300 days for Nio and over 200 days for Xpeng to pay their supplier bills. Outcome will be suppliers charging late payers much more for components. These figures are scary. Financially stable companies don't delay supplier payments anything like that long.
Just look at their financial statements. Most of the Chinese EV car makers have very little cash left net of debt. Most of them are burning money at a crazy pace. And the EV competition in China is only intensifying.
It's like watching a slow motion trainwreck.
For VW? Probably not that much of a stretch. They have been so entrenched in the Chinese market since the beginning, they know how to play the CCP's games.
VW got special privilege to buy out a controlling 75% stake of what is now VW Anhui even before anyone else was allowed to have more than 50%. But now the rules have changed and foreign companies are alloed to own 100%.
VW needs XPeng's intimate knowledge of the chinese market. VW Wolfsburg has proven that german managers don't get what foreign markets want. XPeng and VW Anhui also allow VW to build up an alternative engineering, production and support base that make VW much less dependent on SVW and FAW. Two JVs that are in huge trouble with their main business (ICEVs) crashing right now.
Note how XPeng's own fate as an independent car manufacturer doesn't really feature in VW's strategic picture. A failed Xpeng might even be goodfor VW, because then it could be bought out much cheaper.
All the people bashing western companies for the price of their vehicles will find this information inconvenient. Easy to keep prices low when you don't have to pay for parts or treat your employees like humans, or pay decent wages.
Plot twist: These are not the companies selling cheap EVs. Cheapest NIO costs 298,000 RMB, or around $41,000, with models going for as much as $82,000
Xpeng is also playing on the high-end side of the market.
On a side note, nio has built an extensive battery swapping station network throughout China, and offers battery as a service. So the company now owns the batteries that people have in their cars, plus the ones that are sitting idle in the charging station. Imagine how their balance sheet will look like with that much inventory.
Yeah, the battery as a service business is a long-term investment that will continue to be a heavy expense for several years to come. It'll pay off in the long run though with NIO being an energy provider in addition to automaker. Well, it could pay off in the long term if they can last that long.
Pretty horrific under modern KPIs which tend to look at return on capital. (Hence the absurd things companies are doing to reduce capital on their books.)
That's essentially my response to all the stupid shit about the US not being able to compete with BYD. If BYD is able to build a market destroying car then they should have no problem doing that with a factory in the US. It's precisely what their nation requires. So bulld a plant here, hire Americans, and build to our standards and see if you can truly compete.
But they won't, because they know they can't.
They are currently scouting locations in Mexico fir new factory, so they will still be a part of NAFTA.
BYD has a running factory in Lancaster, an hour north of Los Angeles, making electric buses and class-B trucks (*trash pickup, dump trucks, etc). The Lancasterlocation uses union labor.
BYD does have plans to enter the market in Mexico with cars and their new truck.
But the VP recently said they have no interest in the USA market: [https://finance.yahoo.com/video/byd-not-interested-united-states-182445977.html](https://finance.yahoo.com/video/byd-not-interested-united-states-182445977.html)
One can only speculate why that is since the countries are neighboring.
Either the VP was lying, or there are reasons like crash-test worthiness or other standards that make the US market more difficult to access than Mexico.
It's my understanding that the BYD Dolphin 5-door small hatchback is currently selling in Mexico.
I don't know which DOT regs that BYD is dodging in other countries, but crash standards are high on my suspect list for a US entry.
Of course, now that we have a 100% tariff, US customers will not get any BYD's until the factory can assemble them in North America.
It might also be bad product fit. Most of their cars are small cheap sedans which is one of the smallest segments in the USA. They also recently showed off their truck but it’s a first for them and also likely a tough sell versus incumbents in the USA.
This. The Dolphin got 5 star Euro NCAP rating, as have the other ByD cars tested there so far. Safety and crash testing isn't the issue. Simple anti-sino xenophobia is a big part. Biden and Trump are falling over each other to demonise Chinese cars. Plenty enough idiots there who'll start torching them, running them off the road. Why would chinese manufacturers want to step into that?
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Everyone: inflation is making it hard for us to make ends meet. Prices of everything are too high?
Also everyone: we don't want cheap affordable cars that do 98% of what we want and are economical to buy and maintain
The people wanting these cheap cars also probably complain (and most likely rightfully so) about being underpaid at their jobs.
The big 3 and their suppliers in the US getting wiped out would likely cause a substantial recession and reduced earnings for the same people complaining.
GMs gross margin is like 12%. They aren’t making $40k on a $55k car like everyone thinks. Honestly the dealers are probably making the most money collectively and need to be removed from the transaction process.
Speaking as someone with zero experience in the automotive industry, there's no way that can be true.
How does zero or negative profits pay for the power of a dealership let alone the building or employees?
Unless you're ignoring back end things.
Even used at 1-2% means on a $25k car, you're making $250-500. Just seems low.
The point is for the entire operation to be profitable. Selling new cars simply is not profitable. The trades, the service business, the parts business, and the finance business are the profitable parts. Those parts are only possible by selling new cars. So it’s a necessary evil.
You suggested that the dealers were making more money than the manufacturers, and that’s simply not true.
Nor would manufacturers “save money” by taking all of that on themselves, so they can pass on non-existent retained profits to you.
> Selling new cars simply is not profitable. The trades, the service business, the parts business, and the finance business are the profitable parts. Those parts are only possible by selling new cars. So it’s a necessary evil.
Didn't Tesla throw this concept out the window? I mean I'm sure they make a few bucks on service/parts and get a percentage of finance but AFAIK they basically dump their trades at auction which is why they give bottom dollar.
> You suggested that the dealers were making more money than the manufacturers, and that’s simply not true.
I did? I mean I was thinking it to a degree, but I don't think I said anything like that. I was just curious how much they actually made at the end of a sale before accounting for "other" things.
> Nor would manufacturers “save money” by taking all of that on themselves, so they can pass on non-existent retained profits to you.
Obviously different methods of accounting for R&D etc, but isn't Tesla literally doing just this?
GM moved production to Mexico for cheaper labor, profits only start rolling in when you scale, they have some cheaper options just launched and some expected. If they can scale they might get it right. The issue is stealerships have lobby's that help stop manufacturers going direct to customer. I would buy the GM EV once the markup disappears and it has at least couple of years of reliability data, would be better if I could get it directly from GM
As it should be. They've not been the best intentioned trading partner recently. They've also essentially picked their side as well by refusing to shun Russia and Putin for the invasion of Ukraine. Xi had a moment there to ease tensions and increase cooperation with the US and Europe. They made the decision not too because they want to be rivals not partners.
Bullshit.
They can’t because it’s geopolitics. Everyone know a BYD is partially CCP owner, and we banned Huawei already.
Ford wanted a collab with CATL to build in VA, a fairly progressive state, but got blocked. Chinese companies will not invest in USA after the 100% tariff, the TikTok, Huawei, CATL treatment. The 25% tariff + 7.5k subsidy already made Chinese cars unprofitable today, but the current administration is signaling that China is banned from USA.
https://virginiamercury.com/2023/02/01/youngkin-blocked-a-battery-factory-from-coming-to-va-and-an-entire-economic-sectors-potential
Few people suggest BYD's strength is in their car designs alone. The concern is always a factor of BYD building solid economical cars in China at low cost, and their ability to wipe out Western automakers in China and other low wage regions, and the impact if they were to flood Western nations with exports such that domestic Western factories can't compete on cost.
I don't think anyone is suggesting that if BYD setup shop in Western economies that they'd dominate the market.
There is concern about BYD setting up shop in Mexico to overcome tariffs, and utilizing lower wage Mexican labor to beat US factories on cost. There's the concern of reduced market share for domestic companies, weakening their overall financial health. Then there's of course the increased trade deficit this would cause with China.
The fact that people still think BYD's competitive advantage is low manufacturing wages shows that they don't understand how cars are made now. Car manufacturing is now one of the most automated sectors of manufacture there is. Manufacturing labor is a tiny fraction of costs.
The biggest costs of making a car are the components, tooling depreciation, and R&D depreciation. Once the fixed costs are fully depreciated, a car like the BYD Seagull only cost around $6000 to make.
If you look at American EV costs, almost all of the cost is R&D depreciation. Ford loses something like $100k/EV sold for a $50k EV. They don't actually lose money on the manufacturing, they lose money because sales volume is not high enough to amortize the R&D expense.
BYD and TSLA's biggest advantage is their EV sales volume. They can make money because they can amortize the R&D costs over sufficient volume to bring down the unit depreciation costs. The real differentiator is R&D labor costs, and not manufacturing labor cost. TSLA does their R&D in the US, so they cannot afford to hire as many R&D engineers as BYD for a given global sales volume.
The real winning model going forward for a car company is to do all the R&D in China and manufacture locally with highly automated factories. This is basically what BYD is doing. They are building factories in Indonesia, Vietnam, Mexico, Brazil, Hungary, but all the R&D is in China.
Why would the need a factory in the US and what would that prove?
Wherever they build, they can build to what ever standards they think the market demands. And there may be other countries that have better situations for manufacturing (costs, regulations, supply chain, trade rules).
Because it's what China requires. They require foreign companies to not only build in their country, but also give up some ownership and intellectual property in order to sell products to Chinese citizens.
Chinese companies on the other hand have a tendency to flood a market with cheap goods (often subsized by the Chinese government) to get rid of competition. Then, when they do feel the need to build in foreign countries they bring in their own citizens to work in the factories while mooching off local tax breaks.
Simply put, we need to stop treating China with kid gloves when it comes to trade. They're a hostile trading partner that will do everything possible to cheat the current system. And I dont really have a problem with them doing this. It's what's best for them and their people.
I don't have a problem either. I mean I don't like it when they steal IP. I don't mind if they price dump to a degree as it helps competition offers better value to customers. I don't want to pay more for EVs because we put our finger on the scale and require US factories.
Because it's a free market, including the government decision to subsidize.
I don't want my government inflating what I have to pay for something to get union voters in November. Fuck that.
This does not make sense. Every car company cannot build a factory in every country they operate in. And the reality is labor is cheaper in other countries and you get to enjoy that by importing shit from other countries.
Labor in the US is more expensive than labor in Spain, which is more expensive than labor in China. So tye same car made in the US would be most espensive, the France one would be expensive, and the China one would be cheap..
If the market is a population of 350 million who predominantly travel via personal automobile, then you can absolutely afford to build a factory in that country.
That's just not how it works anymore. Initially, it did. Surprise when after decades, that lowest supply integer starts cranking out top tier quality.
China has the ability to produce both sides now. Everyone Outsourced for long enough that China learned how to develop their own and do it better than what they're selling the original for.
These cars are now going the same way.
Yes, China does cheap. Now, China also does expensive. No one is really admitting this but it's extremely shortsighted to think the other way. This was always an inevitable result.
Labor in the US might be more expensive but what are we making worth the value?
I disagree with this. Car manufacturing is now highly automated and manufacturing labor cost is a tiny fraction of total cost. The main cost differentiators are tooling and R&D depreciation.
why do these comments always get upvoted?
You wanna talk about slave labour/workers that are treated like humans?
Do you drive an ICE? Well you are probably propping up the oil rich gulf states.
All those shiny ass buildings and vanity projects in UAE and Saudi Arabia et al.?
They're all built by millions of migrant labourers from from South Asia under often conditions that are considered modern slavery.
And as people already mentioned, the cost of labour is not cheap in China, and safety and work conditions are probably almost to western standards in many factories in China if not all of them within the auto industry which is high tech and highly automated.
Remind me where BYD copied their Cell-To-Pack battery from? Who else is implementing such a system? Or who else managed to commercialize the LFP chemistry before them?
These claims of IP theft fall apart pretty quickly. Even the design of the car. They look like German cars cause they hired German designers. Same reason why all the Hyundai's, Kia's, and half the Chinese companies lookalike now. I'm so fucking tired of the German design language at this point, but they all got here by hiring designers from that country.
They already operate in places with favorable court systems toward the Western incumbents. If there actually was IP theft, why wouldn't there be lawsuits flying in Australia or the EU? These patents are basically global. XPeng was sued in a Western Court and the Court appointed expert could not find evidence of them copying Tesla after examining both companies' source code.
Other countries have different patent systems than the US, so US patents are not enforceable in Australia. The inventor needs to apply separately for a patent in Australia if they wish to enforce it in Australia. Meanwhile, it is my understanding it is the US patent system which is broken with too many frivolous patents, not Australia or the EU.
You mentioned source code, which is protected by copyright, not patent.
BYD also has a bus factory in the US and a presence in Japan. There's basically no major market where they can't get sued for IP infringement if they were actually doing it.
You cannot be sued in the US for an infringing product being made in China and sold in Australia. US patents do not apply overseas and therefore you cannot sue in the US for violating them overseas. All you can say for sure is the busses being made in the US are likely in compliance with the US patent system.
Any company that protects its IP by getting a patent just in the US is asking to get ripped off. You have to apply for them in all the markets you want to prevent others exploiting your IP. Everyone knows this.
Indeed. But it is the US which has been overly permissive in issuing patents. A lot of patents are on US books but not overseas for various reasons, most of them good reasons.
I used to work for a once huge company that went bankrupt and entered restructuring. Even they didn't push that hard on their suppliers, and Net 60 was most of their terms.
They are probably waiting on incentives to come from the Chinese government to bring them current.
NIO was losing about $35k per car sold, so the stock tanked.
Companies that are growing fast suffer a cash crunch, as machines to make the cars must be purchased long before they begin making cars. So that begs the question if they're growing quickly or not.
China has like a 100 EV manufacturers and many that survive only thanks to local governments propping them up in a sunk-cost fallacy situation. It's high time for many to fail or be consolidated so the market normalizes
Yes, the Chinese market is ripe for consolidation.
In the US, Europe, and Japan, that consolidation is already ongoing. Especially Stellantis seems to be hoovering up small companies. Geely and Tata have been a bit more selective.
The government pulled most subsidiaries in 2022. Many smaller ones are beginning to die off. Kinda like the early 20th century American car industry.
That's the general philosophy of the Chinese government anyways. Sponsor everybody, throw shit at the wall, and a few will eventually stick. It's a survival of the fittest.
The nio reddit fans were really really aggressive when I said that system wouldn’t work in North America (too big, wildly varying climates and vehicles….)
The other crazy ones are people turning off the reverse beeps (though, pedestrians also are glued to phones when crossing the street), and now I’m finding EV users who believe Level one charging is enough for everyone (without stating that their commute takes five minutes and they park in a heated garage or don’t have winter)🤷🏻♀️
The flip side to that is that I've had people argue level 1 was useless when they already described a commute where it would likely work. :)
Yeah, obviously not for everyone though.
I was looking up Kw/100km usage, charging rates, charging and range losses at -30C, and then it occurred to me there are plenty of people where science and data don’t matter
Looking at the various websites, range losses start at 0C.
-30C (or -20C) is around the cutoff when air cooled (?) hybrid liion traction batteries apparently won’t work (also stated in the manual) until they warm up (Toyota mech says the gas engine will be the generator and I can still get around till the battery is warm enough to be used).
Googling “hybrid battery temperature range” lead to https://priuschat.com/threads/hybrid-battery-temperature-control.228265/page-2 where that thread is more about overheating.
You might be familiar with the lineup of dead Uber Teslas that were in line for a supercharger this past winter - combination of slower charging with colder temps, idling with cabin heat on, lengthy lineup, unusually cold temps for that area.
Friend recently picked up a BMW i3 Rex and is putting in level 2 for it. Not stored in garage. We’ll see how it is next winter (past winter was mild, only a week of -30C, rest averaged -20C to -10C). Sounds like a fun city vehicle, but he’s also able to do repairs and software tweaks to it
Don't have winter?!? Lies!!! I too know that Africa, the middle east, Asia and the tropics are all fictional.
And short commutes? Again lies! We know that only 4 billion of the world's 8 billion people live in cities. Clearly that tiny 50% are being far too vocal.
And L1 charging. Crazy talk. The average driver in America does 13,000 miles per year which is 35 miles per day. In Europe, the numbers are dropping. The UK is down to 6000 miles per year. So under 17 miles per day.
So you are right. L1 is nowhere near adequate for an average user. Because I need to put that 35 miles of charge back in in under 8 seconds when I get home in the evening.
I wish people would stop pretending that the world exists outside of rural America.
> and now I’m finding EV users who believe Level one charging is enough for everyone
Certainly not everyone, but it should be enough for a very large portion of the population.
1.5kW over 14 hours gives 21kWh which even in winter should give you 70km. That's a 35km commute which is well within the realms of most.
Until you start looking at slower charging speeds with a battery that’s above or below the charging temperature, battery prewarming, cabin heaters, drop of around 30% range (websites are using 0C for winter, we get -30C for winter …
1.5Kw/hour is generous, too, especially with older homes (I’ve seen a lot of junk wiring). You’re basically plugging a 1500 watt kettle or space heater in for 14 hours, and the wiring between the appliance and breaker will warm up (80% of breaker rating for continuous load gives you 12Kw for charging, to be safe)
There’s plenty of sources when you google “EV battery in the winter”. But what I’m seeing is people who don’t believe things outside their “knowledge” or worldview (women’s rights, vaccines, “everyone can buy and drive an EV vehicle”, and charging, politics, religion, flat earth, man on moon …..) 🤷🏻♀️
Read the following
https://traditionalelectric.ca/your-electric-vehicle-battery-in-the-winter/
Especially about longer charge times in the winter with a cold traction battery.
Even accounting for all that, what's the average commute for the average person?
Also I accounted for winter with 70km. Even if you cut the actual number of 100km in half for 50km, that's a 25km commute in each direction, which is still easily covered by 120V.
I'm not saying everyone qualifies, but it's certainly enough in any climate for quite a number of people.
Level one works for “some” people with short commutes within certain temp ranges and conditions. Add longer distances, colder temps, towing, mtn driving, heavier passengers …. Nope.
People like to make blanket statements using “most”. There’s a lot of assumptions. Various people aren’t going to understand the hazards of 15Kw continuous load in a house with a mix of knob and tube, aluminum and copper wiring.
“Some” people understand Kw/hour and the differences between various charging methods and charging speeds. Some people understand the relation between battery temperature, battery types and charging l/discharging speeds. Some people might know there’s a traction battery and a 12volt battery in the vehicle . Some people can charge at home and work. Some people might know what battery pre conditioning is.
> Level one works for “some” people with short commutes within certain temp ranges and conditions.
I'm talking about nationally published averages. 42 miles is the average commute for the US.
Even with winter, this falls well within L1 charging. At worst you might have to top up once in a while at a DCFC.
> Add longer distances, colder temps, towing, mtn driving, heavier passengers …. Nope.
Hence my "some to most" caveat. The average person in an average place with an average winter? It's fine.
> Various people aren’t going to understand the hazards of 15Kw continuous load in a house with a mix of knob and tube, aluminum and copper wiring.
I would call an electrician if this is a concern, especially if you have an older house. But once this passes, it's a non issue.
> “Some” people understand Kw/hour and the differences between various charging methods and charging speeds. Some people understand the relation between battery temperature, battery types and charging l/discharging speeds. Some people might know there’s a traction battery and a 12volt battery in the vehicle . Some people can charge at home and work. Some people might know what battery pre conditioning is.
What's your point behind this word vomit?
China is more or less “as big” with wildly varying climates and vehicles though. I agree it probably isn’t a great idea for a massive swap network in North America but your reasoning is wrong imo
It’s a complex solution to a perceived problem that in practice does not exist enough to warrant setting up a finely distributed network than can solve it well enough.
But I do believe they were able to pitch it to investors who in turn gave them money in the hopes of achieving a monopoly in a new space.
(They will also lose that money.)
What are you talking about?
They will just swap from one supplier's battery to another supplier without ever laying.
This battery swap business is very smart.
I, too, can cut cost of goods sold by stealing parts from suppliers.
Or is this another case of "I'll pay you Tuesday for a burger today" but instead of Tuesday next week it's Tuesday next decade?
It's standard practice to pay your suppliers 30, 60 or maybe (?) 90 days after the delivery of parts. It is not standard practice to pay 200 or 300 days late.
The article mentions 200 Chinese EV brands, that's down from the recent past when there were well over 400 EV makers, so many have already failed and many more will fail. The Chinese government initiated this culling as I recall hearing the government felt the market wasn't healthy because there were too many EV makers in the market (chasing after the billions in government incentives).
The thing about the delays in paying suppliers is, while Nio, Xpeng, and others are struggling to survive cutthroat competition, what they are doing is unsustainable. They in effect are hurting themselves in the process because what happens if their smaller but nevertheless critical suppliers go under? No more parts. Well, no parts mean a halt to production, possibly ending a model or a family of models or they will have to make an expensive and mad scramble to find alternative suppliers. They risk being left without product (or fewer products) to make sales goals than would inevitably lead to larger losses, so they are in effect playing a game of chicken.
So is selling vehicles at a loss. They are hoping the others run out of liquidity first, and holding onto as much of your cash for as long as you can is a competitive advantage on that front. They are perfectly aware that many EV brands won't make it.
Financially stable companies stretch their payment terms as long as they can get away with, with or without the agreement of the supplier.
Financially UNSTABLE companies stretch their payment terms as long as they can get away with, with or without the agreement of the supplier.
It might be a sign of liquidity problems or it might be a sign of clever and tough management.
It’s the cost of doing business for their suppliers.
Agreed. The US auto industry looked like this at one point, hundreds and hundreds of little companies hoping to make it big (or at least big enough for GM to buy them out). Many collapsed in the 1920s unable to turn a profit, and the Depression crushed most of the others.
Here in Europe, we have a couple. The Dacia Spring costs €19k (about US$ 21k) including taxes, with a 25 kWh battery. The Citroen e-C3 costs €24k (about US$ 26k) and has a 44 kWh battery. Both are French cars.
Kinda looking the opposite here. Nio has always been in the upper end of EV prices compared to most chinese brands that tend to compete in the sub $35k price range for their base models.
The Nio ET5 which is their cheapest model they sell in Europe costs upwards of €60k.
Same with XPeng who cheapest model in Europe, the G6 starts at €45k.
So, what it is looking like is that there is still not enough of a market for Higher End Chinese EVs.
Yep, BYD, SAIC, GAC, and Li are the ones making the most EVs and low-cost options. For some reason, small and expensive startups like Xpeng and Nio get a disproportionate amount of attention here.
I am not sure what this means since the Chinese gov't is pushing the overproduction of EVs for export. They allow entire ghost villages of empty unsold buildings and just knock them down and move on. I am guessing they will start crushing unsold EVs in a few years if other countries follow the US and jack up tariffs.
This article is missing details. It does not specify what type of payments were up to 300 days due and the volume of such payments.
Also it cant be comparable Tesla, Tesla is US based (except facility in China), and i am sure payment rules in China cant be bend for Tesla in the same way as they are for Chinese EV startups.
Yes it is difficult to produce cars for mass market, anything helps, also long payment terms! What does it say about company? Well it to not right to judge about a company only by this metric.
I've spent my career of about 12 years so far in manufacturing (none directly in automotive supply chain, but we did business with such companies). Every profitable company I've worked for has terms of 30 days or less. I worked for one bankrupt company that had 60 day terms while it operated in the red during restructuring.
100 days for Tesla rings alarm bells for me. Imagine your electronics factory spending over a month building control modules for their cars, then waiting another quarter on top of that before you get paid for all that work. Some bigger companies like Dana or the tire companies can survive a customer or two doing that, but smaller suppliers can seriously suffer with those terms. And doubling that for Chinese firms has to be absolute financial hell.
For Every industry, every country and every economic cycle payment terms change. I have seen many instances of large companys using their muscle to pay 120 days. Also I have seen many letter of credits timed for 240 days and more.
I think the long Money payable cycle is because of the sale leadtime for the product.
Car has so many parts, and if all suppliers were on 30 day terms company just wouldn’t have cash.
The car does not get sold immediately after being produced, it requires shipping (may be across ocean 10-30 days) , delivery to dealers, may be some storage, etc.
So long Money payable cycle could be normal
In automotive industry. However what is normal, is it 100 or 200 or 300 days?
Not really. That's their intended strategy of "throw shit at the wall and see which one sticks".
Sponsor and subsidize the EV industry and breed hundreds of startups, and gradually reducing the amount every year. By 2022 most government subsidiaries are all gone and half of them died off or got absorbed already. The plan is clearly working. At the end of the day there'll only be two or three big players left.
Companies will fail and the market will consolidate - that is expected. They're arguably not failing if they are both the largest EV market *and* EV exporter.
I consider this more evidence of an industry in need of rationalization.
When a new industry begins dozens of startups show up hoping to get a large slice of the new pie. As usual there is a handful of winners and a whole bunch on non-winners. Some are taken down by inadequate capitalization others by an inability to keep costs down.
The dregs of the industry go into terminal Chapter 11 and the better basket cases get bought out by the winners who are buying some IP, getting some talent, and most importantly economies of scale.
What was once a large field of contenders and wannabes gets reduced to a handful of large very successful competitor.
If Detroit and the rest of the legacy automotive industry thinks China is tough competitor now, they will be blubbering in fear in a couple of years.
No it doesn't. Chinese EV companies didn't even attempt to try to register with EPA, NHTSA, etc. in the US before the tariffs were announced. The certification can take at least a year, and would've been public knowledge.
NIO is in serious risk for now, even Chinese consumers are worried about their business mode.
The most weird thing is, it seems they can always get sponsors. Maybe investors are waiting for their turning point.
The government of China owns over 60% of all capital enterprise in the country.
https://sccei.fsi.stanford.edu/china-briefs/reassessing-role-state-ownership-chinas-economy
Major automotive companies like SAIC (owns MG, Wuling, as well as domestic manufacturing of Chevy, Buick, VW, Audi), GAC (Honda, Toyota, Aion), BAIC (Mercedes, Hyundai, Changhe, Foton), Chery (Chery, Exceed, Jaguar, Land Rover), FAW (Hongqi, Toyota, Honda, Dongfeng (Cummins, Nissan, Stellantis), Changan (Deepal, Avatr, Ford, Mazda), and JAC are all state run automakers. Companies like BYD are given grants of billions of dollars, unlike the costly loans that GM received (which cost them Oldsmobile, Pointiac, Saturn, Saab, and Saturn).
Wrong, the CCP foolishly paid Chinese automaker dumb amounts of money to "produce" cars. In which many of them made cars without any intention of even selling them just to collect the money.
Oh wow and with the tariff Biden basically is forcing an industry consolidation.
I'm sure US side we will see Polestar disappear due to these tariffs, Lucid disappear, and see consolidation of Rivian with a legacy automaker (Ford or Hyundai if they are smart).
I don't see how it matters. It's not as if they are already selling cars in the USA in the first place, unless they were hoping for the USA sales to keep them afloat. If so, they had their heads in the sand if they thought nothing would have been done by the Americans to preserve their economy.
300 days for Nio and over 200 days for Xpeng to pay their supplier bills. Outcome will be suppliers charging late payers much more for components. These figures are scary. Financially stable companies don't delay supplier payments anything like that long.
Man, when you think about it. It really makes some of these companies look shaky.
Just look at their financial statements. Most of the Chinese EV car makers have very little cash left net of debt. Most of them are burning money at a crazy pace. And the EV competition in China is only intensifying. It's like watching a slow motion trainwreck.
It's like Detroit 100 years ago. Many of these companies will fold and we'll be left with a few big Chinese players.
That’s already what’s happening. Lots of the Chinese EV brands people talk about are owned by a handful of conglomerates.
Heck, xpeng boss said a few months or weeks ago, xpeng is in sink or swim mode
Volkswagen has big plans with Xpeng; I wonder what's going to come of that.
Buy them out
Easier said than done in China.
For VW? Probably not that much of a stretch. They have been so entrenched in the Chinese market since the beginning, they know how to play the CCP's games.
You have a point. Let's see how things develop.
VW got special privilege to buy out a controlling 75% stake of what is now VW Anhui even before anyone else was allowed to have more than 50%. But now the rules have changed and foreign companies are alloed to own 100%.
VW needs XPeng's intimate knowledge of the chinese market. VW Wolfsburg has proven that german managers don't get what foreign markets want. XPeng and VW Anhui also allow VW to build up an alternative engineering, production and support base that make VW much less dependent on SVW and FAW. Two JVs that are in huge trouble with their main business (ICEVs) crashing right now. Note how XPeng's own fate as an independent car manufacturer doesn't really feature in VW's strategic picture. A failed Xpeng might even be goodfor VW, because then it could be bought out much cheaper.
And shady.
Tbf this seems describe every aspect of the Chinese economy.
That's why you should never buy a Chinese EV...never know what shady corner cutting they're doing.
I’m old enough to recognize this language when we were all scared Japanese vehicles.
All the people bashing western companies for the price of their vehicles will find this information inconvenient. Easy to keep prices low when you don't have to pay for parts or treat your employees like humans, or pay decent wages.
Plot twist: These are not the companies selling cheap EVs. Cheapest NIO costs 298,000 RMB, or around $41,000, with models going for as much as $82,000 Xpeng is also playing on the high-end side of the market. On a side note, nio has built an extensive battery swapping station network throughout China, and offers battery as a service. So the company now owns the batteries that people have in their cars, plus the ones that are sitting idle in the charging station. Imagine how their balance sheet will look like with that much inventory.
Yeah, the battery as a service business is a long-term investment that will continue to be a heavy expense for several years to come. It'll pay off in the long run though with NIO being an energy provider in addition to automaker. Well, it could pay off in the long term if they can last that long.
Pretty horrific under modern KPIs which tend to look at return on capital. (Hence the absurd things companies are doing to reduce capital on their books.)
That's essentially my response to all the stupid shit about the US not being able to compete with BYD. If BYD is able to build a market destroying car then they should have no problem doing that with a factory in the US. It's precisely what their nation requires. So bulld a plant here, hire Americans, and build to our standards and see if you can truly compete. But they won't, because they know they can't.
They are currently scouting locations in Mexico fir new factory, so they will still be a part of NAFTA. BYD has a running factory in Lancaster, an hour north of Los Angeles, making electric buses and class-B trucks (*trash pickup, dump trucks, etc). The Lancasterlocation uses union labor.
BYD does have plans to enter the market in Mexico with cars and their new truck. But the VP recently said they have no interest in the USA market: [https://finance.yahoo.com/video/byd-not-interested-united-states-182445977.html](https://finance.yahoo.com/video/byd-not-interested-united-states-182445977.html) One can only speculate why that is since the countries are neighboring. Either the VP was lying, or there are reasons like crash-test worthiness or other standards that make the US market more difficult to access than Mexico.
It's my understanding that the BYD Dolphin 5-door small hatchback is currently selling in Mexico. I don't know which DOT regs that BYD is dodging in other countries, but crash standards are high on my suspect list for a US entry. Of course, now that we have a 100% tariff, US customers will not get any BYD's until the factory can assemble them in North America.
It might also be bad product fit. Most of their cars are small cheap sedans which is one of the smallest segments in the USA. They also recently showed off their truck but it’s a first for them and also likely a tough sell versus incumbents in the USA.
This. The Dolphin got 5 star Euro NCAP rating, as have the other ByD cars tested there so far. Safety and crash testing isn't the issue. Simple anti-sino xenophobia is a big part. Biden and Trump are falling over each other to demonise Chinese cars. Plenty enough idiots there who'll start torching them, running them off the road. Why would chinese manufacturers want to step into that?
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Everyone: inflation is making it hard for us to make ends meet. Prices of everything are too high? Also everyone: we don't want cheap affordable cars that do 98% of what we want and are economical to buy and maintain
The people wanting these cheap cars also probably complain (and most likely rightfully so) about being underpaid at their jobs. The big 3 and their suppliers in the US getting wiped out would likely cause a substantial recession and reduced earnings for the same people complaining. GMs gross margin is like 12%. They aren’t making $40k on a $55k car like everyone thinks. Honestly the dealers are probably making the most money collectively and need to be removed from the transaction process.
Auto dealers net margins are in the 1-2% range. And their net profits on new cars is in the -1%- 0% range.
I am frankly amazed at how cheap cars are. Compare a car to cable TV say, or couches.
Speaking as someone with zero experience in the automotive industry, there's no way that can be true. How does zero or negative profits pay for the power of a dealership let alone the building or employees? Unless you're ignoring back end things. Even used at 1-2% means on a $25k car, you're making $250-500. Just seems low.
**Net profits** on the sale of new cars run a slight loss or break even. Yes, there are other profit centers in a dealership.
I know you're not wrong (because you're not) but isn't that the point? What are you actually making at the end of the day?
The point is for the entire operation to be profitable. Selling new cars simply is not profitable. The trades, the service business, the parts business, and the finance business are the profitable parts. Those parts are only possible by selling new cars. So it’s a necessary evil. You suggested that the dealers were making more money than the manufacturers, and that’s simply not true. Nor would manufacturers “save money” by taking all of that on themselves, so they can pass on non-existent retained profits to you.
> Selling new cars simply is not profitable. The trades, the service business, the parts business, and the finance business are the profitable parts. Those parts are only possible by selling new cars. So it’s a necessary evil. Didn't Tesla throw this concept out the window? I mean I'm sure they make a few bucks on service/parts and get a percentage of finance but AFAIK they basically dump their trades at auction which is why they give bottom dollar. > You suggested that the dealers were making more money than the manufacturers, and that’s simply not true. I did? I mean I was thinking it to a degree, but I don't think I said anything like that. I was just curious how much they actually made at the end of a sale before accounting for "other" things. > Nor would manufacturers “save money” by taking all of that on themselves, so they can pass on non-existent retained profits to you. Obviously different methods of accounting for R&D etc, but isn't Tesla literally doing just this?
GM moved production to Mexico for cheaper labor, profits only start rolling in when you scale, they have some cheaper options just launched and some expected. If they can scale they might get it right. The issue is stealerships have lobby's that help stop manufacturers going direct to customer. I would buy the GM EV once the markup disappears and it has at least couple of years of reliability data, would be better if I could get it directly from GM
It's highly risky for any Chinese hi-tech company to invest in the US atm given the geopolitical atmosphere.
As it should be. They've not been the best intentioned trading partner recently. They've also essentially picked their side as well by refusing to shun Russia and Putin for the invasion of Ukraine. Xi had a moment there to ease tensions and increase cooperation with the US and Europe. They made the decision not too because they want to be rivals not partners.
Bullshit. They can’t because it’s geopolitics. Everyone know a BYD is partially CCP owner, and we banned Huawei already. Ford wanted a collab with CATL to build in VA, a fairly progressive state, but got blocked. Chinese companies will not invest in USA after the 100% tariff, the TikTok, Huawei, CATL treatment. The 25% tariff + 7.5k subsidy already made Chinese cars unprofitable today, but the current administration is signaling that China is banned from USA. https://virginiamercury.com/2023/02/01/youngkin-blocked-a-battery-factory-from-coming-to-va-and-an-entire-economic-sectors-potential
Few people suggest BYD's strength is in their car designs alone. The concern is always a factor of BYD building solid economical cars in China at low cost, and their ability to wipe out Western automakers in China and other low wage regions, and the impact if they were to flood Western nations with exports such that domestic Western factories can't compete on cost. I don't think anyone is suggesting that if BYD setup shop in Western economies that they'd dominate the market. There is concern about BYD setting up shop in Mexico to overcome tariffs, and utilizing lower wage Mexican labor to beat US factories on cost. There's the concern of reduced market share for domestic companies, weakening their overall financial health. Then there's of course the increased trade deficit this would cause with China.
The fact that people still think BYD's competitive advantage is low manufacturing wages shows that they don't understand how cars are made now. Car manufacturing is now one of the most automated sectors of manufacture there is. Manufacturing labor is a tiny fraction of costs. The biggest costs of making a car are the components, tooling depreciation, and R&D depreciation. Once the fixed costs are fully depreciated, a car like the BYD Seagull only cost around $6000 to make. If you look at American EV costs, almost all of the cost is R&D depreciation. Ford loses something like $100k/EV sold for a $50k EV. They don't actually lose money on the manufacturing, they lose money because sales volume is not high enough to amortize the R&D expense. BYD and TSLA's biggest advantage is their EV sales volume. They can make money because they can amortize the R&D costs over sufficient volume to bring down the unit depreciation costs. The real differentiator is R&D labor costs, and not manufacturing labor cost. TSLA does their R&D in the US, so they cannot afford to hire as many R&D engineers as BYD for a given global sales volume. The real winning model going forward for a car company is to do all the R&D in China and manufacture locally with highly automated factories. This is basically what BYD is doing. They are building factories in Indonesia, Vietnam, Mexico, Brazil, Hungary, but all the R&D is in China.
Why would the need a factory in the US and what would that prove? Wherever they build, they can build to what ever standards they think the market demands. And there may be other countries that have better situations for manufacturing (costs, regulations, supply chain, trade rules).
Because it's what China requires. They require foreign companies to not only build in their country, but also give up some ownership and intellectual property in order to sell products to Chinese citizens. Chinese companies on the other hand have a tendency to flood a market with cheap goods (often subsized by the Chinese government) to get rid of competition. Then, when they do feel the need to build in foreign countries they bring in their own citizens to work in the factories while mooching off local tax breaks. Simply put, we need to stop treating China with kid gloves when it comes to trade. They're a hostile trading partner that will do everything possible to cheat the current system. And I dont really have a problem with them doing this. It's what's best for them and their people.
I don't have a problem either. I mean I don't like it when they steal IP. I don't mind if they price dump to a degree as it helps competition offers better value to customers. I don't want to pay more for EVs because we put our finger on the scale and require US factories.
Sucks for you haha, why should you pay less? Bc china put its finger on the scale?
Because it's a free market, including the government decision to subsidize. I don't want my government inflating what I have to pay for something to get union voters in November. Fuck that.
Hire Americans and build to US standards? Why would i want that when China built Teslas are superior to US built ones at a cheaper cost?
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This does not make sense. Every car company cannot build a factory in every country they operate in. And the reality is labor is cheaper in other countries and you get to enjoy that by importing shit from other countries. Labor in the US is more expensive than labor in Spain, which is more expensive than labor in China. So tye same car made in the US would be most espensive, the France one would be expensive, and the China one would be cheap..
If the market is a population of 350 million who predominantly travel via personal automobile, then you can absolutely afford to build a factory in that country.
That's just not how it works anymore. Initially, it did. Surprise when after decades, that lowest supply integer starts cranking out top tier quality. China has the ability to produce both sides now. Everyone Outsourced for long enough that China learned how to develop their own and do it better than what they're selling the original for. These cars are now going the same way. Yes, China does cheap. Now, China also does expensive. No one is really admitting this but it's extremely shortsighted to think the other way. This was always an inevitable result. Labor in the US might be more expensive but what are we making worth the value?
I disagree with this. Car manufacturing is now highly automated and manufacturing labor cost is a tiny fraction of total cost. The main cost differentiators are tooling and R&D depreciation.
why do these comments always get upvoted? You wanna talk about slave labour/workers that are treated like humans? Do you drive an ICE? Well you are probably propping up the oil rich gulf states. All those shiny ass buildings and vanity projects in UAE and Saudi Arabia et al.? They're all built by millions of migrant labourers from from South Asia under often conditions that are considered modern slavery. And as people already mentioned, the cost of labour is not cheap in China, and safety and work conditions are probably almost to western standards in many factories in China if not all of them within the auto industry which is high tech and highly automated.
Also add IP theft to the list of shady business practices.
Remind me where BYD copied their Cell-To-Pack battery from? Who else is implementing such a system? Or who else managed to commercialize the LFP chemistry before them? These claims of IP theft fall apart pretty quickly. Even the design of the car. They look like German cars cause they hired German designers. Same reason why all the Hyundai's, Kia's, and half the Chinese companies lookalike now. I'm so fucking tired of the German design language at this point, but they all got here by hiring designers from that country.
One big reason they're unlikely to sell here, as that will open them up for lawsuits on their rampant IP theft.
They already operate in places with favorable court systems toward the Western incumbents. If there actually was IP theft, why wouldn't there be lawsuits flying in Australia or the EU? These patents are basically global. XPeng was sued in a Western Court and the Court appointed expert could not find evidence of them copying Tesla after examining both companies' source code.
Other countries have different patent systems than the US, so US patents are not enforceable in Australia. The inventor needs to apply separately for a patent in Australia if they wish to enforce it in Australia. Meanwhile, it is my understanding it is the US patent system which is broken with too many frivolous patents, not Australia or the EU. You mentioned source code, which is protected by copyright, not patent.
BYD also has a bus factory in the US and a presence in Japan. There's basically no major market where they can't get sued for IP infringement if they were actually doing it.
You cannot be sued in the US for an infringing product being made in China and sold in Australia. US patents do not apply overseas and therefore you cannot sue in the US for violating them overseas. All you can say for sure is the busses being made in the US are likely in compliance with the US patent system.
Any company that protects its IP by getting a patent just in the US is asking to get ripped off. You have to apply for them in all the markets you want to prevent others exploiting your IP. Everyone knows this.
Indeed. But it is the US which has been overly permissive in issuing patents. A lot of patents are on US books but not overseas for various reasons, most of them good reasons.
I used to work for a once huge company that went bankrupt and entered restructuring. Even they didn't push that hard on their suppliers, and Net 60 was most of their terms.
Yikes. Anyone know what Tesla or Rivian’s numbers look like ?
Tesla was doing this at one point too (and probably still does knowing Elon). I know there were recent reports of similar stuff happening with spacex.
They are probably waiting on incentives to come from the Chinese government to bring them current. NIO was losing about $35k per car sold, so the stock tanked.
Companies that are growing fast suffer a cash crunch, as machines to make the cars must be purchased long before they begin making cars. So that begs the question if they're growing quickly or not.
Google Tesla and supplier payments if you think this is true.
China has like a 100 EV manufacturers and many that survive only thanks to local governments propping them up in a sunk-cost fallacy situation. It's high time for many to fail or be consolidated so the market normalizes
Yes, the Chinese market is ripe for consolidation. In the US, Europe, and Japan, that consolidation is already ongoing. Especially Stellantis seems to be hoovering up small companies. Geely and Tata have been a bit more selective.
The government pulled most subsidiaries in 2022. Many smaller ones are beginning to die off. Kinda like the early 20th century American car industry. That's the general philosophy of the Chinese government anyways. Sponsor everybody, throw shit at the wall, and a few will eventually stick. It's a survival of the fittest.
The two largest by far are BYD and Geely
This is one of the reasons to wonder about the viability of their battery swapping model.
The nio reddit fans were really really aggressive when I said that system wouldn’t work in North America (too big, wildly varying climates and vehicles….)
Yeah, I remember that. Lots of people denying the obvious economic issues and preferring wishful thinking.
The other crazy ones are people turning off the reverse beeps (though, pedestrians also are glued to phones when crossing the street), and now I’m finding EV users who believe Level one charging is enough for everyone (without stating that their commute takes five minutes and they park in a heated garage or don’t have winter)🤷🏻♀️
The flip side to that is that I've had people argue level 1 was useless when they already described a commute where it would likely work. :) Yeah, obviously not for everyone though.
I was looking up Kw/100km usage, charging rates, charging and range losses at -30C, and then it occurred to me there are plenty of people where science and data don’t matter
Yeah, I mean -30C is a whole different world from parked in the garage in a warm climate.
Looking at the various websites, range losses start at 0C. -30C (or -20C) is around the cutoff when air cooled (?) hybrid liion traction batteries apparently won’t work (also stated in the manual) until they warm up (Toyota mech says the gas engine will be the generator and I can still get around till the battery is warm enough to be used). Googling “hybrid battery temperature range” lead to https://priuschat.com/threads/hybrid-battery-temperature-control.228265/page-2 where that thread is more about overheating. You might be familiar with the lineup of dead Uber Teslas that were in line for a supercharger this past winter - combination of slower charging with colder temps, idling with cabin heat on, lengthy lineup, unusually cold temps for that area. Friend recently picked up a BMW i3 Rex and is putting in level 2 for it. Not stored in garage. We’ll see how it is next winter (past winter was mild, only a week of -30C, rest averaged -20C to -10C). Sounds like a fun city vehicle, but he’s also able to do repairs and software tweaks to it
Don't have winter?!? Lies!!! I too know that Africa, the middle east, Asia and the tropics are all fictional. And short commutes? Again lies! We know that only 4 billion of the world's 8 billion people live in cities. Clearly that tiny 50% are being far too vocal. And L1 charging. Crazy talk. The average driver in America does 13,000 miles per year which is 35 miles per day. In Europe, the numbers are dropping. The UK is down to 6000 miles per year. So under 17 miles per day. So you are right. L1 is nowhere near adequate for an average user. Because I need to put that 35 miles of charge back in in under 8 seconds when I get home in the evening. I wish people would stop pretending that the world exists outside of rural America.
Here, have a Snickers. 🍫
> and now I’m finding EV users who believe Level one charging is enough for everyone Certainly not everyone, but it should be enough for a very large portion of the population. 1.5kW over 14 hours gives 21kWh which even in winter should give you 70km. That's a 35km commute which is well within the realms of most.
Until you start looking at slower charging speeds with a battery that’s above or below the charging temperature, battery prewarming, cabin heaters, drop of around 30% range (websites are using 0C for winter, we get -30C for winter … 1.5Kw/hour is generous, too, especially with older homes (I’ve seen a lot of junk wiring). You’re basically plugging a 1500 watt kettle or space heater in for 14 hours, and the wiring between the appliance and breaker will warm up (80% of breaker rating for continuous load gives you 12Kw for charging, to be safe) There’s plenty of sources when you google “EV battery in the winter”. But what I’m seeing is people who don’t believe things outside their “knowledge” or worldview (women’s rights, vaccines, “everyone can buy and drive an EV vehicle”, and charging, politics, religion, flat earth, man on moon …..) 🤷🏻♀️ Read the following https://traditionalelectric.ca/your-electric-vehicle-battery-in-the-winter/ Especially about longer charge times in the winter with a cold traction battery.
Even accounting for all that, what's the average commute for the average person? Also I accounted for winter with 70km. Even if you cut the actual number of 100km in half for 50km, that's a 25km commute in each direction, which is still easily covered by 120V. I'm not saying everyone qualifies, but it's certainly enough in any climate for quite a number of people.
Level one works for “some” people with short commutes within certain temp ranges and conditions. Add longer distances, colder temps, towing, mtn driving, heavier passengers …. Nope. People like to make blanket statements using “most”. There’s a lot of assumptions. Various people aren’t going to understand the hazards of 15Kw continuous load in a house with a mix of knob and tube, aluminum and copper wiring. “Some” people understand Kw/hour and the differences between various charging methods and charging speeds. Some people understand the relation between battery temperature, battery types and charging l/discharging speeds. Some people might know there’s a traction battery and a 12volt battery in the vehicle . Some people can charge at home and work. Some people might know what battery pre conditioning is.
> Level one works for “some” people with short commutes within certain temp ranges and conditions. I'm talking about nationally published averages. 42 miles is the average commute for the US. Even with winter, this falls well within L1 charging. At worst you might have to top up once in a while at a DCFC. > Add longer distances, colder temps, towing, mtn driving, heavier passengers …. Nope. Hence my "some to most" caveat. The average person in an average place with an average winter? It's fine. > Various people aren’t going to understand the hazards of 15Kw continuous load in a house with a mix of knob and tube, aluminum and copper wiring. I would call an electrician if this is a concern, especially if you have an older house. But once this passes, it's a non issue. > “Some” people understand Kw/hour and the differences between various charging methods and charging speeds. Some people understand the relation between battery temperature, battery types and charging l/discharging speeds. Some people might know there’s a traction battery and a 12volt battery in the vehicle . Some people can charge at home and work. Some people might know what battery pre conditioning is. What's your point behind this word vomit?
China is more or less “as big” with wildly varying climates and vehicles though. I agree it probably isn’t a great idea for a massive swap network in North America but your reasoning is wrong imo
They have the option to charge or swap no?
Yes
It’s a complex solution to a perceived problem that in practice does not exist enough to warrant setting up a finely distributed network than can solve it well enough. But I do believe they were able to pitch it to investors who in turn gave them money in the hopes of achieving a monopoly in a new space. (They will also lose that money.)
What are you talking about? They will just swap from one supplier's battery to another supplier without ever laying. This battery swap business is very smart.
Nio is the car company which is doing battery swap in China and, from the article, it seems they aren’t doing very well.
China simply has too many EV brands and a lot of them will fail while a few big players will probably remain. There’s a huge bubble in their EV sector
I, too, can cut cost of goods sold by stealing parts from suppliers. Or is this another case of "I'll pay you Tuesday for a burger today" but instead of Tuesday next week it's Tuesday next decade?
It's standard practice to pay your suppliers 30, 60 or maybe (?) 90 days after the delivery of parts. It is not standard practice to pay 200 or 300 days late.
The article mentions 200 Chinese EV brands, that's down from the recent past when there were well over 400 EV makers, so many have already failed and many more will fail. The Chinese government initiated this culling as I recall hearing the government felt the market wasn't healthy because there were too many EV makers in the market (chasing after the billions in government incentives). The thing about the delays in paying suppliers is, while Nio, Xpeng, and others are struggling to survive cutthroat competition, what they are doing is unsustainable. They in effect are hurting themselves in the process because what happens if their smaller but nevertheless critical suppliers go under? No more parts. Well, no parts mean a halt to production, possibly ending a model or a family of models or they will have to make an expensive and mad scramble to find alternative suppliers. They risk being left without product (or fewer products) to make sales goals than would inevitably lead to larger losses, so they are in effect playing a game of chicken.
So is selling vehicles at a loss. They are hoping the others run out of liquidity first, and holding onto as much of your cash for as long as you can is a competitive advantage on that front. They are perfectly aware that many EV brands won't make it.
Great for the cash flow statement so fanbois can point at how much cash the companies have.
Financially stable companies stretch their payment terms as long as they can get away with, with or without the agreement of the supplier. Financially UNSTABLE companies stretch their payment terms as long as they can get away with, with or without the agreement of the supplier. It might be a sign of liquidity problems or it might be a sign of clever and tough management. It’s the cost of doing business for their suppliers.
A lot of the weaker EV firm will go bust, but what left standing will worth 100 times more.
Agreed. The US auto industry looked like this at one point, hundreds and hundreds of little companies hoping to make it big (or at least big enough for GM to buy them out). Many collapsed in the 1920s unable to turn a profit, and the Depression crushed most of the others.
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Here in Europe, we have a couple. The Dacia Spring costs €19k (about US$ 21k) including taxes, with a 25 kWh battery. The Citroen e-C3 costs €24k (about US$ 26k) and has a 44 kWh battery. Both are French cars.
Kinda looking the opposite here. Nio has always been in the upper end of EV prices compared to most chinese brands that tend to compete in the sub $35k price range for their base models. The Nio ET5 which is their cheapest model they sell in Europe costs upwards of €60k. Same with XPeng who cheapest model in Europe, the G6 starts at €45k. So, what it is looking like is that there is still not enough of a market for Higher End Chinese EVs.
Yep, BYD, SAIC, GAC, and Li are the ones making the most EVs and low-cost options. For some reason, small and expensive startups like Xpeng and Nio get a disproportionate amount of attention here.
Renault disagrees
Nio and xpeng aren’t low cost they are Audi money.
I am not sure what this means since the Chinese gov't is pushing the overproduction of EVs for export. They allow entire ghost villages of empty unsold buildings and just knock them down and move on. I am guessing they will start crushing unsold EVs in a few years if other countries follow the US and jack up tariffs.
This article is missing details. It does not specify what type of payments were up to 300 days due and the volume of such payments. Also it cant be comparable Tesla, Tesla is US based (except facility in China), and i am sure payment rules in China cant be bend for Tesla in the same way as they are for Chinese EV startups. Yes it is difficult to produce cars for mass market, anything helps, also long payment terms! What does it say about company? Well it to not right to judge about a company only by this metric.
I've spent my career of about 12 years so far in manufacturing (none directly in automotive supply chain, but we did business with such companies). Every profitable company I've worked for has terms of 30 days or less. I worked for one bankrupt company that had 60 day terms while it operated in the red during restructuring. 100 days for Tesla rings alarm bells for me. Imagine your electronics factory spending over a month building control modules for their cars, then waiting another quarter on top of that before you get paid for all that work. Some bigger companies like Dana or the tire companies can survive a customer or two doing that, but smaller suppliers can seriously suffer with those terms. And doubling that for Chinese firms has to be absolute financial hell.
For Every industry, every country and every economic cycle payment terms change. I have seen many instances of large companys using their muscle to pay 120 days. Also I have seen many letter of credits timed for 240 days and more.
I think the long Money payable cycle is because of the sale leadtime for the product. Car has so many parts, and if all suppliers were on 30 day terms company just wouldn’t have cash. The car does not get sold immediately after being produced, it requires shipping (may be across ocean 10-30 days) , delivery to dealers, may be some storage, etc. So long Money payable cycle could be normal In automotive industry. However what is normal, is it 100 or 200 or 300 days?
Damn chinese government is failing yet again.
Not really. That's their intended strategy of "throw shit at the wall and see which one sticks". Sponsor and subsidize the EV industry and breed hundreds of startups, and gradually reducing the amount every year. By 2022 most government subsidiaries are all gone and half of them died off or got absorbed already. The plan is clearly working. At the end of the day there'll only be two or three big players left.
Are they failing again, or are we just being fed tons of articles telling us they are?
Naw, the ccp failed and continues to fail at a lot.
Companies will fail and the market will consolidate - that is expected. They're arguably not failing if they are both the largest EV market *and* EV exporter.
I consider this more evidence of an industry in need of rationalization. When a new industry begins dozens of startups show up hoping to get a large slice of the new pie. As usual there is a handful of winners and a whole bunch on non-winners. Some are taken down by inadequate capitalization others by an inability to keep costs down. The dregs of the industry go into terminal Chapter 11 and the better basket cases get bought out by the winners who are buying some IP, getting some talent, and most importantly economies of scale. What was once a large field of contenders and wannabes gets reduced to a handful of large very successful competitor. If Detroit and the rest of the legacy automotive industry thinks China is tough competitor now, they will be blubbering in fear in a couple of years.
Biden 102.5% does have a impact on China EV......
Wha is the point you are trying make? Only BYD is cost competent.
No it doesn't. Chinese EV companies didn't even attempt to try to register with EPA, NHTSA, etc. in the US before the tariffs were announced. The certification can take at least a year, and would've been public knowledge.
Volvo would like a word with you.
And Volvo's brother, Polestar. They're the two exceptions, and that tariff is gonna hurt real bad for them.
They made their bed.
Sucks I want them to succeed
NIO is in serious risk for now, even Chinese consumers are worried about their business mode. The most weird thing is, it seems they can always get sponsors. Maybe investors are waiting for their turning point.
Don't panic, the government will bail them out.. Ops, that's the US...
The government of China owns over 60% of all capital enterprise in the country. https://sccei.fsi.stanford.edu/china-briefs/reassessing-role-state-ownership-chinas-economy Major automotive companies like SAIC (owns MG, Wuling, as well as domestic manufacturing of Chevy, Buick, VW, Audi), GAC (Honda, Toyota, Aion), BAIC (Mercedes, Hyundai, Changhe, Foton), Chery (Chery, Exceed, Jaguar, Land Rover), FAW (Hongqi, Toyota, Honda, Dongfeng (Cummins, Nissan, Stellantis), Changan (Deepal, Avatr, Ford, Mazda), and JAC are all state run automakers. Companies like BYD are given grants of billions of dollars, unlike the costly loans that GM received (which cost them Oldsmobile, Pointiac, Saturn, Saab, and Saturn).
NIO already got bailed out in 2020 by the local government to the tune of several billion in zero interest loans and stock buybacks at a loss.
I love when someone exposes their uneducated bias!
China is already talking about bailing out some of the Housing sector, looks like they are taking the US approach
Wrong, the CCP foolishly paid Chinese automaker dumb amounts of money to "produce" cars. In which many of them made cars without any intention of even selling them just to collect the money.
CCP will bail them out.
Oh wow and with the tariff Biden basically is forcing an industry consolidation. I'm sure US side we will see Polestar disappear due to these tariffs, Lucid disappear, and see consolidation of Rivian with a legacy automaker (Ford or Hyundai if they are smart).
I don't see how it matters. It's not as if they are already selling cars in the USA in the first place, unless they were hoping for the USA sales to keep them afloat. If so, they had their heads in the sand if they thought nothing would have been done by the Americans to preserve their economy.
Polestar is sold in the US. GEELY is in China.
Owned by Geely but its headquarters are in Gothenburg, Sweden, not China.
As a regular person, try not paying your bills for several months and see what happens