After authorities voiced worries with supply chain financing, a number of China's state-owned automakers promised to standardize bill payment times for their suppliers to 60 days.
Similar statements were released this week by at least three automakers, including Dongfeng Motor Group Co., Guangzhou Automobile Group Co., and China FAW Group Co., stating that their payment schemes are intended to encourage effective financial flows across supplier chains in the automotive sector.
Due to their internal pricing war, Chinese automakers have been looking for cheaper parts and postponing supplier payments by months, which has resulted in a type of quasi-debt financing. Concerned that the price war was becoming unsustainable, regulators, including the Ministry for Industry and Information Technology, met with the leaders of major electric vehicle manufacturers last week to discuss supply chain finance.
In order to safeguard small and medium-sized businesses, Chinese authorities released new regulations in March that stipulate that bills must be paid within 60 days and that big organizations cannot utilize promissory notes or other non-cash payment methods to stall payments from smaller companies.
In June, the rules will go into force. In the automobile sector, supply chain financing is widespread.
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The best-selling automaker in China, BYD Co., pays its suppliers with a promissory note system called Dilian, or Dilink in English, which can be redeemed later. The last time BYD released such information was in May 2023, when the platform had issued 400 billion yuan ($55.7 billion) worth of notes.