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Investing.com -- China auto stocks rose Wednesday after major car companies committed to shortening payment terms for suppliers amid an intensifying price war in China’s auto market.
Guangzhou Automobile Group Co Ltd (HK:2238) announced late Tuesday that it would pay suppliers within 60 days, a measure designed to ensure efficient capital flow across auto industry supply chains. Government-owned companies Dongfeng Motor Group Co (OTC:DNFGF) Ltd (OTC:DNFGY) and China FAW Group made similar commitments.
The initiative gained momentum Wednesday when electric vehicle manufacturer BYD Co (SZ:002594) Ltd-H (HK:1211), along with Li Auto Inc (NASDAQ:LI) and Xiaomi (OTC:XIACF) Corp (HK:1810), also pledged to follow the 60-day payment schedule. More than 10 Chinese auto companies have now agreed to this payment term.
The stock market responded positively to these announcements. BYD shares rose 4.6% in Hong Kong trading, while Guangzhou Automobile Group climbed 1.8% and Dongfeng Motor gained 1.7%.
These payment commitments came shortly after the China Iron and Steel Association raised concerns about how the latest round of price cuts by Chinese EV makers was affecting supply chain operations.
In a WeChat statement Tuesday, the association warned that the ongoing EV price war would force iron and steel companies to reduce their prices, putting additional pressure on profit margins. The statement also pointed out that Chinese EV manufacturers have been delaying payments, creating financial strain for upstream suppliers.