A total of 13 Chinese automakers made a statement on Wednesday, promising to unify their supplier payment time to within 60 days, in a move to ensure the stability of the automobile sector supply chain, according to a post released by China's Ministry of Industry and Information Technology (MIIT) seen on its WeChat account on Wednesday.
Companies including BYD, Chang'an Automobile, FAW Group, Xiaomi Auto, Li Auto, and Xpeng, along with other domestic automakers, have issued the initiative so far this week.
BYD, the world's largest EV maker, said on Wednesday that the company will unify supplier payment terms to no longer than 60 days in a bid to promote the high-quality development of the automotive industry and support the healthy development of small and medium-sized enterprises (SMEs). The company also pledged to collaborate with upstream and downstream partners to ensure the steady and sustainable progress of China's automotive industry.
Chang'an Automobile, along with its brands including Deepal and Avatr, will take concrete measures to ensure efficient capital flow to SME suppliers, the company noted.
FAW Group, based in Northeast China's Changchun, highlighted specific measures in a statement on Tuesday. The automaker will implement a 60-day payment term across all units with enhanced financial oversight and whole-process management. It pledged to streamline approvals by strengthening interdepartmental coordination to monitor contract execution so as to ensure timely payments to suppliers.
In addition to announcing the payment term unification, Xpeng said in a Weibo post on Wednesday that the company strives to empower the industrial chain and upstream and downstream partners through artificial intelligence tech innovation.
These announcements followed a revised regulation on SME payments that took effect on June 1. The regulation aims to promote timely payments by government agencies, public institutions, and large enterprises to SMEs, safeguard their legitimate rights and improve the overall business environment.
Under the regulation, large enterprises procuring goods, projects, or services from SMEs must pay within 60 days of components delivery, or as per contract. Payments cannot be contingent on third-party payments or proportional to third-party payment schedules.
Zhang Xiang, director at the Digital Automotive International Cooperation Research Center of the World Digital Economy Forum, noted that the timely payments to component partners are crucial for maintaining stable industrial and supply chains.
Shortened payment will significantly improve the utilization rate of funds for SMEs, helping shorten those enterprises' cash turnover cycle and increasing turnover frequency. Faster cash turnover enhances operational efficiency, and boosts productivity, Zhang said.
Domestic automakers work closely with suppliers, and timely payments are vital to maintaining the automobile sector's research and development progress, smooth operations, as well as ensuring the production efficiency across the industrial chain, Zhang told the Global Times on Wednesday.
Chinese authorities have repeatedly emphasized safeguarding the healthy development of the auto sector, amid the country's strenuous efforts to tackle "involution-style" competition.
To address "involution" competition in the automotive sector, the Ministry of Commerce (MOFCOM) will actively collaborate with other departments to strengthen comprehensive regulation and compliance guidance, maintain a fair and competitive market order, and promote the healthy development of the industry, MOFCOM spokesperson He Yongqian said on June 5.
And, an MIIT official said in late May that the ministry would ramp up efforts to rein in "involution-style" competition in the auto sector. Measures include promoting industrial structure upgrades, implementing random inspections for product consistency, cooperating with the authorities in combating unfair competition. The official also called on companies to enhance their innovation, improve their product quality and service, and fulfill their social responsibilities.
