Monday, June 17, 2024

From BYD to Xpeng, Chinese EV makers delaying payments to vendors

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The time Guangzhou-based Xpeng took to honour its obligations to suppliers rose to 221 days last year, from 208 days in 2022, and 179 days in 2021.

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Cheap EV alternative to Tesla and BYD takes off in small-town China

Cheap EV alternative to Tesla and BYD takes off in small-town China

“The time taken by carmakers to pay their suppliers is an indicator of their financial health,” said David Zhang, director of WDEF Digital Automotive International Cooperation Research Centre in Hangzhou. “An extended payment cycle shows that some of them are facing liquidity issues and they have to fine-tune their cash-flow management.”

Longer payment delays are also likely to affect carmakers’ and vendors’ production because component manufacturers may not be able to secure sufficient supply of raw materials to ensure smooth operations, he added.

The Bloomberg findings provide yet another snapshot of a slowing EV market in China, where 40 per cent of new cars are powered by batteries.

EV makers sold 8.9 million units in China last year, 37 per cent higher than 2022, but a sharp slowdown from the 90 per cent jump in 2022, according to the China Passenger Car Association (CPCA).

The slowdown has continued in the first quarter of the year, with deliveries of pure electric and plug-in hybrid cars slumping by 31 per cent quarter on quarter to 1.76 million units, the CPCA data showed.

BYD, which counts Warren Buffett’s Berkshire Hathaway among its shareholders, fired the first salvo in an EV price war on the mainland, slashing prices of nearly all of its cars by 5 to 20 per cent since mid-February.

Since then, the prices of 50 models across a range of brands have dropped by 10 per cent on average, Goldman Sachs said in a report last month.

Another cut of 10,300 yuan (US$1,425) per vehicle by BYD, or 7 per cent of the company’s average selling price, could drive the nation’s EV industry into losses, the US bank added.

Some carmakers bucked the trend by reducing the time taken to clear invoices.

The US carmaker’s mainland sales dropped by 3.6 per cent quarter on quarter to 132,420 units in the three months to March.

Beijing-based Li Auto, Tesla’s nearest Chinese rival, also closed the payment cycle by 17 days from a year earlier to 164 days in 2023.

At present, only a few ­mainland EV makers – such as BYD and Li Auto – are profitable.

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