BAK Battery is in a series of debts, and the survival of small and medium-sized battery manufacturers is worrying

Recently, BYD Battery has fallen into trouble due to the fact that downstream car companies owed nearly 900 million yuan in payments, which also affected its upstream suppliers and prevented them from receiving the corresponding payments in time.

At this point, BYD Battery was caught in a "triangle debt".

Upstream suppliers warn of risks

In early November, several upstream suppliers of BYD Battery, including Hangke Technology, Rongke Technology, and Dangsheng Technology, issued risk warning announcements regarding BYD Battery's accounts receivable.

So far, BYD Battery's upstream suppliers have set aside more than 500 million yuan in bad debts.

On the evening of December 15, RongBa Technology disclosed the "Announcement on the Progress of Accounts Receivable Collection" and the "Announcement on the Company's Accounts Receivable Related Litigation Matters", stating that BYD Battery failed to pay its two installments on time and in full, and the amount of repayments received so far only accounted for 3.82% of the total amount agreed in the repayment agreement.

RongBa Technology plans to increase the bad debt provision ratio for BYD Battery's accounts receivable to 40%, and said that its lawsuit against BYD Battery has been accepted by the court.

In addition, on December 6, Beijing Dangsheng Materials Technology Co., Ltd. responded to the Shenzhen Stock Exchange's inquiry letter, mentioning that the first batch of repayments by BYD Battery and Zhengzhou BYD Battery Co., Ltd. failed to be repaid in full on time, and the gap was large. It believed that there was still a risk that their subsequent repayments would not be fulfilled as scheduled.

A person related to BYD Battery once told the media that the unpaid debt was mainly affected by the accounts receivable of about 900 million yuan from the two vehicle manufacturers, Huatai and Zotye.

Car companies are unable to repay their debts

The subsidy policy for new energy vehicles has declined and the overall sales situation in the automobile industry is poor.

As a battery supplier for many small and medium-sized automakers, BYD Battery could not escape the disaster.

BAK Battery reached a supply agreement with Zotye Auto in 2016, and the latter paid BAK Battery for the goods in multiple installments. However, since the first installment was paid in 2017, Zotye began to delay the payment on the grounds of tight cash flow, and promised to repay the money many times during the period, but none of them came true.

In August 2019, BYD Battery took Zotye Auto to court.

Zotye Auto expressed its willingness to settle and signed an agreement with BAK Battery. However, after withdrawing the lawsuit, BAK Battery did not receive the payment as agreed. In September, BAK Battery filed a second lawsuit against Zotye, which will be heard in court on December 30.

Currently, BYD Battery has applied to the court to freeze more than 40 million yuan of Zotye Auto’s assets, and Zotye’s debts have been guaranteed by multiple parties.

But it is still unknown when the debt can be repaid. After all, this amount of money is not a small amount for Zotye.

As of July 10, 2019, Zotye owed BYD Battery a total of RMB 545 million in payments. BYD Battery also required Zotye Auto and its subsidiaries to pay approximately RMB 71 million in late payment penalties, totaling RMB 616 million.

In addition, the lawsuit between BYD Battery and Huatai Automobile is at a stalemate.

BAK Battery said that it had won the first instance of the lawsuit against Huatai Automobile, Rongcheng Huatai had to pay 261 million yuan in payment and interest, and Huatai Automobile would bear the latter's joint and several liability. However, Huatai later objected to the first instance judgment and applied for a second instance.

In order to ensure the validity of its creditor's rights, BYD Battery has applied to freeze the equity and dividends of two listed companies, Bank of Beijing and Sugon Auto, held by Huatai Automobile Group Co., Ltd.

However, according to public information, the current situation of Huatai Automobile is worrying. The factory stopped production about a month ago, and R&F Properties announced the cancellation of cooperation with Huatai Automobile. Since last year, Huatai Automobile has been exposed to many rumors, including various information about suspension of production and unpaid wages.

Therefore, it is unclear when this debt will be recovered.

The battery industry is in an awkward position

Data from the research department of the Power Battery Application Branch showed that in October this year, the installed capacity of power batteries was about 4.07GWh, a year-on-year decrease of 31.35%. This is the third consecutive month that the installed capacity of power batteries has declined year-on-year.

In addition to BAK Battery, many battery companies have also fallen into crisis. The former power battery giant Watma has entered bankruptcy liquidation procedures, and another power battery company Hubei Mengshi has also gone bankrupt and liquidated.

The direct cause of the decline in installed capacity of power batteries is the drop in sales of new energy vehicles.

Affected by the decline in subsidies, China's new energy vehicle market has been declining for five consecutive months, and the decline continues to expand.

According to data from the China Association of Automobile Manufacturers, in November this year, the production and sales of new energy vehicles were 110,000 and 95,000 respectively, down 36.9% and 43.7% year-on-year respectively. The production and sales in the first 11 months were only 1.093 million and 1.043 million respectively, with the growth rates narrowing to 3.6% and 1.3% respectively. According to this trend, the annual growth may show the first negative growth.

In addition, BYD Battery itself also has problems with its technical route.

BYD Battery has always used a circular battery solution. Now the mainstream solutions in the industry are ternary square batteries and ternary soft-pack batteries, and BYD does not have an advantage in products.

Zhang Xiang, an automotive industry analyst, told Caijing.com: "Due to BAK Battery's inherent disadvantages, its market share is far behind that of CATL. BAK Battery's customers are all small companies, and the quality of their customers is not as good as that of CATL. They are all small companies like Zotye and Huatai, which undoubtedly increases operational risks."

Xpeng Motors' first model, the Xpeng G3, used BYD batteries in its initial stage.

A relevant person in charge of Xiaopeng Motors told Caijing.com: "Xiaopeng G3 long-range version (520km) uses batteries from CATL. The previous old G3 used batteries from BAK."

Zhang Zhiliang, an automotive industry observer, told Caijing.com: "Small car companies and start-up car companies will choose batteries from small manufacturers like BAK due to financial constraints in the initial stage, but as products and brands are upgraded, they will inevitably switch to batteries from leading companies such as CATL. It is also worth mentioning that the core competitiveness of CATL, a leading battery company, is technology. It provides car companies with not only battery cells, but also battery casings and BMS battery management systems. This is undoubtedly more worry-free for car companies, and most importantly, it is relatively safer."

Summary: The automotive battery industry is facing a reshuffle. Small battery manufacturers like BAK Battery have relatively weak technology and their customers are all some tail car manufacturers. The broken capital chain of small car manufacturers will directly cause arrears to battery suppliers. Without money, battery manufacturers cannot upgrade technology. Without technological improvement, they cannot compete with leading battery companies like CATL, thus forming a vicious circle.