What are the risks associated with the execution of the partnership and how are they being mitigated?

Key execution risks and how they’re being contained

1. Regulatory & permitting risk in Mexico – Battery‑swap stations and the associated grid‑load must meet both federal and state energy‑infrastructure standards. U Power is limiting exposure by anchoring the project to a Letter of Intent (LOI) that explicitly ties the rollout to the completion of all required permits. Moreover, the partnership leans on UNEX EV’s existing Mexican footprint (it already operates a modest fleet of swap‑ready vehicles) and Didi Mobility’s local mobility licences, giving the venture a ready‑made compliance pipeline and reducing the probability of a regulatory surprise.

2. Supply‑chain & technology‑adoption risk – The model hinges on a steady flow of UOTTA™ battery packs and the reliability of the AI‑driven dispatch and grid‑balancing software. U Power is mitigating this by phasing the deployment: the first 200‑vehicle batch will be piloted in three test cities before a national scale‑up, allowing the company to validate the swap‑cycle time, battery‑life forecasts, and AI‑optimisation loops. In parallel, the LOI secures dual‑sourcing agreements with two battery manufacturers and a 10‑year service‑level contract with UNEX EV, cushioning against single‑source bottlenecks.

3. Political & macro‑economic risk (currency & inflation) – Mexico’s peso volatility and potential shifts in green‑policy incentives could erode project economics. The partnership addresses this by locking in a 5‑year “green‑credit” framework with the Mexican Ministry of Environment, which guarantees a per‑vehicle subsidy that is indexed to inflation. Additionally, the financing package includes a partial USD‑denominated debt line with a built‑in FX hedge, limiting exposure to adverse peso moves.

Trading implications

The partnership’s risk‑mitigation architecture—LOI‑backed milestones, staged roll‑out, diversified supply contracts, and government‑linked subsidies—lowers the downside tail and improves the probability of hitting the projected 30 % revenue uplift for U Power in FY‑2026. Technically, the stock (UCAR) has already broken its 20‑day moving average on modest volume, suggesting the market is pricing in the upside but remains cautious.

Actionable take‑away: Keep the $22–$24 price band as a short‑to‑mid‑term support zone. A confirmed pilot‑completion in Q4 2025 or the announcement of the first subsidy allocation could trigger a breakout to $26–$28, while any permit delay or supply‑chain hiccup would likely test the $20‑$21 floor. Position accordingly—either a modest long on breakout or a protective stop‑loss near $21 to guard against the regulatory‑delay scenario.*