Since the beginning of 2025, the technology growth sector of the Chinese A-share market has exhibited remarkable performance, particularly highlighting the surge of investment opportunities in the realm of intelligent driving. According to data from Wind, as of February 23, the CSI Intelligent Electric Vehicle Index saw an annual growth of nearly 20%. In parallel, several actively managed equity funds focused on automotive industry themes have achieved an impressive yield exceeding 20% for the same period.

Upon scrutinizing this scenario, it becomes evident that several actively managed equity funds that heavily invested in the intelligent driving sector have realized substantial returns in 2025. By the end of the fourth quarter of 2024, funds such as the Hongyi Yuanfang Automotive Industry Upgrade A and Huaxia Automotive Industry A showcased commendable performance, with over 10% returns on their investments, bolstered by key stocks in the intelligent driving field. Notably, the Hongyi Yuanfang Automotive Industry Upgrade A fund marked an impressive annual return of 24.20%, showcasing the immense potential within this segment.

A deeper look into these funds reveals intriguing portfolio compositions; for instance, the Hongyi Yuanfang Automotive Industry Upgrade A fund had significant holdings in leading companies such as CATL, Xiaomi, BYD, Xiaopeng Motors, Geely, Top Group, BaoLong Technology, Yutong Bus, Yinlun Holdings, and Lingyi Automation by the end of 2024's fourth quarter. These investments are strategically aligned with the anticipated growth in the intelligent driving sector.

As 2025 unfolds, a plethora of favorable developments are announcing themselves in the intelligent driving arena, especially following BYD's recent press conference unveiling its nationwide intelligent driving strategy. This move has drawn considerable attention in the secondary market, particularly towards companies associated with intelligent driving technologies and their supply chains. From an industrial value chain perspective, the integration of BYD's intelligent initiatives is set to foster collaborative growth across upstream and downstream enterprises. Suppliers of essential components such as lidar, cameras, and millimeter-wave radar are poised to capitalize on new opportunities, while chip manufacturers and intelligent driving platform providers are expected to gain significantly as well. Such dynamics are creating a fertile ground for investors by providing numerous compelling investment avenues, especially in the core segments of the intelligent driving value chain.

Furthermore, BYD's ambition to democratize high-level intelligent driving technologies for markets priced at 100,000 yuan or below is likely to lower market entry barriers. This strategy paves the way for other automotive manufacturers to expedite their own transitions towards greater automation, enhancing the industry-wide push for smart vehicle technologies. Additionally, BYD's approach poses challenges for foreign brands by offering high-cost performance intelligent driving solutions that could potentially erode the market shares of foreign mid and low-end fuel vehicles, urging these brands to accelerate their localized research and development efforts.

Investment manager Wang Zheyu from Hongyi Yuanfang is notably vocal about the burgeoning potentials within this sector. He anticipates that 2025 will mark a significant milestone in the commercialization of L3 automated driving technology. With advancements in both AI hardware and software capabilities, the domestic automated driving industry is on the cusp of groundbreaking innovations. On the hardware front, the accuracy and reliability of sensors such as lidar and cameras have seen a substantial rise—and costs have notably decreased, providing vehicles with enhanced environmental perception. For instance, a specific domestic company recently developed an advanced lidar system capable of identifying obstacles at a distance 50% greater than the previous generation, showcasing significant improvements in precision and functionality.

On the software side, continuous optimizations in deep learning algorithms are paving the way for more intelligent automatic driving systems, capable of navigating complex road conditions based on extensive data from real-world road tests. For example, during peak traffic hours, these systems can adeptly follow leading vehicles, recognize changes in traffic signals, and execute well-calibrated decisions regarding acceleration and lane changes. Such technological advancements are not only drawing attention within China but also attracting international car manufacturers and tech giants looking to partner with domestic entities to expedite the practical application of these innovations.

Wang Zheyu also elaborates that 2025 is poised to see L3 automated driving capabilities engaging in commercial applications, enabling vehicles to operate automatically in designated scenarios—such as on highways—allowing drivers to moderately relax their direct control. Over the next three years, pilot programs for Robotaxis are expected to emerge nationwide, leveraging effective automated driving systems to decrease operational costs and enhance travel efficiency. This trend suggests that various stakeholders, including auto manufacturers, sensor suppliers, and algorithm development firms, will witness considerable growth opportunities, which could significantly elevate their market share and valuations, further propelling the automated driving industry to unprecedented heights.

In Wang Zheyu’s perspective, the application of intelligent driving functionalities is likely to gain maturity over this period. Domestic brands are noticeably advancing within the intelligent driving sector, putting them in a favorable position ahead of certain global auto groups and enabling them to drive the automotive industry’s smart transformation. As this evolution unfolds, companies operating within the intelligent industrial chain, including complete vehicle manufacturers and parts suppliers, are set to harness ongoing advantages throughout the process.