The time it takes for some Chinese electric car makers to pay their suppliers has ballooned, a further sign of stress in the country’s increasingly competitive auto market.
Nio Inc. took 197 days to settle outstanding receipts in 2021, the majority of which will be paid to suppliers by the end of 2023, according to the latest available data compiled by Bloomberg. It took approximately 295 days to settle the due receipts. Another US-listed Chinese EV maker, Xiaopeng, took between 179 and 221 days to fulfill its obligations to vendors and related parties, according to the data.
By comparison, Elon Musk’s Tesla Inc. takes only about 101 days, and that period has remained fairly stable over the past three years.
The lengthening of payment cycles is a sign that many automakers are under pressure in China, where economic growth remains weak and consumer sentiment is weak. That has led to a decline in demand for electric vehicles, and what was once a fast-growing market is now beset by intense price competition and tight profit margins.
Since the Chinese government phased out state subsidies for EV purchases in 2022, some small manufacturers have been pushed to the brink. WM Motors filed for restructuring in October, and Human Horizons Group, owner of luxury EV brand Hi-Fi, suspended operations for at least six months in February.
“Everyone is suffering,” said Jochen Sievert, managing director of consultancy JSC Automotive. “For manufacturers, lower prices mean less money coming in. So the money they owe suppliers may be necessary to maintain liquidity.”
Representatives for Mr. Nio and Mr. Shupen did not respond to requests for comment.
Siebert said payment delays are starting to trickle down to auto parts suppliers.
“Tier 3 and 4 suppliers are really going to be hurt because they can’t pass it on,” he said, adding that supplier bankruptcies will lead to “disruptive consolidation” in the EV sector and could quickly create problems for future automakers’ production. He added that it could cause
In fact, Minshi Group, an exterior parts supplier based in Jiaxing City, Zhejiang Province, saw its accounts receivable and notes receivable increase by more than 40% from the end of 2020 to 4.74 billion yuan as of December, according to data compiled by Bloomberg. 656 million), while cash and cash equivalents fell by almost a third to 4.2 billion yuan over the same period.
BYD’s main supplier Hunan Yuneng New Energy Battery Materials Co., Ltd. had accounts receivable and notes receivable of 10.43 billion yuan at the end of 2022, more than three times the same period last year, according to data compiled by Bloomberg. Cash reserves decreased to 435.2 million yuan.
“The price war won’t end soon, and the stress will eventually be passed on to suppliers,” said Zhu Lin, Shanghai-based managing director of regeneration management firm Alvarez & Marsal.
“More auto parts manufacturers are approaching us to improve their performance, and some are considering selling unprofitable businesses,” Zhu said. “Weak players in the supply chain will face a high risk of being kicked out of the game.”
