Chinese electric vehicle stocks advanced on Monday as commitments from several major manufacturers towards paying their suppliers helped quell some concerns over a cash crunch in the sector.
BYD Co (HK:1211) rose over 4% in Hong Kong trade after local media reports showed the company reiterating its commitment to a 60-day cycle of paying its suppliers. The company has been at the heart of recent investor anxiety over Chinese EV makers, having lost about 23% of its valuation since hitting a record high in May.
Li Auto Inc (HK:2015) surged 5% in Hong Kong trade after local media reports showed the company also reiterating its commitment to the 60-day cycle, which was agreed upon by local EV makers earlier this year amid heightened government scrutiny.
Other EV stocks also advanced, with Zhejiang Leapmotor Technology Co Ltd (HK:9863) adding 3.7%, while NIO Inc (HK:9866) rose 5.9% in Hong Kong trade. Xpeng Inc (HK:9868) rose 2.4% while Geely Automobile (HK:0175) added 0.7%.
BYD’s commitment helped soothe some concerns over waning cash levels in the Chinese EV sector, especially as local players remain involved in a bitter price war to capture a greater share of the world’s biggest EV market.
BYD and its rivals were seen enacting steep price cuts earlier this year as they sought to undercut competition.
But this trend sparked steep margin losses across the sector, while Chinese reports earlier suggested that local EV makers were also facing a cash crunch and could see some difficulty in paying suppliers.
Beijing had intervened in the sector in June, drawing commitments of more healthy competition from local EV makers. They had then also committed to a 60-day cycle of paying their suppliers.
China’s EV market is the largest in the world, accounting for well over half of global EV production and sales.
Consumer demand, strong government subsidies, and aggressive charging infrastructure rollouts have all helped accelerate EV adoption in the country.
But intense competition, subsidy phase-outs, and export and pricing pressures mean future growth will depend less on policy and more on whether companies can compete profitably.
Aggressive price cuts by local EV makers came following similar measures from Tesla Inc (NASDAQ:TSLA) over the past three years.
Majors such as BYD were seen seeking a greater presence in offshore markets such as Europe and India to offset growing headwinds in the mainland.
Source :
https://www.investing.com/news/stock-market-news/china-ev-stocks-rise-on-pledges-of-supplier-payments-4237889
