More than a dozen major Chinese automakers, including BYD, Xpeng, and Geely Auto, have committed to shortening payment terms to their suppliers in an effort to safeguard supply chain stability, as price competition and delayed payments raise alarm in the country’s automotive sector.
Automakers announced between late Monday and Tuesday that they would reduce payment cycles to within 60 days. The move comes amid growing scrutiny from regulatory authorities and rising concern over supplier viability as the electric vehicle (EV) price war compresses industry margins.
In coordinated statements, automakers described the decision as a measure “to fulfill corporate social responsibility and promote the high-quality development of China’s automotive industry.”
The companies making the pledge include BYD (HKG:1211), Geely Auto (HKG:0175), Chery, Changan Automobile, FAW Group, Dongfeng Motor, SAIC Motor, Great Wall Motor, Seres Group, Xpeng (NYSE:XPEV), Xiaomi EV, Li Auto (NASDAQ:LI), Leapmotor (HKG:9863), Nio (NYSE:NIO), BAIC Group, and Anhui Jianghuai Automobile Group.
The change comes amid heightened concern from upstream suppliers, particularly in the steel sector, about delayed payments and increasing financial pressure. The China Iron and Steel Association (CISA) issued a rare statement Monday urging automakers to stop shifting financial burdens onto suppliers.
“Since last year, some automakers have demanded that steel mills reduce the price of automotive steel sheets by over 10 percent, far exceeding what steel mills can accept,” CISA said in the statement.
The association also criticized the use of corporate promissory notes to defer payments: “Some automakers rely on their own supply chain finance platforms to delay payments to suppliers for months, settling through corporate promissory notes instead of paying promptly after delivery.”
“These automakers have shifted the financing pressure and costs they should bear onto upstream suppliers,” the association added, warning that this practice “has severely impacted the stable operations of enterprises.”
In contrast, CISA pointed to international practices where foreign automakers, including Japanese brands, maintain long-term and stable relationships with suppliers, ensuring cost efficiency while allowing reasonable profit margins.
The pledge from domestic manufacturers comes as China’s NEV sector faces intensified price cuts and oversupply. Analysts say the success of the initiative will depend on implementation and whether smaller firms can match the payment commitments of larger players.