So far, 17 major manufacturers have signed up, in a move aimed at boosting the health of the current industry financial situation.
Seventeen of major auto manufacturers have signed pledges promising to make payments to suppliers within 60 days in a move aimed at quashing vocal unrest around long payment delays to suppliers.
The move has been backed by China’s Ministry of Industry and Information Technology (MIIT), which has reinforced the importance of reliable payment structures for the health of the wider auto industry.
Recent weeks have seen finger pointing from the likes of Great Wall Motor Chairman, Wei Jianjun, who suggested that there is an “Evergrande” of China’s automotive industry which has yet to “explode”, Evergrande being the massively indebted property developer that has been fighting ongoing bankruptcy challenges causing a massive housing industry crisis in the process.
The criticisms were reportedly directed at BYD, China’s largest car maker, who have faced a wide number of accusations recently from long supplier payment cycles to zero-mileage cars being registered for sales then placed onto second-hand markets.
The list of manufacturers includes industry giants BYD, Geely, Dongfeng, GAC, Great Wall Motor (GWM), Seres, and tech newcomer Xiaomi, all of whom have committed to the initiative to address growing concerns over delayed payments and financial bottlenecks.
In a statement yesterday, MIIT praised the agreements as a critical step towards reinforcing a collaborative vehicle-component development model, quoting the Chinese proverb, “when the big river has water, the small streams are full”, to highlight that prosperity at the top level filters down to the rest of the industry.
An MIIT spokesperson stated: “A stable and timely payment system is essential to maintaining supply chain integrity. Delays in supplier payments not only hinder technological innovation but also jeopardise the sector’s sustainable development.”
The ministry vowed to monitor compliance among automakers and encourage long-term, stable partnerships across the supply chain. By improving cooperation between large manufacturers and smaller suppliers, MIIT aims to enhance innovation resilience and safeguard the industry against disruptions.
The ministry also issued a warning against malicious practices threatening the sector’s reputation. It called on industry stakeholders to resist online disinformation campaigns, including coordinated smear tactics and false PR narratives, which could undermine fair competition and disrupt market stability.
BYD’s General Manager of Brand and Public Relations Division, Li Yunfei, had a strong response to the accusations against BYD, highlighting not only the financial performance of BYD but that of their rivals compared to other big names of foreign industry.
Criticism of BYD’s 70% asset-liability ratio was benchmarked against that of Ford (84 percent), General Motors (76 percent), Apple (80 percent), and Boeing (102 percent), with Geely at 68 percent and Seres at 76 percent.
Total debt of 580 billion yuan was placed in contrast to Toyota’s 2.7 trillion, VW’s 3.4 trillion, and Ford’s 1.7 trillion, with Chinese makers SAIC at 610.4 billion and Geely at 504.7 billion.
Not all debt is the same, for example interest-bearing debt, which for BYD is 28.6 billion yuan, less than Geely’s 86 billion and SAIC’s 94.5 billion, and much less than Toyota’s 1.8 trillion, Ford’s 1.1 trillion, and VW’s 1 trillion.
He also noted that the supplier payment cycle for BYD averages 127 days, equal to Geely, and less, ironically, than Great Wall, at 163 days, and SAIC at 164 days.
Based on the average supplier payment times quoted by the BYD executive, many brands will be more than halving their payment times to suppliers, which should bolster the overall strength of the industry, though it could equally place those car makers, already fighting an intensely damaging price war, into further difficulty, and speeding up the shakeout of the industry.
It’s expected that those who remain in good health after the commitments have been made and acted upon, will likely be the ones carrying forward China’s automotive industry in the years ahead.
MIIT reaffirmed its commitment to guiding automakers towards sustainable growth, emphasising that collaboration between large firms and SMEs will be key to maintaining China’s leadership in the global automotive market.
As China’s automotive sector continues to evolve, the combination of regulatory support and corporate accountability could set a new standard for ethical and efficient supply chain management worldwide.
