Chinese carmakers promise faster payments amid price war pressure

In response to mounting backlash over delayed payments and a deepening price war, major Chinese automakers including BYD, Chery, Geely, SAIC, BAIC, Xpeng, and Xiaomi have pledged to pay suppliers within 60 days, aligning with new government rules that came into effect on June 1.

The announcement follows intense criticism from the China Iron and Steel Association, which warned that steel suppliers are facing liquidity strains and shrinking profit margins. The group accused automakers of demanding more than 10% price cuts and delaying payments for months.

Government Push & Industry Response

China’s Ministry of Industry recently held a meeting with automakers, pressuring them to end the destructive price war and ease the burden on suppliers. New regulations now legally require large companies to settle most supplier payments within 60 days, although suppliers had expressed concerns about potential loopholes.

In their public statements:

• Chery said it aims to "speed up the turnover of capital" across its supply chain.
• BAIC and SAIC explicitly pledged not to use commercial paper — a common but controversial payment method that delays actual cash transfer.
   

However, none of the companies clearly stated what qualifies as the start of the 60-day clock or whether payments will be in cash.

Mounting Pressure from Supply Chain and Dealers

The auto industry’s cutthroat competition since early 2023 has led to extreme discounting, putting a squeeze on dealers and suppliers alike. Many dealers say they are being flooded with inventory, leading to cash flow problems and in some cases, store closures.

Great Wall Motor’s chairman, Wei Jianjun, has compared the situation to Evergrande's collapse, suggesting the auto industry is similarly heading toward a credit crunch.

Industry Experts Weigh In

Yang Hongze, chairman of Autolink, welcomed the pledges as a step toward healthier supply chain practices but stressed the need for transparency and enforcement:

“It is a pleasant but difficult change... but we still need clarity on whether we’ll get paid in cash or paper, and when the 60-day clock really starts.”

The situation remains fluid, with suppliers hoping these pledges signal a real shift toward fairer, more sustainable practices in China’s EV-dominated auto sector.

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