In a whirlwind move that sent ripples across the burgeoning electric vehicle (EV) landscape, Chinese automakers have begun to aggressively slash payment cycles to their suppliers, with a clear focus on a 60-day payment window. This rapid-fire shift comes as major state-owned enterprises (SOEs) and prominent private players alike, including Geely and Changan, embrace the new standard. It’s a development that underscores the intensifying competition and the pressure to maintain robust, cash-rich supply chains in a fiercely competitive market.
The move was spearheaded by industry giants like GAC, Dongfeng, and China FAW, who swiftly announced their adoption of the 60-day policy, effectively codifying it as a core financial imperative. GAC, for instance, explicitly stated that a 60-day maximum is now non-negotiable, solidifying its stance on strict payment timelines. The competitive spirit extends to companies like SERES, proactively boasting its already-existing adherence to the 60-day period as a selling point.
While this shift is grabbing headlines, it also highlights that Xiaomi, the consumer electronics behemoth turned EV disruptor, has quietly been operating under this model for some time. Industry insiders note that Xiaomi, even prior to the launch of its highly anticipated SU7 model, was already operating with a 60-day payment term for its suppliers. This early adoption is significant, according to market analysts, and reflects a forward-thinking approach to supply chain management.
As one supplier remarked after the SU7 launch, “The long payment terms from some of the larger companies were a killer. Xiaomi’s 60-day policy is a lifesaver, giving us the breathing room we need to focus on R&D and quality improvements.”
Experts further suggest that Xiaomi’s strategy isn’t just altruistic; it’s strategically sound. Faster payments translate to increased supplier loyalty and a willingness to invest in technological upgrades. “By accelerating the cash flow, these suppliers are in a better position to fund innovation and meet evolving demands,” one analyst explained. “This creates a virtuous cycle that benefits the whole automotive ecosystem.”
Xiaomi’s financial firepower is also a factor here. Reports indicate they currently possess a cash reserve exceeding RMB 200 billion, giving them the flexibility to implement cutting-edge practices like these.
Xiaomi’s approach to supplier payments is varied and includes a few different options, including:
Primary Payment Structure: 45-60 Days
1. Standard Terms: 45 Days
The majority of Xiaomi’s suppliers operate under a 45-day payment cycle. After delivery, suppliers receive payment within a month and a half. This clearly contrasts with the lengthy payment cycles prevalent in the automotive industry. Compare this to Tesla’s 90-day model, and others that can stretch to 180 days; Xiaomi’s faster approach relieves significant financial strain on its suppliers.
2. Negotiated Extension to 60 Days
In certain cases, Xiaomi’s procurement teams sometimes negotiate a modest extension to 60 days. However, even these terms are still faster than what is typical in the industry, and the company typically settles in cash, rather than using delayed payment tools. This further safeguards suppliers from potential cash flow problems.
Flexibility in Special Cases
1. Immediate Payment on Small Orders
For smaller or emergency orders, Xiaomi typically adopts immediate payment methods like wire transfers or monthly settlements, shortening the payment cycle to under 30 days.
2. Financial Support via Supply Chain Financing
Xiaomi provides its own financing solutions (such as via its subsidiary financial platform, Tianxing Shuke) to help suppliers receive their receivables sooner. However, this has raised some concern, as reports indicate Xiaomi earns additional profits through variable interest rate adjustments and the securitization of accounts receivable.
Multiple suppliers report that the speed of payments allowed them to remain solvent and afloat, and that Xiaomi helped them survive. Suppliers have estimated that the cost savings is roughly 2% for suppliers, if they used the extended terms of payments.
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