Capable of directly enhancing the smart cockpit experience in cars, China's AI platform "DeepSeek" has sparked new insights into self-driving technology, China Merchants Securities remarked in its report.

In the broker's opinion, the three key elements of autonomous driving competition, namely algorithms, data, and computing power, have not changed, nor has the competitive edge of leading players like Tesla (TSLA.US)      , Huawei, XPENG-W (09868.HK)  +2.100 (+3.382%)    Short selling $373.05M; Ratio 33.230%   , and LI AUTO-W (02015.HK)  -3.250 (-4.443%)    Short selling $584.13M; Ratio 49.064%   . Yet, the innovations sparked by DeepSeek will further strengthen these players' leadership.

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In addition, companies like XPENG-W, which previously had advanced algorithms but lacked computing power capital, will have greater development opportunities. It is expected that second-tier companies lagging in smart driving, including BYD COMPANY (01211.HK)  -2.300 (-2.222%)    Short selling $1.11B; Ratio 37.051%   and GEELY AUTO (00175.HK)  -0.640 (-2.705%)    Short selling $274.01M; Ratio 11.260%   , can speed up to catch up with their first-tier peers.

China Merchants Securities remained bullish about the GEELY AUTO, XPENG-W, and BYD COMPANY combination, which would be shored up by sales growth and changes in smart driving margins. It raised its target prices for the H-shares of these three companies to $23.2, $92, and $460 respectively.

In terms of the components sector, given that the penetration rate of smart driving will escalate notably along with high certainty in component volume increases, China Merchants Securities will focus on BYD ELECTRONIC (00285.HK)  +0.080 (+0.298%)    Short selling $106.24M; Ratio 36.589%   , as well as smart driving chip suppliers HORIZONROBOT-W (09660.HK)  +0.180 (+2.413%)    Short selling $151.72M; Ratio 17.290%   and BLACK SESAME (02533.HK)  +0.220 (+1.335%)    Short selling $1.77M; Ratio 3.991%   . In the LiDAR sector, the broker's focus will be on Hesai Group (HSAI.US)      and ROBOSENSE (02498.HK)  +0.300 (+0.884%)    Short selling $53.24M; Ratio 34.169%   .

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China Merchants Securities' investment ratings and target prices for Chinese electric vehicle stocks are detailed on a separate table.
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