with the rapid increase in the penetration rate of new energy vehicles, post-90s have gradually become the main group of car buyers, and the recognition of independent brands will increase rapidly.

From the perspective of supply chain, China has the resources of the whole industry chain at the two core technology levels of new energy vehicles and intelligent driving. China has the independent production capacity of "three electricity", especially the power battery industry chain, China has a complete and globally leading supply capacity from minerals, smelting, positive and negative electrode materials/electrolytes/diaphragms to power batteries, in addition to the relatively low proportion of minerals due to resource endowments, the middle and lower reaches of the technical barriers are relatively high links, occupying an absolute leading position.

From the perspective of the intelligent driving industry chain, from the sensors and high-precision maps at the perception level, the chips and algorithms at the decision-making level, to the chassis control and intelligent cockpit at the execution layer, China's industrial chain has a deeper layout, and its strength is stronger after the technology giants such as Huawei and Baidu enter.

In addition, in the era of smart cars, the demand for talents in the automotive industry has shifted to the software and electronics fields, and China has a large talent reserve in the Internet and consumer electronics.

At present, the trend of "consumer electronics" of automobiles is more obvious, and "software-defined vehicles" have gradually become the consensus of the industry. In the field of consumer electronics, taking smart phones as an example, among the global Top 5 brand manufacturers in 2021, Chinese companies have 3 such as Xiaomi, OPPO and VIVO, as well as a complete parts industry chain. In the field of Internet, China's strength is leading the world.

In short, with the continuous development of intelligent electric, independent brands are accelerating to catch up with foreign/joint venture brands in terms of core technology, product strength, brand, supply chain resources and talent levels, and some areas have even caught up, and independent brands are ushering in the best opportunity for rise.

Huafu Securities said that throughout the history of the development of the world's automobile industry, the automakers of Japan, Germany, the United States and other automotive industry powers have created a number of world-class auto parts companies in the process of expanding to the world. The rise of independent brands is expected to become a continuous driving force for Chinese parts and components enterprises to become bigger and stronger, and to "refuel in the air" for the take-off of domestic parts.

Huaxi Securities said that electric intelligence has reshaped the order of the automobile industry, with rapid growth in performance + new fixed-point catalysis, and firmly bullish parts. Intelligence will be the core main line in 2022, intelligent driving and intelligent cockpit acceleration, optimistic about the accelerated penetration of acoustics + wire control chassis + domain controller; electrification accelerates the development of lightweight, Tesla leads the integrated die-casting, increase the expansion of the industry while enhancing the industry concentration. It is recommended to select the target from the customer dimension (industrial chain such as new forces) + product dimension (electrification and intelligent incremental components), and the two-dimensional resonance is the best.

Intelligent race

Since the introduction of the top-level design document of the "Intelligent Vehicle Innovation Development Strategy" in 2020, the Ministry of Industry and Information Technology has recently issued a series of normative documents related to the Internet of Vehicles, providing guidance on key issues such as automatic driving classification and data security. According to the plan, by 2025, the penetration rate of PA and CA-level intelligent networked vehicles will reach 50%, and by 2030, the new car assembly rate of C-V2X terminals will reach 50% in 2025, and it will be basically popularized in 2030.

As the most important part of the smart car, the new design of the smart cockpit will provide consumers with an unprecedented driving experience. CICC estimates that the value of smart cockpit incremental components is expected to reach 10,000 yuan, and the smart cockpit market space will reach 100 billion yuan in 2025.

Guojin Securities said that the automotive intelligent networking has brought a large increase in information flow, but also let the number of electronic control units (ECUs) more and more, automotive electrical and electronic (EE) architecture will usher in upgrades, automotive architecture from distributed - domain centralized - central computing gradually evolved, control functions quickly centralized, domain-based DCU (domain controller) integrated architecture officially on the historical stage.

Smart cockpit includes cockpit domain controllers, operating systems, acoustic systems, HUDs, etc., of which autonomous driving domain controllers and smart cockpit domain controllers are the focus of development. At present, ADAS domain controllers are still in their infancy, the global ADAS domain controller market size is only $0.4 billion in 2019, and by 2025, according to the global demand for ADAS domain controllers 7 million sets, the total market size is about $2 billion. The smart cockpit mass production is less difficult and the cost is relatively controllable, and the market size of the smart cockpit domain controller will grow faster than the ADAS domain controller, and it is expected that the global shipment of smart cockpit domain controllers will reach 13 million sets in 2025.

As a key component of automobile intelligence, autonomous driving is gradually accelerating. The overall market demand for intelligent driving domain controllers is strong, and the penetration rate will be greatly improved in the next 5 years.

According to the research report of Guojin Securities, the current global ADAS-related ECU market size is gradually expanding, with the global market size reaching 14.85 billion US dollars in 2019, and it is expected that by 2025, the global ADAS-related ECU market size will exceed 19.8 billion US dollars. According to Zosco Automobile Research, it is estimated that by 2025, the annual shipment volume of ADAS/AD domain controllers in China will reach 3.565 million units, and the penetration rate of passenger car front-loading autonomous driving domain controllers will reach 14.7%.

The degree of electronicization of intelligent vehicles has increased, and the scale of the sensor market has steadily increased. Automotive sensors can be divided into three types: on-board cameras, millimeter wave radar, and lidar. In terms of vehicle cameras, the penetration rate of various types in 2019-2020 is different, and the global vehicle camera market space is expected to be 27 billion US dollars in 2025. Millimeter-wave radar accounts for a relatively large proportion of automotive collision avoidance sensors, reaching 70%. According to the global lidar market report released by Valuates, the lidar market size is expected to reach $2.90 billion by 2027, with a compound annual growth rate of 20.1% from 2020 to 2027.

Guojin Securities Is rich in information, high value of derivative applications and high cost performance of car cameras, which is currently the mainstream choice of ADAS. CMOS (Complementary Metal Oxide Semiconductor) is currently the mainstream automotive camera photosensitive element solution, with a wide range of application prospects.

Millimeter wave radar has the advantages of high integration, small influence by external environment, high measurement accuracy, strong anti-interference ability, and high cost performance. At present, 77GHz is regarded as the preferred frequency band for global vehicle-mounted millimeter wave radar in the future, the rapid development of the intelligent automotive industry will open a large demand for millimeter wave radar, domestic related companies will accelerate research and development, 77GHz products are expected to achieve localization in the next three years.

Vehicle-mounted lidar will develop to solid state and miniaturization in the future, and the cost will be lowered to accelerate mass production. Lidar is mainly composed of a transmitting module, a receiving module, a main control module, and a scanning module (if any), but the current technical path has not yet been finalized. At present, the application of mechanical lidar in automatic driving is more, but the overall cost is higher, MEMS comprehensive performance is good, low cost, the current practical application of automatic driving is in the era of mechanical and MEMS lidar, MEMS, Flash is the future focus direction.

Guojin Securities believes that in the era of automatic driving, vehicles have gradually evolved into a supercomputer. Chips play an important role in the development of automatic driving, and the improvement of automatic driving levels also puts forward high standards for chips. The global artificial intelligence chip market size in 2019 was $11 billion. With the maturity of artificial intelligence technology and the continuous improvement of digital infrastructure, the commercial application of artificial intelligence will accelerate the landing, promoting the rapid growth of the AI chip market, and it is expected that the global artificial intelligence chip market will reach 72.6 billion US dollars in 2025. At present, most of the major chip suppliers do not stay in the chip itself, but gradually extend to the software layer to build an industrial ecology.

In the braking system, the line control is one of the footholds for the electrification and intelligence of future cars. The development of braking system has gone through three generations, line control is the third generation, mainly divided into EHB (hydraulic line control action) and EMB (mechanical line control action), you can use the motor's own braking force for electric assistance, get rid of the need for vacuum assist, suitable for pure electric, plug-in hybrid and intelligent car occasions used in ADAS, to adapt to the development trend of automobile electrification and intelligence.

In terms of air suspension, the demand for air suspension for new energy vehicles has accelerated the penetration rate, and the domestic air suspension market is in its infancy. Since the stability requirements of the new energy vehicle chassis system are much higher than those of pure fuel vehicles, the air suspension system has gradually become the mainstream accessory of the new energy vehicle platform, Intelligence predicts that the global automotive air suspension market space will reach 6 billion US dollars in 2020, and it is expected that the global air suspension market space will reach 9 billion US dollars in 2026, with a compound growth rate of more than 6%. Air suspension currently has a high degree of market share, but in order to reduce costs, the development direction of splitting large assemblies and independently doing customized integration provides an opportunity for domestic suppliers to break through single points, domestic independent suppliers have begun to break through core components, and high-quality suppliers of individual products are expected to get more fixed-point opportunities.

The road to lightweighting

Lightweight refers to the premise of ensuring the strength and safety performance of the car, as far as possible to reduce the curb weight of the car. Studies have shown that if the fuel vehicle is reduced by 10%, the fuel consumption will be reduced by 6%-8%; if the new energy vehicle is reduced by 100kg, the cruising range will be increased by 10%-11%, while reducing the battery cost and daily loss cost by 20%. For traditional fuel vehicles and new energy vehicles, lightweight technology can improve the efficiency of the power system, thereby reducing energy consumption and improving the endurance of the whole vehicle, and gradually become an important technical direction for major vehicle and parts companies.

The traditional automobile manufacturing process includes stamping, welding, painting, and assembly, which are assembled by about 500 parts of different shapes and materials, and the error fluctuations of each part will affect the accuracy of the vehicle. In order to ensure that the quality of the whole vehicle meets the requirements, each part must undergo strict testing before assembly, and the assembly of the car also requires a lot of debugging and matching work, which is a greater cost of time and money.

In September 2020, Tesla announced that it will use integrated die casting technology in the model Y rear body baseplate, leading a new round of technological innovation.

At the end of the manufacturing process, the integrated die casting technology can make the body one-time molding, eliminating the complex process of first split stamping and welding, greatly simplifying the manufacturing process; because there are only 1-2 large parts, the integrated die casting technology can eliminate the cumulative error caused by the connection of a large number of parts, and the manufacturing accuracy can be improved, while saving a lot of debugging time and money costs.

At the material end, the traditional automobile manufacturing process widely uses steel that is easy to stamp and weld as the body material, and in the integrated die-casting technology, the aluminum alloy that is convenient for die-casting will become the main material of the body, driving the application of aluminum alloy parts on the vehicle to increase, further improving the degree of lightweight of the car.

Orient Securities research shows that taking Model 3 and Model Y as an example, the model 3 rear body baseplate adopts the traditional process and is assembled from 70 parts; model Y adopts integrated die-casting technology, and the rear body baseplate as a whole is composed of two large castings, the connection point is reduced from 700-800 to about 50, the manufacturing time is reduced from 1-2 hours to 3-5 minutes, and the weight of the car body assembly will be reduced by 30%. Tesla's next step is to use integrated die casting technology to create a complete assembly of vehicle bodies, and to die-cast about 370 parts into 2-3 large castings, which will further reduce the weight by 10%, thereby increasing the cruising range by about 14%.

Chassis lightweight is an important area of vehicle lightweighting. As one of the core components of the car, the car chassis accounts for 27% of the total vehicle weight, second only to the body-in-white and powertrain. Compared with the body, the chassis lightweight technology and technology is more mature, the cost is lower, according to the analysis of the car chassis home, the weight reduction cost coefficient of the chassis suspension is 0.95, which is much lower than the cost coefficient of the body of 1.35. The chassis carries 70% of the body weight, and the lightweight chassis helps to reduce the underspring weight, thereby improving the acceleration, handling and comfort of the car.

At present, the main path of chassis lightweight is to replace steel with aluminum alloy, and the aluminum alloy parts of the automobile chassis include steering knuckles, subframes, brake calipers, control arms, wheel hubs, various housings, etc. According to the data of China Industry Information Network, in 2020, the penetration rate of aluminum alloy steering knuckles, auxiliary frames, brake calipers and control arms in the Chinese automotive market is 15%, 8%, 40% and 5%, respectively, which has a broad room for improvement. According to the International Aluminum Association, the penetration rate of aluminum alloys in the power system is 90%, and the automotive chassis is still a blue ocean market compared with it.

Orient Securities said that many domestic aluminum alloy precision die casting companies are in the field of chassis lightweight layout, with the increasing demand for automotive lightweight, it is expected that aluminum alloy components will accelerate penetration in the chassis field, related parts companies are expected to continue to benefit from the chassis lightweight trend.

Automobile body is the highest proportion of vehicle weight, but also the field with the greatest potential for lightweight, traditional cars with high-strength steel instead of ordinary steel can reduce weight by about 11%, the use of aluminum alloy can reduce weight by about 40%, lightweight material weight reduction effect is significant. In view of the body strength requirements, the price of lightweight materials and the level of processing technology, the status of steel as the main material of automobile body is difficult to shake in a short period of time.

The announcement of relevant listed companies shows that the current penetration rate of aluminum alloy body structural parts in fuel vehicles is only 3%, and the penetration rate of pure electric vehicles is 8%, with the improvement of processing technology and the continuous improvement of the demand for electric vehicle weight reduction, it is expected that the application of lightweight materials such as aluminum alloys on the body will continue to increase.

Orient Securities believes that the use of ultra-high-strength steels such as thermoformed steel and lightweight manufacturing processes at this stage is the mainstream way to achieve lightweight body. In addition to thermoforming technology, lightweight manufacturing processes such as laser welding and hydroforming can also reduce the thickness of steel plates under the premise of ensuring body safety, achieving the purpose of lightweight body. In recent years, the rapid development of domestic thermoforming and other lightweight technologies, domestic parts companies have mature thermoforming technology capabilities, can provide DOMESTIC and foreign vehicle companies with AB columns, anti-collision beams, bumpers and other thermoformed body parts, is expected to benefit from the general trend of body lightweight.

Compared with traditional cars, the new energy vehicle triple electric system will lead to an increase in the weight of the vehicle, which will affect the endurance. According to the data of China Energy News, for the same model, the three-electric system will cause an additional weight of 200-300kg to be added to the whole vehicle; at the same time, the lightweight coefficient of new energy vehicles is 1.5-4 times higher than that of traditional fuel vehicles, which means that the lightweight degree of new energy vehicles is lower. The three-electric system usually accounts for 30%-40% of the weight of the new energy vehicle, and its lightweight is the key to achieving the lightweight and improving the endurance of new energy vehicles.

Orient Securities Research Report shows that in the new energy vehicle three-electric system, the battery pack is the largest part of the weight, accounting for about 18%-20% of the vehicle weight, of which the battery pack shell (battery box) accounts for about 10%-20% of the battery pack weight, which is the second largest part of the battery pack in terms of weight. After the improvement of battery energy density gradually entered the bottleneck period, battery box lightweight became the focus of new energy vehicles. At the current stage, the best lightweight solution for the battery box that takes into account the cost performance and the lightweight effect is the combination of the extruded aluminum profile lower shell and the upper cover of the SMC, with the price of carbon fiber, magnesium alloy and other materials falling, the battery box lightweight program is expected to usher in further optimization.

Keeping up with the rapid development of new energy vehicles, domestic parts manufacturers are actively developing lightweight battery box products and obtaining fixed-point projects. In addition to the battery box, domestic manufacturers also have related layouts in the fields of aluminum alloy motors, electronic control system housings and hybrid vehicle transmission housings. As the production, sales and penetration rate of new energy vehicles continue to rise, the lightweight of the three-electric system is expected to open up the new increment space of domestic parts manufacturers.

Orient Securities said that under the leadership of Tesla, a number of domestic aluminum alloy die-casting parts companies began to lay out integrated die-casting technology, and purchased a number of giant die-casting machines for integrated die-casting in the field of body structural parts. With the expansion of the scale of integrated die casting, production costs will gradually decrease, it is expected that more vehicle companies will adopt integrated die casting technology in the future, and the penetration rate of integrated die casting is expected to continue to increase.

Orient Securities calculated the market space of aluminum alloy die castings for vehicles in China from 2020 to 2025 based on the output of passenger cars in China, the amount of aluminum used in passenger cars, the proportion of aluminum alloy die casting parts in automobiles, and the sales price of automotive aluminum alloy parts.

China's passenger car production: According to the China Automobile Association, China's passenger car production will reach 23 million units in 2022, an increase of about 7.4% year-on-year. From 2023 to 2025, the growth rate of Passenger Car production in China is expected to slow down, falling to about 3% per year.

Aluminum used in bicycles: According to the "China Automotive Industry Aluminum Consumption Assessment Report (2016-2030)", the amount of aluminum used in Passenger Cars in China in 2020 is 138.6 kg, which is expected to increase to 187.1 kg in 2025, and the compound growth rate in 2020-2025 is 6.2%.

Aluminum alloy die-casting parts account for the proportion of aluminum used in automobiles: die-casting parts are the most widely used aluminum alloy forms in automobiles, which are widely used in chassis, body, power system and other fields. According to Die Casting Magazine, die-cast aluminum alloys account for about 77% of the amount of aluminum used in automobiles.

Sales price of automotive aluminum alloy die castings: According to relevant data calculations, the average selling price of automotive aluminum alloy die castings industry is about 45,200 yuan / ton. Since the price of aluminum alloy die castings is greatly affected by aluminum price fluctuations, it is assumed that the average selling price of automotive aluminum alloy die castings remains unchanged.

According to the above data calculations, Orient Securities expects that the market space of Aluminum Alloy Die Castings for Passenger Cars in China will reach 163.714 billion yuan in 2025, and the compound growth rate of market space in 2020-2025 will be about 11.2%, and the market for aluminum alloy die castings for vehicles has broad prospects.

Orient Securities said that there are barriers to entry in the automotive precision die casting industry, such as qualification and customer certification barriers, technical barriers and capital and scale barriers, and new entrants will face greater obstacles. The die casting suppliers of foreign-funded or joint venture brands have a large scale of individual enterprises and have advantages in terms of capital, technology and production scale. However, with the expansion of the production capacity of independent suppliers, through the cost-effective advantage, more orders from traditional car companies and car companies of new car manufacturers are expected to gradually narrow the gap with foreign die-casting enterprises and increase market share.