(Yicai) June 11 -- Ten Chinese automakers, including BYD, GAC Group, and Seres Group, have pledged to shorten the time it takes them to pay suppliers to within 60 days, following new regulations aimed at ensuring timely remuneration to smaller businesses.

The goal is to help funds flow more smoothly through the supply chain and keep the car business healthy and growing, Dongfeng Motor and GAC announced late yesterday. FAW Group said the move will strengthen financial management and clearly set payment deadlines and methods. Meanwhile, Seres called for a more orderly market, urging firms to act responsibly and work together to improve the industry.

Six more automakers -- BYD, Changan Automobile, Geely Automobile Holdings, Chery Automobile, Xpeng Motors, and Xiaomi Auto -- announced today that they will also shorten their supplier payment times to within 60 days. Others may follow suit.

Revised regulations governing payments to small and medium-sized enterprises took effect on June 1, requiring large businesses to pay for goods, projects, and services procured from SMEs within 60 days from the date of delivery.

Industry insiders told Yicai that this commitment by automakers is not only a response to the new rules but also a way for them to tackle involution-style competition, or excessive and self-defeating competition, firmly uphold a fair and orderly market environment, and foster the high-quality development of the auto industry.

By the end of April, large industrial companies in China waited an average of 70.3 days to receive payments due to them, or about four days longer than a year earlier, according to official data. Meanwhile, media outlet Caijing reported that 16 listed Chinese carmakers took an average of 182 days to pay their suppliers during the first nine months of last year, about 30 days longer than in the same period of 2023, and about twice as long as their international peers.

While the issue of delayed payments has persisted for a long time, it has intensified recently and needs to be corrected, said Dong Yang, former executive vice president and secretary-general of the China Association of Automobile Manufacturers. 

Shortening payment times will impact automakers' cash flow, limiting their ability to wage price wars, Dong noted, adding that the penalties for companies that violate the law and regulations must be strengthened.

BYD cut the prices of 22 of its vehicle models on May 23, and many carmakers subsequently followed suit, intensifying the already cutthroat price competition in China’s auto market.

Editor: Futura Costaglione