The time it takes some Chinese electric vehicle makers to pay suppliers is increasing sharply, another sign of stress in the country’s increasingly cutthroat auto market.
Nio Inc., according to the latest available data compiled by Bloomberg. it took about 295 days to clear its accounts payable, the vast majority of which are from suppliers, at the end of 2023, compared with 197 days in 2021. Xpeng Inc., another U.S.-listed Chinese electric vehicle maker, took 221 days to meet its obligations to suppliers and related parties, up from 179 days, the data showed.
For comparison, Tesla Inc. It only took Elon Musk about 101 days, a period that has remained largely stable over the past three years.
The extended payment cycles highlight the pressure many automakers are under in China, where economic growth remains sluggish and consumer sentiment subdued. This has led to reduced demand for electric vehicles, and the once fast-growing market is now suffering from intense price wars and declining profits.
Since Beijing ended a national program to subsidize the purchase of electric vehicles in 2022, some smaller manufacturers have found themselves on the brink of bankruptcy. WM Motors has applied for restructuring in October and Human Horizons Group Inc., owner of the premium electric vehicle brand HiPhi, suspended operations for at least six months in February.
“Everyone is suffering,” said Jochen Siebert, managing director of consultancy Automotive AO. “For producers, lower prices mean less money coming in. So the money they owe their suppliers may be necessary to keep them liquid.”
Representatives for Nio and Xpeng did not respond to requests for comment.
Payment delays are starting to impact auto parts suppliers, Siebert said.
“The third- or fourth-tier suppliers are really getting bitten because they can’t pass it on,” he said, adding that the EV sector could see “disorderly consolidation” as suppliers go bankrupt, quickly causing production problems for automakers down the line.
Indeed, Jiaxing, a Zhejiang-based exterior body parts supplier, has accounts receivable from Minth Group Ltd. has risen more than 40% to 4.74 billion yuan ($656 million) as of December since the end of 2020, while its cash and equivalents fell by nearly a third over the same period, according to data compiled by Bloomberg. up to 4.2 billion yuan.
Hunan Yuneng New Energy Battery Material Co., which is BYD Co.’s main supplier, has increased the receivables of Hunan Yuneng New Energy Battery Material Co., which is BYD Co.’s main supplier, by the end of 2022, according to Bloomberg data. a year earlier, more than three times, to 10.43 billion yuan. Cash reserves fell to 435.2 million yuan.
“The price war will not end soon, and the stress will ultimately fall on suppliers,” said Zhu Lin, managing director of a Shanghai-based turnaround management company. Alvarez and Marsal.
“We see more auto component manufacturers approaching us to improve their performance, and some are thinking about getting rid of unprofitable businesses,” Zhu said. “Weak supply chain players will face a high risk of being left out of the game.”