According to the Financial Times China’s car industry runs on empty as supply chain bills go unpaid.
Chinese carmakers’ price war is putting the industry’s balance sheet under strain, a Financial Times analysis has revealed, as Beijing demands more action to protect suppliers in the world’s largest car market.
Current liabilities exceeded current assets at more than a third of publicly listed car manufacturers at the end of last year, according to FT calculations based on their most recent financial reports. The weakening liquidity picture highlights how China’s leading carmakers are being forced to squeeze suppliers to maintain working capital and fund their fight for market share amid heavy discounting.
The dominant electric-vehicle maker BYD is deepest in negative territory with its working capital, followed by rivals Geely, Nio, Seres and state-backed BAIC and JAC, while the total net current assets of 16 major listed Chinese carmakers fell to Rmb104.3bn ($14.5bn) by December 31 — a 62 per cent decline from their Rmb290.5bn peak in the first half of 2021. Yin Xinchi, a car industry analyst at Citic Securities, said a decline in net current assets indicated an increasing rate of cash consumption, with liquidity risks as the numbers turned negative. “Given the current downward trend, China’s auto industry is expected to enter an industry-wide elimination phase . . . in 2026 at the latest,” he warned. “During the process, some companies will die of liquidity crises.”
Source: Financial Times