China’s leading automakers, including BYD, Geely, and Xiaomi, have pledged to make more timely payments to their suppliers, following regulatory pressure from Beijing aimed at curbing controversial industry practices during a fierce price war, according to reporting by the Financial Times.
Roughly a dozen domestic carmakers, including state-owned giants GAC and FAW, have committed to standardising a 60-day payment period for their suppliers. The move is positioned as part of broader efforts to “promote high-quality development” and “ensure supply chain stability,” according to public statements made by the companies over the past 24 hours.
The pledges come in response to growing government concern over the industry’s increasing reliance on so-called supply chain financing — a practice in which automakers delay payments to suppliers to preserve cash flow, often pushing financial strain down the supply chain.
Last week, China’s Ministry of Industry and Information Technology, the country’s top automotive regulator, held a closed-door meeting with executives from 16 of the largest domestic carmakers, warning them against aggressive price-cutting tactics and unpaid supplier bills, FT sources said.
This comes amid broader regulatory changes: in March, China’s State Council introduced new rules requiring large enterprises to settle invoices with smaller suppliers within 60 days. These regulations officially took effect on June 1.
The new rules are intended to address long-standing grievances from suppliers, who have frequently faced delayed payments of up to 200 days. In some cases, suppliers are forced to accept promissory notes — essentially IOUs — from clients in place of actual payments.
“If you don’t accept, the clients will just go find another supplier,” one domestic auto supplier, speaking anonymously to the Financial Times, said. According to the supplier, nearly all major automakers in China — including BYD and Geely — have implemented such promissory note systems to manage payments.
While the pledges mark a positive shift toward financial discipline and supplier protection, some analysts remain skeptical about enforcement and long-term commitment. Still, the crackdown reflects a broader effort by Chinese authorities to restore balance in an increasingly cutthroat automotive market, which has seen price wars intensify competition and strain supplier relationships.
As automakers face tighter margins and ongoing electric vehicle competition, their willingness — or ability — to abide by these new standards will be closely watched by regulators and supply chain partners alike.
