Morgan Stanley: BYD's second wave is ready!

Morgan Stanley believes that BYD is at a crucial turning point in its smart driving strategy, and the second wave of growth is poised to take off.

According to Chasewind Trading Desk, Morgan Stanley's latest report shows that BYD announced three major initiatives yesterday: launching a one-year city NOA user "Safety Cushion" insurance policy; allowing mass-market models to upgrade to the DiPilot B version for 12,000 RMB; and releasing its self-developed Xuanji A3 chip.

The "Safety Cushion" policy is expected to accelerate the penetration of city NOA on BYD's more than 3 million basic models, while expanding hardware upgrade options will provide a powerful data flywheel effect for its autonomous driving model training, forming a scale advantage among mass-market competitors. Meanwhile, the aggressive rollout of self-developed chips and platforms is seen as a highlight, helping BYD maintain its competitive pace with leading autonomous driving players as Tesla FSD enters the Chinese market.

These initiatives mark BYD’s strategic transformation in the smart driving sector entering a critical phase, rather than only being short-term sales boosters. Morgan Stanley maintains its "overweight" rating on BYD A-shares, with a target price of 120 RMB, representing about 25% upside from the current stock price.

Smart Driving for All: City NOA Expands to Mass Market

Morgan Stanley believes that BYD’s significant lowering of the entry threshold for city NOA is the core highlight of this strategic transformation.

Previously, city NOA functions were basically limited to models priced above 200,000 RMB. This time, the 12,000 RMB upgrade plan means mass-market consumers can also enjoy this function. This price point is highly attractive to mass-market buyers and is expected to significantly increase city NOA activation rates.

At the same time, the launch of the "Safety Cushion" insurance policy directly addresses consumer concerns about smart driving safety and helps lower the psychological barrier for users to utilize NOA functions. This policy will create a scale effect on BYD’s massive user base of over 3 million, allowing its autonomous driving models to accumulate vast amounts of real-world driving data and build up competitive barriers.

Self-developed Chips: Strategic Ambition and Long-term Structural Shift

BYD’s newly released Xuanji A3 chip boasts computing power exceeding 2100 TOPS and can support BYD’s L3/L4 autonomous driving platform, sending a clear signal of BYD’s determination to maintain independent control in the intelligent sector.

Although the specific model lineup to be equipped with the Xuanji A3 chip has not yet been confirmed, the long-term structural shift from Nvidia to self-developed chips is already underway. This trend is similar to the paths taken by other Chinese new energy automakers and reflects the industry-wide strategic intention to pursue independence in core computing platforms.

The self-developed chip route not only helps BYD control costs during scale expansion, but also reinforces its technological influence in higher-level smart driving fields amid competitive pressures from Tesla FSD’s rapid entry into the Chinese market.

Despite the active strategic layout in smart driving, Morgan Stanley remains cautious about BYD’s short-term sales outlook. The actual recovery of domestic sales will largely depend on whether new models priced below 150,000 RMB with ultra-fast charging capabilities can be successfully launched. However, supply bottlenecks for the second-generation Blade Battery are expected to limit short-term sales growth.

Supply Chain Landscape Faces Further Reshuffling

This round of BYD’s strategic adjustment will have a ripple effect on upstream supply chains.

Upgrading from DiPilot C version to B version means demand for LiDAR installations will increase, benefiting both BYD’s self-developed solutions and third-party suppliers. This trend will accelerate LiDAR penetration in mass-market models, creating potential positives for related suppliers.

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The above content comes from Chasewind Trading Desk.

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