The new year is approaching, and BAK Battery, which has been involved in the two major debt black holes of Zotye and Huatai, still has two lawsuits to fight.
Future Auto Daily (ID: auto-time) learned that on December 19, the second instance of the debt litigation between BAK Battery and Huatai Automobile officially opened, and the related litigation with Zotye Automobile (000980, Stock Bar) is also still ongoing. Relevant litigation documents show that the debt litigation between BAK Battery and Zotye Automobile involved a total amount of 616 million yuan, while Huatai Automobile defaulted on payment of 263 million yuan and interest.
“BAK may be the worst company this year.” An insider close to BAK Battery told Future Auto Daily. This debt of nearly 900 million has dragged BAK Battery into a quagmire and caused chain reactions to follow.
In early November, Hangke Technology (688006, Stock Bar), Rongbai Technology (688005, Stock Bar), Dangsheng Technology (300073, Stock Bar) and many other upstream suppliers of BAK Batteries issued reports on BAK Battery accounts receivable. Risk warning announcement. According to incomplete statistics from Future Auto Daily, the upstream suppliers of BAK batteries currently have bad debt provisions exceeding 500 million yuan.
The power battery industry, once regarded as a hot spot, suddenly suffered a cliff-like decline. In the cold winter of “five consecutive declines” in sales of new energy vehicles, companies upstream and downstream of the entire industry chain are in danger.
There is no time to recover the 900 million debt
BAK Battery, which was “dragged down” by two main engine manufacturers, had early warning signs of crisis.
People close to BAK Battery revealed to Future Auto Daily (ID: auto-time) that BAK Battery reached a supply agreement with Zotye Motors in 2016, and the latter paid BAK Battery in multiple installments. However, since the first payment was made in 2017, Zotye began to default on payment due to tight cash flow. During the period, Zotye repeatedly promised repayment time, but none of them was fulfilled. Starting in mid-2019, Zotye began to “disappear”.
In August 2019, BAK Battery and Zotye Automobile went to court. Zotye expressed its willingness to reconcile and signed an agreement with BAK Battery. However, after the lawsuit was withdrawn, BAK Battery did not receive the payment as promised. In September, BAK Battery filed a second lawsuit against Zotye, which will be heard in court on December 30.
Judging from the information disclosed by BAK Battery, the conflict between the two parties has been eased. BAK Battery revealed to Future Auto Daily (ID: auto-time) that the company has applied to the court to freeze Zotye’s assets of more than 40 million yuan, and Zotye’s arrears have been guaranteed by multiple parties. Another BAK Battery insider said, “Zotyy’s repayment attitude is very positive, and the local government leader responsible for rescuing Zotye has also stated that it will give priority to supporting Zotye in repaying BAK’s debt.”
I have a positive attitude, but it’s still unclear whether I can pay it back. After all, this amount of money is not a small amount for Zotye.
As of July 10, 2019, Zotye had defaulted on payment of 545 million yuan. BAK Battery also required Zotye Automobile and its subsidiaries to pay liquidated damages of approximately 71 million yuan for overdue payments, totaling 616 million yuan.
There has been no progress in debt collection by Zotye, and the lawsuit between BAK Battery and Huatai Automobile is still in a stalemate. BAK Battery said that it had won the first instance of the relevant lawsuit against Huatai Automobile. Rongcheng Huatai needs to pay 261 million yuan in payment and interest, and Huatai Automobile will bear the latter’s joint and several liability. But then, Huatai objected to the first-instance verdict and applied for a second instance.
In order to ensure the effectiveness of its claims, BAK Battery has applied to freeze the equity and dividends of two listed companies, Bank of Beijing (601169, Stock Bar) and Shuguang Shares (600303, Stock Bar) held by Huatai Automobile Group Co., Ltd.
BAK Battery insiders predict that the stalemate between the two parties may last for a long time, and “this lawsuit may last for several years.”
He is both a creditor and a “laodai”
The payments from downstream car companies have not yet been recovered, but the “cry of crusade” from upstream raw material suppliers is approaching.
On December 16, Rongbai Technology, the upstream supplier of BAK Battery, announced that due to overdue accounts receivable from BAK Battery, the company had sued BAK Battery, and the case has been accepted by the court.
In addition to Rongbai Technology, a number of upstream raw material suppliers for lithium batteries have also joined BAK Battery’s “debt collection army”.
On the evening of November 10, Hangke Technology issued an announcement stating that due to the current risk of repayment of BAK batteries, the company has made additional provision for bad debts on part of the payment. If BAK Battery’s accounts receivable cannot be recovered, the company will make provision for bad debts for this part of the amount.
Regarding the arrears owed by suppliers, BAK Battery responded to Future Auto Daily (ID: auto-time) that since the hundreds of millions of lawsuits between the company and Zotye have not yet been resolved, the company’s normal payment to upstream suppliers will not be resolved. The process has also been affected, and the company is currently formulating a plan to solve the problem of arrears with upstream suppliers.
Under pressure from multiple suppliers, BAK Battery chose to negotiate with the suppliers for installment repayment. However, even though installment payment had been agreed upon, BAK Battery still failed to pay the price as agreed.
On the evening of December 15, Rongbai Technology issued an announcement stating that as of December 15, the actual payment of BAK Battery totaled 11.5 million yuan, which was far from the 70.2075 million yuan for the first and second phase repayments previously agreed between the two. This means that BAK Battery’s payment to Rongbai Technology is once again overdue.
In fact, BAK Battery’s repayment ability has been questioned by regulatory authorities. On December 15, the Shanghai Stock Exchange issued a letter of inquiry requesting Rongbai Technology to explain the reasons why the above-mentioned repayment plan could not be fulfilled as agreed, and the possibility of subsequent performance.
On December 16, BAK Battery responded to Future Auto Daily that the company had negotiated a new repayment plan with major suppliers such as Rongbai Technology, and would pay suppliers mainly based on the repayments owed by customers such as Zotye.
This means that BAK Battery’s current cash flow is already very tight. If the payments from downstream automakers are not returned, the company will be unable to pay its upstream suppliers.
According to incomplete statistics from Future Auto Daily, the upstream suppliers of BAK batteries currently have bad debt provisions exceeding 500 million yuan. This means that BAK Battery will still face debts of up to 500 million yuan.
Industry analysts predict that if BAK Battery is unable to pay suppliers as agreed or is deemed to have insufficient repayment ability, BAK Battery’s normal operations will be affected and some assets may be frozen by the judiciary.
The battery industry is ushering in a reshuffle period
In 2019, BAK Battery’s fortunes took a sharp turn.
Data shows that BAK Battery, which was still ranked fifth in terms of shipments in the first quarter of this year, had dropped to 16th in October. Industry analysts believe that in addition to being affected by payment arrears, the cooling of the power battery market is also one of the reasons for BAK’s decline.
According to data from the Research Department of the Power Battery Application Branch, in October this year, the installed capacity of power batteries was approximately 4.07GWh, a year-on-year decrease of 31.35%. This is the third consecutive month of year-on-year decline in power battery installed capacity. In addition to BAK Battery, many battery companies are also in crisis. The former power battery giant Waterma entered bankruptcy and liquidation procedures, and another power battery company Hubei Mengshi has also gone bankrupt and liquidated.
Behind the crisis in the power battery industry is the continued sluggishness of the new energy vehicle market.
“If electric vehicles cannot be sold, battery manufacturers will not have an easy time. If terminal demand cannot keep up, it will have an impact on the entire new energy vehicle industry chain.” An insider from a power battery company told Future Auto Daily (ID: auto- time) expressed. He believes that in the context of the overall decline of the battery industry, only leading companies with scale can withstand the cold winter, and other small and medium-sized power battery companies with low market share may be eliminated at any time.
Future Auto Daily (ID: auto-time) had previously sought confirmation from BAK Battery regarding rumors of wage arrears and production suspension. BAK Battery responded that the factories of Shenzhen BAK and Zhengzhou BAK are currently operating normally, and there is no suspension of production due to wage arrears. However, the company does have tight cash flow, and the overall industry downturn is an important reason.
“The overall industry situation is like this. When two car companies owe so much money, liquidity constraints are a common situation in the industry. Any company may encounter short-term cash flow constraints.” BAK Battery Insiders told Future Auto Daily.
Another industry insider believes that BAK Battery’s problems lie more in the company’s own operations and management. BAK Batteries have always used circular battery solutions. Now the mainstream solutions in the industry are ternary square batteries and ternary soft pack batteries. BAK does not have an advantage in products.
In addition, the current customers of BAK Battery are all mid-to-low-end automobile manufacturers. The latter have difficulty in making payments, which ultimately led to BAK Battery’s cash flow crisis. The above-mentioned people said that the car companies BAK Battery is cooperating with include Dongfeng Nissan, Leapmotor, Jiangling Motors (000550, Stock Bar), etc.
In the lithium battery market, “pay on credit first” has become an industry trend. For suppliers, this industry habit has brought huge risks. The above-mentioned people believe that what happened to BAK Battery may be repeated in other lithium battery companies.
Post time: Nov-22-2023