Desay SV's Growing Pains: Autonomous Driving Leader Faces "Sandwich" Dilemma, Automakers' Defection Forces R&D Breakthrough

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(Source: Times Weekly)

This article is from Times Business Research Institute. Author: Hao Wenran

Source | Times Business Research Institute

Author | Hao Wenran

Editor | Han Xun

In 2025, amidst the turbulent waters of the smart vehicle industry, Desay SV (002920.SZ) has achieved new milestones in its operational performance.

Annual report shows that Desay SV achieved revenue of 32.557 billion yuan, a year-on-year increase of 17.88%, and net profit of 2.454 billion yuan, up 22.38% year-on-year. Despite the intense price wars in vehicle sales and extreme squeezing of industry chain profits, the company still maintained double-digit growth, solidifying its position as a leading Tier 1 supplier in domestic intelligent driving.

However, behind the shining performance, Desay SV’s gross profit margin has declined from 24.60% in 2021 to 19.07% in 2025. At the same time, pressures from chip giants and threats from downstream automakers’ in-house R&D have begun to surface. As the industry transitions from “high-level intelligent driving popularization” to the “cockpit-integration” deep-water zone, Desay SV is attempting to shift from a pure hardware integrator to a technology-driven intelligent driving solution provider.

The “Sandwich” Dilemma of Hardware Integration

As a leading enterprise in China’s intelligent driving field, Desay SV has formed a coordinated development pattern of three major segments: “Smart Cockpit, Intelligent Driving, Connected Services.”

In 2025, revenue from the smart cockpit business reached 20.585 billion yuan, accounting for 63.23% of total revenue, serving as the main pillar; intelligent driving revenue was 9.7 billion yuan, a 32.63% increase, accounting for 29.79%, becoming the core growth engine; connected services and other businesses generated 2.272 billion yuan, accounting for 6.98%, continuously exploring new fields.

However, behind impressive results, a 300 million yuan inventory write-down reveals its passive position as a hardware integrator.

For a long time, Desay SV has been regarded as Nvidia and Qualcomm’s core “spokesperson” in China. Its business essence is converting top-tier chips into mass-produced intelligent domain controllers. Yet, this niche reveals significant “sandwich” pressure during rapid technological iteration: upstream are chip giants with absolute bargaining power; downstream are automakers embroiled in price wars eager to pass on costs. This directly led to an asset impairment of 431 million yuan in 2025, with 300 million yuan from inventory write-down.

Behind this 300 million yuan loss is the “cost of being squeezed.” In a strong seller’s market, Tier 1 suppliers often need to lock in capacity and stock high-priced chips 6 to 9 months in advance, while downstream orders are highly uncertain—2025 is a transition period from Orin to Thor platforms, with automakers adjusting product lines due to technological updates or canceling orders due to lower-than-expected sales, causing the value of old chips to plummet.

This contradiction between “rigid upstream procurement” and “flexible downstream orders” constitutes Desay SV’s “sandwich dilemma.”

Choosing Scale Over Profitability

In exchange for market share, Desay SV’s strategic choice is to prioritize financial resilience. This is especially evident in its intelligent driving business: in 2025, this segment’s revenue surged 32.63% to 9.7 billion yuan, securing new project orders with an annualized sales exceeding 13 billion yuan, but gross profit margin fell by 3.55 percentage points to 16.36%.

The decline in gross margin actually reflects two proactive strategies.

First, to deepen strategic cooperation with mainstream automakers like GAC Toyota and Chery, Desay SV has increased supply of standardized sensors such as millimeter-wave radars. In 2025, its sensor products successfully secured new project orders from these clients. GAC Toyota has designated Desay SV as a digitalization benchmark partner, and cooperation with Chery has upgraded from domain control products to joint development of cockpit-integration platforms. While these sensors have transparent profits and lower margins, they serve as strategic entry points to expand cooperation and bind customers.

Second, new intelligent driving project orders in 2025 have an annualized sales exceeding 13 billion yuan, not only ensuring short-term revenue but also indicating that the company’s intelligent driving solutions have gained scaled market recognition. As future generations of domain control platforms based on Thor chips are gradually mass-produced and high-value products increase, product structure optimization and profit recovery are possible.

Multiple financial indicators support this proactive approach. By the end of 2025, the company’s cash and cash equivalents reached 1.448 billion yuan, and trading financial assets totaled 3.911 billion yuan, with year-on-year increases of 86.77% and 3988.91%, mainly due to a 4.399 billion yuan private placement to fund expansion; work-in-progress increased to 894 million yuan, up 100.79%, indicating that capacity building at factories in Huizhou, Chengdu, and Spain is accelerating.

From “financing for accumulation” to “investment for expansion,” Desay SV has entered a peak period of strategic investment, using real capital to pave the way for global breakthroughs and new business implementation.

From this perspective, the “sandwich” dilemma is an unavoidable “external injury,” while the decline in gross profit margin of intelligent driving may be an “internal repair” actively chosen under “external injury”—trading short-term profit margins for long-term ecosystem security. This is both a necessary adjustment under passive pressure and a ticket to cross from a domestic hardware integrator to an integrated hardware-software tech company.

Automakers’ In-House R&D Threatening Tier 1?

Another major threat Desay SV faces is the trend of downstream automakers “self-developing chips.”

As intelligent driving becomes the core of vehicles, leading OEMs are experiencing a strong sense of security crisis. From Tesla’s FSD to domestic NIO, Xpeng, and Li Auto investing in in-house chips, automakers aim to achieve vertical integration to control pricing and technological iteration.

The logic is that if intelligent driving systems rely entirely on Tier 1 suppliers, automakers not only pay high integration costs but also cannot achieve deep hardware-software synergy. By self-developing chips, automakers can customize algorithms for higher efficiency and lower power consumption under the same computing power. More importantly, this can significantly reduce the “integration markup” earned by Tier 1 suppliers, freeing up profits in price wars.

This trend poses a real “decoupling” risk for Desay SV: if automakers complete full-stack R&D from algorithms to chips, Tier 1s like Desay SV will become pure “OEMs,” losing their core value-added voice.

In response, Desay SV has launched a costly “R&D race.” Over the past three years, R&D expenses have continued to rise: 2.029 billion yuan in 2023, 2.192 billion yuan in 2024, and 2.637 billion yuan in 2025, maintaining an R&D expense ratio of around 8%.

This strategy is twofold: on one hand, deepening its moat in traditional segments by shifting from hardware adaptation to comprehensive services including underlying software architecture (BSP) and system engineering integration, demonstrating its indispensable vehicle-grade engineering capabilities; on the other hand, shifting from “defense” to “expansion,” opening new tracks to prove the universal value of its full-stack capabilities.

The most strategic move is transferring L4 autonomous driving technology to low-speed autonomous vehicles. The “Chuanxing Zhiyuan” S6 series autonomous vehicles tested in Chengdu Economic Development Zone are equipped with Desay SV’s self-developed L4 system, already adapted for logistics in industrial parks and other closed scenarios.

This “vehicle-grade full-stack software and hardware” crossover not only finds new commercial outlets for high R&D investment but also pre-positions in emerging fields like robotics and autonomous delivery, laying the groundwork for mass production of new products such as robot domain controllers in 2026.

Going Global as a Key Solution

As domestic market gross margins are under continuous pressure from vehicle price wars, Desay SV’s hope for breakthrough lies in overseas markets.

The extreme cost transfer by domestic new energy automakers has squeezed Tier 1 profit margins to the limit; in contrast, overseas, especially European OEMs, have higher tolerance for supply chain stability and technological accumulation, offering better gross margins.

Data clearly illustrates Desay SV’s global ambitions. From 2023 to 2025, overseas revenue was 1.644 billion yuan, 1.708 billion yuan, and 2.41 billion yuan, with a CAGR of 21%, showing accelerated growth.

Currently, the company has established 16 overseas branches in key markets such as Germany, France, Spain, Japan, and Singapore, and has secured new project orders from globally renowned automakers including Volkswagen, Mazda, Skoda, Lexus, Renault, Suzuki, Proton, BMW, and Mercedes-Benz.

Meanwhile, the long-standing “big customer dependence” issue is expected to ease through globalization. From 2023 to 2025, the top five customers accounted for 55.9%, 59.27%, and 55.53% of revenue, respectively, maintaining over 50% for the long term. While this high concentration can generate scale effects during growth, it also poses critical vulnerabilities during downturns or when major clients develop in-house R&D.

The upcoming production of the Spain factory in 2026 is a targeted move to address this weakness. It aims to meet localization needs for clients like Volkswagen and Volvo in Europe, and to penetrate the global supply chain, diluting the top five customer’s share to healthier levels.

Additionally, the recent disclosure of a Hong Kong stock listing plan also supports the internationalization strategy—aiming to establish a global capital window, leveraging international financing platforms to hedge against cash flow pressures caused by surging domestic receivables.

Key Point: Technological Depth and Global Deployment Determine Success

Desay SV’s 2025 financial report reveals new trends in the hardware integration of intelligent driving: even as an industry leader, it still faces “scale growth, gross margin decline” pains amid chip giants and OEMs’ squeeze.

However, through “profit-for-scale” strategies, Desay SV has secured market share and order reserves; by expanding into new tracks like low-speed autonomous vehicles, it attempts to carve out a high-margin “second battlefield”; and through global deployment, it seeks better profit structures and customer diversification. The inventory impairment warning and surge in receivables reflect its ecosystem’s vulnerabilities, while over 13 billion yuan in intelligent driving orders and L4 cross-application demonstrate its ambition to break through. Compared to current performance, the company’s technological depth and soft power in intelligent driving are more critical indicators of its long-term value.

(Full text: 3123 words)