Electric vehicle makers in China face the brunt of a major economic slowdown, as sales begin to stagnate and revenue begins to fall.
In such a situation, you don’t want to upset your suppliers, but that’s exactly what certain EV manufacturers in China are doing.
Several Chinese electric vehicle manufacturers are at least 2 or 3 months late in clearing dies from their suppliers. On the contrary, Tesla has somehow managed to pay its suppliers on time.
Slowdown of the electric vehicle sector in China
Expanding payment cycles within China’s electric vehicle (EV) industry highlights the various challenges facing automakers in one of the world’s largest automotive markets.
As of late 2023, prominent electric vehicle makers such as Nio Inc. and Xpeng Inc. have experienced significant delays in clearing their payables, reflecting a broader trend of financial stress within the sector.
While Nio’s payout time was extended to approximately 295 days, up from 197 days in 2021, Xpeng saw a similar increase, with its payout period extended to 221 days from 179 days previously.
On the contrary, Tesla Inc., known for its efficiency in operations, maintained a comparatively stable payment period of around 101 days.
These long payment cycles serve as a barometer of sorts for the growing pressure that automakers operating in China face in the fiercely competitive EV landscape.
The economic slowdown, declining consumer enthusiasm for electric vehicles and the discontinuation of the national subsidy program in 2022 have created a challenging operating environment.
Smaller manufacturers, in particular, have been hit hardest by these adverse conditions, and some have been pushed to the brink of bankruptcy.
The restructuring of WM Motors and the suspension of operations of Human Horizons Group Inc., owner of premium electric vehicle brand HiPhi, highlight the severity of the challenges facing industry players.
Ongoing price wars and compressed profit margins have hit manufacturers’ liquidity, leading to delays in payments to suppliers.
This financial strain has begun to impact the entire automotive supply chain, particularly affecting lower-tier suppliers.
As delayed payments cascade through the supply chain, tier three or four suppliers are facing acute financial pressures, raising concerns about their long-term viability.
Read more: Total success: Xiaomi launches its SU7 electric car.
