Morgan Stanley: BYD's Second Wave Is Ready!

Morgan Stanley believes that BYD stands at a crucial inflection point in its intelligent driving strategy, with the second wave of growth poised to take off.

According to Zhui Feng Trading Desk, Morgan Stanley's latest report shows that BYD announced three major initiatives yesterday: launching a one-year "safety net" insurance policy for urban NOA users, allowing mass-market models to upgrade to the Tianshen Zhiyan (God's Eye) Version B for RMB 12,000, and releasing the self-developed Xuanji A3 chip.

The "safety net" policy is expected to accelerate the penetration of urban NOA across BYD's base of over 3 million vehicles, while expanding hardware upgrade options will provide a powerful data flywheel effect for training its autonomous driving models, creating a scale advantage over mass-market competitors. Meanwhile, the aggressive layout of self-developed chips and platforms is seen as a highlight, helping BYD keep pace with leading autonomous driving players as Tesla's FSD enters the Chinese market.

These moves mark a critical stage in BYD's strategic transformation in the field of intelligent driving, rather than merely short-term sales stimulants. Morgan Stanley maintains an "Overweight" rating on BYD's A-shares, with a target price of RMB 120, representing approximately 25% upside potential from the current share price.

Democratizing Intelligent Driving: Urban NOA Expands to the Mass Market

Morgan Stanley believes that BYD's significant reduction in the threshold for using urban NOA is the core highlight of this strategic transformation.

Previously, urban NOA functionality was basically limited to vehicles priced above RMB 200,000. The launch of the RMB 12,000 upgrade package means that mass-market consumers can also enjoy this feature. This pricing is quite attractive to mass-market buyers and is expected to significantly increase the activation rate of urban NOA.

At the same time, the introduction of the "safety net" insurance policy directly addresses consumer concerns about the safety of intelligent driving, helping to lower the psychological barrier for users adopting NOA features. This policy will create scale effects on BYD's massive base of over 3 million users, accumulating vast amounts of real-world road data for its autonomous driving models and building competitive barriers.

Self-Developed Chips: Strategic Ambition and Long-Term Structural Shift

BYD's newly released Xuanji A3 chip offers computing power exceeding 2100 TOPS, capable of supporting its L3/L4 autonomous driving platform, which is an important signal of BYD's commitment to maintaining autonomy and control in the intelligence sector.

Although the specific model pipeline equipped with the Xuanji A3 has not yet been confirmed, the long-term structural shift from NVIDIA to self-developed chips is clearly underway. This trend is similar to the path taken by other new force automakers in China, reflecting the industry's strategic intent to seek autonomy in core computing platforms.

The self-developed chip route not only helps BYD control costs during scale expansion but also strengthens its technical voice in high-end intelligent driving amid the competitive pressure of Tesla's FSD accelerating into the Chinese market.

Despite the active layout in intelligent driving strategy, Morgan Stanley remains relatively cautious about BYD's short-term sales volume. A substantial recovery in domestic sales will largely depend on the successful launch of new models priced below RMB 150,000 that support ultra-fast charging. However, supply bottlenecks for the second-generation Blade Battery are expected to constrain short-term sales volume growth.

Supply Chain Landscape Faces Further Reshuffling

This round of strategic adjustments by BYD will have ripple effects on the upstream supply chain.

Upgrading from Tianshen Zhiyan (God's Eye) Version C to Version B implies that the demand for LiDAR (Light Detection and Ranging) will rise accordingly, benefiting both BYD's in-house solutions and third-party suppliers. This trend will accelerate the penetration of LiDAR in mass-market vehicles, posing potential benefits for related suppliers.