December 7, 2021

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Auto industry debt will not slow down

Auto industry debt will not slow down

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The auto industry, like other branches of the economy, has not avoided the problems caused by the coronavirus epidemic. Since March last year, corporate debt in this sector has increased by 70.1 million PLN, and the number of debtors has increased by 101 companies. The accelerating crisis is hitting workshops, producers and retailers. Their debts have already exceeded 446 million PLN, and everything indicates that the difficult situation of the motorcycle industry will continue for at least a few more months.

The shortage of components, disruptions in supply chains, unavailability and at the same time high prices of raw materials and steel have turned into a major challenge for the industry. Most manufacturers of cars and components, especially recently, have had to partially or completely reduce production. The trade and auto services sector also recorded a decrease in sales. Many wholesalers suffer from a shortage of spare parts and components for auto repair in warehouses. The result is the financial problems of companies that have been visible in the spare parts trading sector for a long time.

– To date, manufacturers of vehicles, trailers, motorcycles, and parts have been the relatively powerful group of entities in the automobile industry. Their debt is only 5 percent. Total debt in this sector. It’s different in the case of sellers and service technicians, whose debt is 95 percent. However, longer production outages can have serious consequences for both the manufacturers themselves and the rest of the auto industry. If their liquidity problems worsen, sooner or later this situation will also be reflected in our database – reports Adam Ake, President of National Debt Register BIG SA.

The vast majority ie 60%. Automobile liabilities are debts to distributors of spare parts and vehicles (265.1 million PLN), 35 percent. All debts belong to the workshops (155.8 million PLN). Since these two branches of the auto industry are highly dependent on manufacturers, this could have a negative impact on their financial situation in the near future. This is also confirmed by the results of the study “Industry, Trade and Services in the Automotive Industry” conducted by MotoFocus.pl in July 2021 at the request of SDCM and Bank Santander Polska. 96.5 percent of the auto parts distributors participating in the study indicated that there were problems (or significant problems) in the pandemic with the supply or availability of spare parts with manufacturers.

The largest number of indebted workshops, producers and distributors is located in the following provinces: Mazowieckie (92.9 million PLN), Śląskie (69.1 million PLN) and Wielkopolskie (49.4 million PLN). On the other extreme, i.e. with the lowest debts, there are companies of the Opole, Podlasie and Lubowski provinces. In these regions, the total debt of auto companies does not exceed 10 million PLN.

The average debt of one car company is 35510 PLN, but the record holder – a car wholesaler from Silesia, lags behind with his creditors by about 4.8 million PLN.

Most of it, that is PLN 212 million, is arrears from financial and insurance institutions, PLN 133.7 million must be recovered by securitization funds and debt collection companies, and PLN 35.4 million demanded by creditors from the commercial sector.

Representatives of the smallest companies are in the most difficult situations, accounting for 95 percent. All motor debtors. More than 10,000 sole proprietorships have a total of 328.6 million PLN in overdue financial obligations. In such institutions, a torrent of financial problems often arises due to a single unpaid bill. NFG factoring data shows that in 2021 small auto companies were very keen on using factoring, knowing that this would protect their operations.

The vast majority of these companies, 61 percent, are small workshops. In this year alone, we have funded their bills for a total of 4.4 million PLN, although I assume that this value will increase every month. Not only because of the growing need to protect financial liquidity, but also for developmental and investment reasons. For example, some workshops will soon have to invest in additional training, because it is currently approximately 66 percent. Some of them are not ready to repair hybrid or electric vehicles. Meanwhile, in line with the EU’s climate policy, it will be low- and zero-emission vehicles that will begin replacing internal combustion engines common in Poland. In order to maintain operations and meet new requirements, microservices will have to retrain, thus raising funds to finance this type of investment – says Dariusz Szkaradek, NFG’s head of factoring.

The average invoice value submitted by car companies for financing under eFactoring is PLN 6,649, and the average limit awarded is PLN 29,000. zloty. According to the NFG, this amount can be spent on training employees in the field of repairing hybrid or electric vehicles, on bills, fees and other current taxes, purchasing materials for the company, or even rewarding the crew. Additionally, in the event of delays in payments on the part of contractors, factoring can be a good way to discipline lazy payers.

The greater the number of debtors for the auto industry.

– According to our data, the contractors owe it 61.3 million PLN. Commercial companies have arrears, 16.5 million PLN in transport, 5 million PLN in industrial arrears – lists the head of the KRD, Adam Aoki.

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