In the highly competitive automotive market, intelligent driving has become one of the core criteria for car purchases. Under the trend of intelligentization, steer-by-wire technology has emerged at the right time, especially with Tesla's Cybercab model featuring a steer-by-wire system that completely eliminates mechanical connections for the first time, placing steer-by-wire at the forefront of investment opportunities.

Policy support is also intensifying. Recently, the Ministry of Industry and Information Technology and seven other departments jointly issued the "Automotive Industry Stable Growth Work Plan (2025-2026)," which stated that they will promote intelligent connected vehicle access and road trial pilots, conditionally approving L3-level vehicle production access. This undoubtedly paves the way for the implementation of domestic new energy vehicle L3-level assisted driving standards and opens market expectations for the steer-by-wire industry.

As a leader in steer-by-wire technology, NEXTEER (01316) possesses first-mover advantages with product and technical capabilities. The company has secured steer-by-wire orders with Tesla and multiple domestic new energy vehicle manufacturers, with production and delivery scheduled for 2026. The company's performance over the past two years has been solid, gaining capital favor with market value rising by 120% this year. However, compared to its 2018 highs, the company's valuation has still contracted by over 60%. Under the steer-by-wire opportunity, does NEXTEER have investment value?

**Standing at Industry Crossroads, SBW Orders to be Delivered in 2026**

NEXTEER primarily operates steering system products, including Electric Power Steering (EPS), Hydraulic Power Steering (HPS), Steer-by-Wire (SBW), Column & Intermediate Shafts (CIS), Driveline (DL), as well as electric drive and software solutions across multiple areas. The company holds leading market positions and technological advantages in EPS and SBW, with SBW products being the key business for future development.

SBW eliminates the intermediate drive shaft, with only electrical connections between the steering wheel and steering mechanism, completely transmitting control commands through electrical signals. The steering mechanism has no direct physical torque transmission path with the driver. SBW is an important condition for achieving high-level autonomous driving. Among automation driving levels L0-L5, L2 and above represent high-level intelligent driving, while L3 and beyond require no driver intervention and are completely controlled by the system, representing SBW's primary market.

As mentioned earlier, the Ministry of Industry and Information Technology has issued policies indicating conditional approval for L3-level vehicle production access, providing reassurance to the SBW industry. The second half of 2025 is expected to mark the beginning of large-scale SBW production.

NEXTEER is a leading SBW supplier with strong technological first-mover advantages and benefits from industrial positioning brought by large-scale mass production experience. As the steer-by-wire industry accelerates implementation, the company will fully benefit.

The company received its first SBW order in 2022, primarily from Tesla. In 2024, it first secured SBW orders from domestic automakers and obtained Rear Wheel Steering (RWS, a type of SBW) orders from two domestic automakers. Additionally, the company first secured SBW orders for L4-level MaaS applications. Currently, the company has 6 confirmed orders (including RWS and RWA), planning production and delivery in 2026, which is expected to drive performance growth.

Of course, steering market players are all actively developing steer-by-wire layouts, including ZF, NEXTEER, Bosch, JTEKT, and Schaeffler, all actively conducting R&D. NEXTEER is the first supplier to commercialize SBW applications. As technology matures and product technology converges, NEXTEER will also face significant competitive pressure. However, L3-level policies have not yet been widely implemented, and the current mainstream steering system remains EPS, where NEXTEER has a solid foundation.

**Solid Foundation with Outstanding Asia-Pacific Performance**

From an industry perspective, current automotive automation levels are primarily L2 and below. New energy vehicles generally reach L2 level, with XPeng MONA M03 bringing L2 to the 100,000-150,000 yuan range. In passenger cars, EPS penetration rate is nearly 100%, while commercial vehicles primarily use HPS and EHPS applications.

NEXTEER maintains a solid market share and leading position in mainstream application products for both passenger and commercial vehicles. EPS is the company's core product, generating $1.525 billion in revenue in the first half of 2025, up 8.57% year-over-year, accounting for 68% of revenue - a further increase compared to previous years, contributing 84.2% of revenue growth.

This business is primarily distributed in North America and Asia-Pacific, generating $704 million and $472 million respectively during the period, contributing 77.11% of total business. Notably, benefiting from Chinese market demand, Asia-Pacific revenue growth reached 19.65%.

NEXTEER has a rich EPS product matrix capable of meeting different automakers' needs across various price segments. Based on its extensive EPS products, NEXTEER has proposed a Modular Electric Power Steering (mEPS) solution, providing customers with cost-effective, scalable platform designs whose flexibility can meet extensive demands from major automakers.

The company's market leadership position is solid, ranking first in North American market share and second in China with 16% share, trailing only Bosch. In new orders, EPS orders account for over 65%. The company secured $1.5 billion in new orders in the first half of this year, including domestic and overseas business from Chinese automakers, dual-pinion EPS and rear wheel steering orders from European automakers. The company maintains its full-year target of $5 billion in orders.

This confidence stems not only from its leading product position but also from three stable major customers. The largest customer, General Motors, contributes stable revenue growth, reaching 34.39% in the first half of this year, while the other two customers contribute 18.5% and 15.6% respectively. The three major customers collectively contribute 68.5%, typically fluctuating narrowly around 70% in previous years.

The solid foundation provides sufficient safety margin for the company's profit improvement. In the first half of this year, the company's adjusted EBITDA reached $230 million with a profit margin of 10.26%, up 0.86 percentage points year-over-year. The Asia-Pacific market contributed the most, with adjusted EBITDA profit margin reaching 16.85% and profit contribution exceeding 50%.

Although profitability has improved in recent years, the company's shareholder return rate remains relatively low, annualized at only 6.1% in 2025.

**Industry Outlook: Scale Commercialization Era Approaching**

From an industry perspective, under the dual resonance of policy and market, the steer-by-wire industry will usher in an era of large-scale commercialization, especially as Robotaxi deployment accelerates steer-by-wire commercialization progress. North America and China are two core markets for scenario implementation. In North America, Tesla and Waymo have launched paid Robotaxi services in multiple U.S. cities, while in China, companies like Pony.ai are expanding domestic and overseas Robotaxi market layouts.

According to a research report, starting from 2025, steer-by-wire will begin vehicle installation. Calculations suggest that by 2030, China's steer-by-wire market could exceed 35 billion yuan, while the global steer-by-wire market could exceed 80 billion yuan, with domestic steer-by-wire penetration rate potentially exceeding 30%.

NEXTEER's forward-looking layout with confirmed orders and production delivery in 2026 may position it as the first leading supplier to capitalize on this opportunity.

From major investment bank perspectives, they generally maintain optimistic attitudes. For example, Daiwa research believes NEXTEER integrates steer-by-wire and related software into vehicle steer-by-wire systems, having secured multiple orders in the first half of this year. The company has continuously reduced costs and improved profit margins over the past several years, expecting continued improvement in future profitability, reiterating "Outperform" rating. CICC research believes Chinese automakers' steer-by-wire model mass production speed may lead globally, with NEXTEER expected to secure more new appointments. Additionally, the company's profit margin has entered a recovery cycle, raising the target price to HK$8.4.

Overall, at the steer-by-wire investment opportunity, NEXTEER leverages its rich product matrix and first-mover advantages, having secured orders from multiple automakers with upcoming vehicle installations, potentially creating new growth drivers. Additionally, the company has a solid foundation, with mainstream EPS applications maintaining leading market share in North America and China, three core customers ensuring revenue growth, and strong Asia-Pacific revenue growth this year, particularly in the Chinese market, continuously driving profit margin improvement.

In 2026, the company's revenue structure is expected to change, with SBW revenue accounting for a certain proportion, while the company's market revenue structure will also tilt toward the U.S. and Chinese markets. The stability of the foundation combined with new growth driver creation, low valuation, and investment bank optimism suggest the company's market value may continue rising.