The Chinese auto industry has ushered in a change.

On June 10-11, many auto companies successively issued statements, announcing that they would reduce the payment period to suppliers to less than 60 days.

GAC Group, FAW Group, Dongfeng Motor, Seres, Geely Auto, and Changan Automobile were the first to issue statements, followed by BYD, Xiaopeng Motors, Leapmotor, Great Wall Motors and more auto companies.

At present, at least 17 auto companies have promised that "the payment period will not exceed 60 days." This move marks the systematic rectification of the long-standing "delayed payment" problem in China's auto industry.

Judging from the official announcement of the auto companies, this move is in response to the State Council's "Regulations on Guaranteeing the Payment of Small and Medium-sized Enterprises" and the "Initiative on Maintaining Fair Competition Order and Promoting the Healthy Development of the Industry" of the Automobile Industry Association, jointly promoting the high-quality development of the industry.

It is worth noting that in this round of "60-day account commitment", SAIC Group stated that "it will unify the payment period of suppliers to within 60 days, and will not use settlement methods such as commercial acceptance bills that increase the financial pressure of suppliers, and practice the responsibility of state-owned enterprises with practical actions"; BAIC Group also stated that "it will strictly fulfill the contract and implement settlement within 60 days, and completely cancel unreasonable settlement methods such as commercial acceptance bills that increase the financial pressure of suppliers, and alleviate the cash flow pressure of small and medium-sized suppliers."

(Data source: public information of automobile companies)

This collective action is a positive response to the "Regulations on Guaranteeing the Payment of Small and Medium-sized Enterprises" officially implemented on June 1.

The regulations set a 60-day upper limit on the payment period for large enterprises to purchase goods, projects and services from small and medium-sized enterprises, and strictly prohibit the use of commercial bills, electronic vouchers and other methods to extend the payment period.

Article 9 When government agencies and institutions purchase goods, projects and services from small and medium-sized enterprises, they shall pay the money within 30 days from the date of delivery of the goods, projects and services; if otherwise agreed in the contract, it shall be followed, but the payment period shall not exceed 60 days at most.

When large enterprises purchase goods, projects and services from small and medium-sized enterprises, they shall pay the money within 60 days from the date of delivery of the goods, projects and services; if there is another agreement in the contract, it shall be followed. However, the payment period shall be reasonably agreed upon and the payment shall be made in a timely manner in accordance with industry norms and transaction practices. It shall not be agreed that the payment to small and medium-sized enterprises shall be conditional on the receipt of third-party payment or the payment to small and medium-sized enterprises shall be made in proportion to the progress of third-party payment.

Article 11 If government agencies, public institutions and large enterprises use non-cash payment methods such as commercial bills and electronic vouchers of accounts receivable to pay small and medium-sized enterprises, they shall make clear and reasonable agreements in the contract and shall not force small and medium-sized enterprises to accept non-cash payment methods such as commercial bills and electronic vouchers of accounts receivable, nor shall they use non-cash payment methods such as commercial bills and electronic vouchers of accounts receivable to extend the payment period in disguise.

This regulation is timely. According to the data of the National Bureau of Statistics, at the end of April, the average collection period of accounts receivable of industrial enterprises above designated size nationwide was 70.3 days, an increase of 4 days year-on-year. The automobile industry is the hardest hit area, with an average accounts payable turnover period of 182 days, far exceeding the 90 days of international auto companies.

According to Wind data statistics, in 2024, the accounts payable turnover days of domestic auto companies generally far exceeded the international level.

For upstream suppliers, the longer time the funds are occupied will lead to increased financial costs and reduced profits.

(Data source: Wind)

In recent years, the accounts receivable turnover days in the automotive parts industry have continued to rise. A supplier in Guangdong that mainly deals in automotive thermal management systems admitted that the payment cycle it faces is "6-12 months", that is, from the completion of product delivery to the final payment, the company needs to bear the pressure of advance payment for up to one year. Even if the account period ends, the supplier may only get an acceptance bill that "cannot be immediately realized".

The scale and period of accounts payable of auto companies are key indicators related to the resilience of the automotive supply chain.

Judging from the 2024 financial reports of some auto companies, the proportion of accounts payable and bills in operating income of Leapmotor is 59%, and that of Xiaopeng Motors is 56%, but that of BAIC Blue Valley is as high as 108%.

(Data source: Wind)

China's automotive industry needs a healthy and good industrial ecology to give enterprises a future and the industry hope.

"We have a dream," Guo Chuan, chairman of Zhejiang Konghui Automotive Technology Co., Ltd., once called for industry reform in an open letter, "I dream that one day the supplier's goods will be delivered to the Party A warehouse and after necessary inspection, they can be reconciled, invoiced and settled. The payment will be received within one month after the invoice is issued, and wire transfer is the only way to get the payment." This open letter expresses the voice of countless small and medium-sized suppliers.

The long payment period is like a noose, making many small and medium-sized suppliers struggle on the line of life and death. When car companies extend the payment cycle to 180 days or even longer, coupled with the price reduction pressure brought by the industry price war, it forms a double stranglehold on suppliers.

- Cash flow crisis: Some suppliers are forced to accept the harsh terms of "15% price reduction + 60-day extension of the payment period", resulting in cash flow turnover days exceeding the 240-day warning line.

- Profit compression: The net profit margin of auto parts suppliers has dropped from 9% in 2015 to 3.8% in the first quarter of 2025.

- R&D stagnation: Liu Xihe, global CEO of Jingxi Zhixing, pointed out that the long payment period leads to "high financial costs and poor liquidity" for suppliers, which greatly limits the investment of enterprises in technology research and development, talent investment and process innovation.

When the 60-day payment period commitment goes from paper to reality, the car companies themselves also face severe financial tests.

The current asset-liability ratio of car companies is generally high. Among them, in 2024, Weilai's asset-liability ratio has reached 87.45%, and Celes' asset-liability ratio is as high as 87.38%.

(Data source: Wind)

Li Yanwei, an expert from the China Automobile Dealers Association, believes that this payment period reform will not hurt BYD, Geely, Great Wall and other car companies with "many accounts payable and high proportion of supply chain finance", but for car companies with "originally tight capital chain and difficulty in financing", they may face more severe challenges.

This reform will have a fundamental impact on the business model of car companies. For a long time, OEMs have significantly improved operating cash flow and reduced reliance on external financing by lengthening the accounts payable period. Delaying payment to suppliers is equivalent to obtaining interest-free or low-interest financing, transferring financial risks to suppliers.

(Data source: Wind)

When the 60-day account period changes from a policy requirement to an active commitment by leading automakers, the core of competition in China's auto industry is shifting from "cost wars that squeeze the supply chain" to "symbiotic value chain resilience." This account period revolution will have multiple far-reaching impacts:

- Supplier decompression and technology upgrade: Bai Wenxi, vice chairman of the China Enterprise Capital Alliance, pointed out that the shortened account period has greatly shortened the supplier's capital recovery cycle, reduced financing needs, and increased profit margins. Stable cash flow allows suppliers to invest more funds in technology research and development, improve product quality and innovation capabilities.

- Change in industry competition logic: Cui Dongshu, secretary-general of the Passenger Car Association, said that the shortened account period will increase the cost of automakers' "involution" with the help of supply chain funds, forcing vehicle companies to focus more on improving operating quality.

- Industrial Ecological Reconstruction: BAIC Group and SAIC Group clearly mentioned in their statements that "comprehensively cancel commercial acceptance bills" and other unreasonable settlement methods that increase the financial pressure on suppliers. GAC Group further elaborated from the perspective of product quality: "The healthy development of the supply chain system is the basis for ensuring high safety and high quality of products."

The key to policy implementation lies in the implementation of details. Mr. Luo, the head of an OEM supplier who provides supporting services to many OEMs, pointed out that the next step needs to clarify many operational details, such as: Is the receipt calculated by the third-party warehouse or the factory? Is the account period calculated by receipt or invoicing? Is the payment method spot or acceptance bill? Is the acceptance bill bank acceptance or commercial acceptance, etc.

This time, the car companies collectively promised to shorten the account period to 60 days, which means that the supplier's capital recovery cycle will be shortened by nearly two-thirds. This adjustment will not only directly alleviate the financial pressure on suppliers, but will also promote the industry from extensive competition of "price for volume" to a virtuous cycle of technology cost reduction. With the strengthening of policy implementation, the trust relationship and technical collaboration between upstream and downstream of the supply chain are expected to enter a new stage, providing solid support for the industry to cope with global competition.

Competition in China's auto industry is shifting from "who can owe more" to "who can create more".

Author：Qinger