The time it takes for some Chinese electric car makers to pay suppliers is increasing, a further sign of the pressure on China’s increasingly cutthroat auto market.
According to the latest data compiled by Bloomberg, Nio will need about 295 days to settle accounts payable by the end of 2023, the vast majority of which are owed to suppliers, compared with 197 days in 2021. Data show that Xpeng Motors, another Chinese electric vehicle manufacturer listed in the United States, needs 221 days to fulfill its obligations to suppliers and related parties, compared with 179 days.
By comparison, Elon Musk’s Tesla took about 101 days, and that time has remained essentially stable over the past three years.
The extended payment cycle shows the pressure many automakers are facing in China, where economic growth remains sluggish and consumer confidence is low. That means less demand for electric vehicles, and a once fast-growing market is now mired in fierce price wars and shrinking profit margins.
Since Beijing phased out a national subsidy program for electric vehicle purchases in 2022, some smaller manufacturers have been pushed to the brink of collapse. WM Motor applied for restructuring in October, and Human Horizons Group Inc., owner of high-end electric vehicle brand HiPhi, suspended operations for at least six months in February.
“Everyone is suffering,” said Jochen Siebert, managing director of consultancy JSC Automotive. “For manufacturers, lower prices mean less money coming in. So the money they owe their suppliers may be necessary for them to maintain liquidity.”
Representatives for Nio and Xpeng Motors did not respond to requests for comment.
Siebert said late payments are starting to have a ripple effect on auto parts suppliers.
“The third- and fourth-tier suppliers have really taken a hit because they can’t pass it on,” he said, adding that the EV industry could see “messy consolidation” as suppliers go bankrupt, quickly giving rise to Automakers pose production problems.
In fact, Minshi Group Co., Ltd., a body exterior parts supplier headquartered in Jiaxing, Zhejiang, saw its accounts and notes receivable surge by more than 40% to 4.74 billion yuan (656 million yuan) in December as of the end of 2020. U.S. dollars), while its cash and notes receivables fell by nearly a third to 4.2 billion yuan in yuan equivalents during the same period, according to data compiled by Bloomberg.
According to data compiled by Bloomberg, accounts receivable and notes receivable at the end of 2022 at Hunan Yuneng New Energy Battery Materials Co., a major supplier to BYD, more than tripled from a year earlier to 10.43 billion yuan, while cash Reserves fell to 435.2 million yuan.
“The price war will not end soon, and the pressure will eventually be passed on to suppliers,” said Zhu Lin, Shanghai-based managing director of turnaround manager Alvarez & Marsal.
“We are seeing more and more auto parts manufacturers approaching us to improve their performance, and some of them are considering selling unprofitable businesses,” Zhu said. “Weak players in the supply chain will be at high risk of being kicked out of the game.”
