Subcontractors have demanded that LG Chem change its no down payment policy for purchase orders, TheElec has learned on Tuesday.
Currently, equipment makers supply equipment to the battery giant without a down payment. Before 2018, they have received a down payment, intermediate payment and final payment. (Usually at a 20%, 50% and 30% ratio)
This has changed in 2018 to a free on board (FOB) payment of 70% after the equipment is delivered with rest given after the equipment goes live in the factory. The whole process took six months.
The delayed payments have hurt some suppliers considerably, which relied on the down payments for materials and labor costs. Some of them went bankrupt in the first half of the year when the COVID-19 pandemic was at full swing.
LG Chem also applied different policies depending on where its supplier was located. Suppliers in China, specifically at those in Nanjing, get their final payment almost a year later.
Some suppliers have lowered their unit prices to get a guarantee that they would receive a down payment.
A person with direct knowledge of the matter said LG Chem’s policy was the most unfair out of there main battery makers (the others are Samsung SDI and SK Innovation) in South Korea. Even Chinese battery makers give a down payment, they said.
Samsung and SK gives a down payment between 10% to 20%. The intermediate payment ranges from 40% to 60%. Samsung pays them within a hundred days while SK pays within 60 days, they said.
A LG Chem spokesperson said the company was listening to its suppliers and is working on improving the policy.