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China has the potential to replicate success it has enjoyed in EV manufacturing in the field of advanced driver assistance systems, according to UBS.
A team of analysts at the bank acknowledged that firms across the globe pushing autonomous driving have floundered in 2022. TuSimple (TSP) and Aurora Innovation (AUR) were cited as key examples of the downside of that focus, with each stock declining over 80% year to date. For the Chinese market, Xpeng (NYSE:XPEV) is perhaps the most prominent poster child, falling about 85% since the start of 2022.
However, over the long term, Xpeng (XPEV) and Li Auto (NASDAQ:LI) could be major beneficiaries from their home nation’s auspicious conditions for autonomous driving innovation. Along with internet giant Baidu (BIDU), the bank believes the automakers could lead the race to mass deployment of autonomous driving technology and potentially outpace US-based peers like Tesla (TSLA) +6.29%.
“The country benefits from a large domestic market with high acceptance of autonomous driving, comprehensive ecosystem, efficient supply chain, and supportive policies and infrastructure,” the analysts wrote. “Our analysis shows the potential market size related to autonomous driving in China could be around the $100B level by 2030, with passenger ADAS accounting for about half, and the other half from robotaxi and robotruck.”
The team also highlighted the differing approach of Chinese ADAS efforts to those of Tesla (TSLA), one of the largest non-domestic competitors in the Chinese market.
“Chinese autonomous driving players generally take a hardware-heavy approach to overcome what they may lack in software,” they explained. “Chinese autonomous self-driving cars have extra sensors including LiDAR and China has the unique advantage of a fast-developing domestic ecosystem and HD Map, which supplements vehicle-side perception and helps navigation. This is something Tesla (TSLA) appears reluctant to use given a global HD Map is likely unavailable.”
To be sure, the team noted that progress in China on autonomous driving advancements remain uncertain. Additionally, any progress that does materialize is not likely to be linear. Nonetheless, the depressed valuation for many Chinese automakers, such as Li Auto +4.48% and Xpeng +4.84%, make the risk/reward dynamics quite attractive in the team’s view.
Elsewhere, firms operating within the potential ADAS supply chain including Sunny Optical Technology (OTCPK:SNPTF), Desay SV, and ThunderSoft were viewed positively.
Read more on the Zero-COVID impact on Chinese EV stocks in November.
Image and article originally from seekingalpha.com. Read the original article here.