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Investing.com-- Chinese electric vehicle stocks retreated from recent gains on Thursday, as local media reports showed the government calling on manufacturers to honor a vow to pay their suppliers in time.
BYD (SZ:002594) Co Ltd (HK:1211) and Zhejiang Leapmotor Technology Co Ltd (HK:9863) fell over 2% each in Hong Kong trade, while NIO Inc (HK:9866) shed 2.9%. Xpeng (NYSE:XPEV) Inc (HK:9868) was the worst performer among its peers, losing 5.1%, while Li Auto (NASDAQ:LI) Inc (HK:2015) shed 1.2%.
EV stocks had risen on Wednesday after several companies vowed to shorten their terms to pay suppliers, to less than 60 days. The vows came amid some concerns over a potential cash crunch among Chinese EVs, especially after BYD in late-May announced another round of deep price cuts aimed at undercutting competition.
Chinese media reports on Thursday showed the government calling on EV makers to honor the 60-day pledge. State media outlet CCTV reported the Ministry of Industry and Information technology asked EV makers to “earnestly implement the commitment of “payment period not exceeding 60 days,” a translation of the article showed.
The EV sector has attracted increased government attention in recent weeks, especially as BYD’s price cuts triggered concerns over low cash levels and stretched debt conditions in the sector, akin to that seen in China’s property market before a devastating crash in 2021.
Chinese EV makers have become embroiled in a bitter price war in recent years, as they race to grab a dominant share in the world’s biggest EV market. The price war was initially triggered by Tesla (NASDAQ:TSLA) repeatedly slashing the prices of its models, which drew similar moves by other EV makers.
Investors are also concerned that a protracted price war could wipe out profitability while causing a supply glut in the Chinese market.