HK Stock Market Move | Car stocks fell in the afternoon, BRILLIANCE CHI (01114) dropped more than 4%. UBS says that the increase in the threshold for tax exemption for new energy vehicles may have a negative impact on market sentiment.

Car stocks surged significantly in the morning session, but fell collectively in the afternoon. As of the time of writing, BRILLIANCE CHI (01114) fell by 4.3% to 3.78 Hong Kong dollars; Great Wall Motor (02333) fell by 2.75% to 15.54 Hong Kong dollars; Guangzhou Automobile Group (02238) fell by 1.86% to 3.17 Hong Kong dollars; LI AUTO-W (02015) fell by 1.18% to 87.9 Hong Kong dollars. On the news front, the Ministry of Industry and Information Technology and two other departments recently issued a statement clarifying the technical requirements for new energy vehicle products to be exempt from vehicle purchase tax in 2026-2027. UBS released a research report stating that although most car manufacturers should be able to meet the new standards, the latest policy updates may be stricter, which could negatively impact market sentiment. While the policy tailwinds in mid-2024 may turn around in 2026, investors remain generally optimistic about the launch of new vehicles by individual companies. In addition, Cui Dongshu, secretary-general of the China Passenger Car Association, recently stated that the association has raised its annual forecast for the car market in August, and will further revise the forecast after a discussion in late October, with an expected upward revision to the growth forecast for 2025. Shenwan Hongyuan Group recently released a research report stating that as the subsidies for cars are gradually coming to an end and the policy of exempting new energy vehicles from purchase tax starting next year, the cost of buying a car will significantly increase. This may lead to a market boom in the fourth quarter.