Reports are some Chinese EV makers, NEO and Xpang in particular, saw their payment times to their suppliers increase drastically. Neo is reported to take a year to pay an invoice.
In this video I discuss how automotive is a high expense industry and this is why cash flow is vital. We also have the defense against certain markets. These companies are basically dependent upon the Chinese market since they have few sales outside right now. This market is termed a "blood bath".
▶️ 3Speak
That is very interesting. They don't have enough liquidity to pay their suppliers immediately? This feels a little bit like a house of cards. If these EV makers get a really bad year, the suppliers are affected, and it can have a cascading effect.
With large corporations, it might be a cashflow issue...
Or it might be the fact they can get away with delaying the payments.
Fortune 500 companies are notorious slow payers. It effectively becomes an interest free loan.
Corporations tend to do that anyway. It is not uncommon for a Fortune 1000 company to take 120-180 days to pay anyway.
NEO and Xpeng's concerning payment delays draw attention to cash flow problems in the pricey car sector. Their reliance on the extremely competitive Chinese market raises their risk profile financially. nice video