UBS Group released a report stating that several mainland auto manufacturers disclosed strong electric vehicle sales performance in October, especially companies targeting the mass market, including BYD (01211.HK) selling 0.503 million vehicles, SAIC Motor Corporation (600104.SH) selling 0.157 million vehicles, and Geely Automobile (00175.HK) selling 0.109 million vehicles. Industry sources pointed out that due to the uncertainty of delivering before the subsidy termination in early January, some stores have refused customer orders.

The bank believes that the short-term production capacity of the electric vehicle industry is insufficient, in stark contrast to the overcapacity situation six months ago. Although the industry's strong sales have boosted investor sentiment, the bank reminds investors to be wary of the risk of advanced demand release, which has already been reflected in the recent strong stock price performance, and a potential weakness that may emerge in early 2025.

With the bank recently downgrading its rating on Geely, it has become even more cautious about the industry outlook, especially the mass market in the near term. It is estimated that companies such as XPeng (09868.HK), Geely, and BYD may soon face particularly strong challenges, possibly entering a new round of price competition.

On the more resilient side, the bank believes that Li Auto Inc (02015.HK) is most advantaged because it has maintained discounts in the past few months to address weak demand in early 2025. As for Great Wall Motor (02333.HK), it closely follows, as half of its revenue comes from overseas markets, and the other half comes from a differentiated product strategy.