Industry-Wide Move Aims to Stabilize Supply Chains Amid Government Anti-“Involution” Push
Major Chinese automakers including BYD, FAW, Dongfeng, GAC, Seres, Changan, Geely, and Chery have pledged to standardize supplier payment terms to 60 days or less, marking a significant shift in industry practices to improve cash flow for smaller supply chain partners.
Wave of Corporate Commitments
The announcements came in rapid succession:
- BYD: Made commitment early June 11 via WeChat, citing national supply chain stability policies
- Chery: Followed hours later on June 11 morning
- Six automakers (FAW, Dongfeng, GAC, Seres, Changan, Geely): Issued statements evening of June 10
Changan Auto emphasized its move covers all subsidiaries including Deepal and Avatr, while Geely positioned the change as part of its “industry leadership responsibility.”
Background: The 60-Day Payment Mandate
Regulatory Context
The commitments respond to China’s “Regulations on Guaranteeing Payments to Small and Medium Enterprises” effective June 1, 2025, which:
- Mandates 60-day payment windows for large enterprises
- Bans forced acceptance of commercial bills instead of cash
- Establishes stricter oversight mechanisms
Current Industry Practice
BYD’s PR head Li Yunfei recently disclosed typical payment cycles:
- BYD & Geely: 127 days
- Great Wall Motors: 163 days
- SAIC Motor: 164 days
The new 60-day standard represents a 55-63% reduction from these averages.
For Automakers
While challenging working capital management, benefits include:
- Improved supply chain responsiveness
- Better alignment with government priorities
- Potential mitigation of “involution” (excessive internal competition)
Government’s Anti-“Involution” Campaign
Policy Enforcement
MIIT Minister Li Lecheng recently chaired meetings addressing:
- Curbing cutthroat competition in NEV sector
- Standardizing payment practices
- Strengthening industry supervision
Expert Perspectives
Dong Yang, former CAAM executive, emphasized:
“Market self-regulation isn’t enough. We expect:
- Stricter penalties for violations
- Concrete implementation of payment term reforms
- Third-party oversight of industry self-discipline”
This coordinated industry response demonstrates China’s blended approach of regulatory mandates and corporate cooperation to optimize its automotive ecosystem, particularly benefiting smaller suppliers while challenging OEMs to enhance financial management capabilities.
Related topic:
