China’s EV Makers Taking Longer to Pay Bills Amid Rising Stress

The time it’s taking for some of China’s electric-car makers to pay suppliers is ballooning — a further sign of stress in the nation’s increasingly cutthroat auto market.

Bloomberg
First Published20 May 2024
China’s EV Makers Taking Longer to Pay Bills Amid Rising Stress
China’s EV Makers Taking Longer to Pay Bills Amid Rising Stress

The time it’s taking for some of China’s electric-car makers to pay suppliers is ballooning — a further sign of stress in the nation’s increasingly cutthroat auto market.

Nio Inc. was taking around 295 days to clear its receipts payable, the vast majority of which are owed to suppliers, at the end of 2023 versus 197 days in 2021, according to the most recent available data compiled by Bloomberg. Xpeng Inc., another US-listed Chinese EV maker, was taking 221 days to honor its obligations to vendors and related parties, up from 179 days, the data show.

Elon Musk’s Tesla Inc., by comparison, only took around 101 days, and that period has remained largely stable in the past three years.

The extended payment cycles are indicative of the pressure many automakers are under in China, where economic growth remains sluggish and consumer sentiment is subdued. That’s translated into reduced demand for electric cars, and the once fast-growing market is now beset with intense price wars and crunched profit margins.

Since Beijing phased out a national subsidy program for EV purchases in 2022, some smaller manufacturers have been pushed to the brink. WM Motors filed for restructuring in October, and Human Horizons Group Inc., the owner of premium EV brand HiPhi, suspended operations for at least six months in February.

“Everybody’s suffering,” said Jochen Siebert, managing director at consultancy JSC Automotive. “For manufacturers, price reductions mean less money coming in. So the money they owe to their suppliers may be necessary for them to remain liquid.”

Representatives for Nio and Xpeng didn’t respond to requests for comment.

Delayed payments are starting to have a knock-on effects at auto-parts suppliers, Siebert said.

“Tier-three or four suppliers really get bitten, because they can’t pass it on,” he said, adding the EV sector may see a “messy consolidation” as suppliers go bankrupt, quickly causing production issues for automakers down the line.

Indeed Jiaxing, Zhejiang-based Minth Group Ltd., a supplier of exterior body parts, saw its accounts and notes receivables surge more than 40% to 4.74 billion yuan as of December from the end of 2020, while its cash and equivalents shrank by almost one-third to 4.2 billion yuan over the same period, according to data compiled by Bloomberg.

Hunan Yuneng New Energy Battery Material Co., which is a major supplier to BYD Co., according to data compiled by Bloomberg, saw its accounts and notes receivables more than triple to 10.43 billion yuan at the end of 2022 from a year earlier, while cash reserves fell to 435.2 million yuan.

“The price war won’t end soon and the stress eventually will be delivered to suppliers,” said Zhu Lin, a Shanghai-based managing director with turnaround management firm Alvarez & Marsal.

“We’ve seen more car components producers approaching us to improve their performance and some of them are thinking about offloading unprofitable businesses,” Zhu said. “The weak ones in the supply chain will face a high risk of being kicked out of the game.”

With assistance from Chunying Zhang and Danny Lee.

This article was generated from an automated news agency feed without modifications to text.

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.MoreLess
HomeNewsworldChina’s EV Makers Taking Longer to Pay Bills Amid Rising Stress

Most Active Stocks

Indus Towers

329.60
05:52 AM | 19 JUN 2024
-14.3 (-4.16%)

Bharat Electronics

311.75
05:52 AM | 19 JUN 2024
-6.5 (-2.04%)

Tata Steel

179.80
05:52 AM | 19 JUN 2024
-1.35 (-0.75%)

Bandhan Bank

198.75
05:52 AM | 19 JUN 2024
0.45 (0.23%)
More Active Stocks

Market Snapshot

  • Top Gainers
  • Top Losers
  • 52 Week High

Rashtriya Chemicals & Fertil

186.70
05:39 AM | 19 JUN 2024
13.35 (7.7%)

Fertilizers & Chemicals Travan

924.20
05:39 AM | 19 JUN 2024
60.05 (6.95%)

360 One Wam

852.95
05:38 AM | 19 JUN 2024
44.1 (5.45%)

Deepak Fertilisers & Petrochemicals Corporation

648.00
05:39 AM | 19 JUN 2024
28.65 (4.63%)
More from Top Gainers

Recommended For You

    More Recommendations

    Gold Prices

    • 24K
    • 22K
    Bangalore
    73,281.00-238.00
    Chennai
    72,711.00-1,095.00
    Delhi
    73,495.00-24.00
    Kolkata
    73,566.00191.00

    Fuel Price

    • Petrol
    • Diesel
    Bangalore
    102.86/L0.00
    Chennai
    100.75/L0.00
    Kolkata
    103.94/L0.00
    New Delhi
    94.72/L0.00
    OPEN IN APP
    HomeMarketsPremiumInstant LoanGet App