In early June this year, after talks with regulators, 17 major automakers including BYD and Geely announced that they would shorten the supplier payment cycle to within 60 days.
However, this move did not dispel the concerns of upstream and downstream supply chains. At the recent Hong Kong Automotive and Supply Chain Show, several parts manufacturers revealed to the media that the industry's long-standing problem of extending payment cycles is difficult to eradicate, and automakers may circumvent the new regulations through workarounds. A market development engineer for an electrical circuit manufacturer pointed out that acceptance bills have become the main alternative, and this financial instrument can further delay cash payments. Among the 17 Chinese automakers that promised a 60-day payment cycle, only SAIC and BAIC Group explicitly excluded the use of acceptance bills, and the rest of the companies did not specify specific payment methods.
In China's automotive industry, there is no shortage of examples of acceptance bills and supply chain financing. Take BYD's "DiChain" system as an example: the platform allows holders to postpone payment, transfer transactions or pay handling fees to cash out in advance. As of the last disclosed data in May 2023, the platform's cumulative billing scale has reached 400 billion yuan.
The Ministry of Industry and Information Technology responded to the car companies' payment commitments, saying that excessively extended payment terms have exacerbated the cash flow crisis of suppliers and are not conducive to the healthy development of the industry. This pressure is particularly significant at the level of small and medium-sized enterprises. An executive of a company that supplies headlight parts to European, American and Korean car companies revealed that the payment cycle of its customers generally exceeds half a year, and it is increasingly difficult for small and medium-sized suppliers to survive and develop in the fierce competition.
The payment cycle adjustment coincides with the new regulations that came into effect in June: requiring government agencies and large enterprises to settle payments to small and medium-sized enterprises within 60 days, and prohibiting the latter from forcing them to accept non-cash payment methods such as acceptance bills. However, the transmission effect of the new regulations in complex supply chains is still unclear - the above-mentioned headlight parts companies may not be able to enjoy the 60-day payment cycle treatment because they do not directly supply vehicle manufacturers. The executive called for the policy to be extended to more terminal suppliers.
Overall, the industry is cautiously optimistic about this change, but the actual effect remains to be seen as the price war continues to intensify. In 2024, for the first time, the number of brands exiting the new energy vehicle market will be greater than the number of brands entering the market: 16 brands focusing on new energy will exit the market, while 13 new brands will enter. A sales manager of an automotive chip supplier admitted that some customers were unable to pay for goods due to the collapse of the competition, and even if legal means were taken, debt recovery would be full of uncertainty. She emphasized: "The government's policy direction of protecting small and medium-sized enterprises is worthy of recognition, but the ultimate effectiveness depends on the strength of implementation."
The price involution in China's new energy vehicle market is evolving into a systemic risk. The leading enterprises have transferred the financial pressure to the supply chain by extending the payment period. On the surface, it is a financial strategy, but in fact it exposes the dilemma of the industry's profit model. When the gross profit margin of the vehicle manufacturer is compressed to single digits, squeezing the profit of suppliers becomes a hidden means to maintain cash flow. This "time for space" operation can be maintained during the period of rapid expansion of the industry. Once the market growth slows down, the domino effect will quickly appear.
Industry insiders pointed out that there are three major implementation difficulties in the new regulations of the Ministry of Industry and Information Technology and the "60-day credit period" promised by automakers. First, the policy only restricts direct trading entities, and it is difficult for multi-layer suppliers to benefit; second, acceptance bills are explicitly prohibited, but alternative methods such as factoring and bill discounting can still circumvent supervision; finally, when automakers still need to deal with price wars, suddenly tightening the credit period may aggravate their capital chain tension and increase the risk of default.
It put forward several suggestions to solve the supply chain crisis. For example, referring to the VDA standards of the German Automobile Industry Association, implementing differentiated account management for suppliers of different sizes; developing supply chain ABS, credit insurance and other tools to disperse the bad debt risks of small and medium-sized enterprises. From the industry level, it is suggested to shift from price war to technology war and service war.
Data showing that the average export price of new energy vehicles in China increased by 12% year-on-year from January to May 2025 shows that the high-end transformation is taking place. Price wars, long payment terms, and pressure on supply chain profit margins are the pain points of China's auto industry's transformation from wild growth to a mature market, and they are also problems that must be solved.