Automakers Pledge 60-Day Payment Terms: Compliance Under Scrutiny

CNBC AI News, August 12th – Back in June, a cohort of 17 Chinese automakers publicly pledged to cap payment terms to suppliers at 60 days. Now, two months on, CNBC takes a look at which companies are delivering on their promises, how they’re doing it, and what challenges remain.

The commitment, made between June 10th and 11th, set a high bar. But with the deadline now passed on August 11th, the question is: who has followed through? And what strategies are these companies employing to meet the accelerated payment schedule?

CCTV’s “News 1+1” tapped Xu Haidong, Deputy Secretary-General of the China Association of Automobile Manufacturers (CAAM), for expert analysis on the situation.

Xu Haidong revealed that some automakers are already ahead of the curve: “Three companies have already achieved payment within 60 days.”

He added that a broad range of industry players, including major state-owned enterprises like FAW, Dongfeng Motor, and Changan Automobile, as well as prominent domestic firms like GAC Group, SAIC Motor, BAIC Group, Geely, Great Wall Motors, and EV startups like SERES, Li Auto, and XPeng, are actively working towards the goal.

“CAAM has conducted its own research and data collection, and it’s clear that major automotive enterprises are taking action,” Xu noted.

Adjusting payment terms requires companies to recalibrate their financial strategies and streamline internal processes. This includes everything from securing necessary capital to revising supply contracts and optimizing workflows for verification, onboarding, and payment processing.

Xu acknowledged that a phased approach is common: “Many companies are prioritizing the 60-day payment term for new orders, while working to gradually address older outstanding invoices. That’s understandable.”

Further insights come from a China Center for Information Industry Development (CCID) article titled “Fulfilling Payment Term Commitments: Key Automakers in Action!”.

The CCID report highlights specific initiatives: First Automobile Works (FAW) has established a cross-functional task force to streamline processes and implement robust oversight, embedding timely payments as a structural practice, rather than just an administrative dictate.

GAC Group has enshrined the “60-day payment to suppliers” as a non-negotiable principle. They’ve also implemented a comprehensive management system covering the entire supply chain, from order placement to payment disbursement.

SERES is leveraging its innovative “factory-within-a-factory” production model to ensure adherence to prompt payment schedules.

The article details the specific measures and milestones achieved by these companies.

It’s important to note that these commitments stem from China’s forthcoming “Regulations on Ensuring Payment of SMEs’ Accounts,” slated to take effect on June 1st, 2025.

The regulations mandate 60-day payment terms, ban mandatory acceptance of commercial drafts or other non-cash payment methods, and strengthen inter-agency oversight. These measures aim to alleviate payment arrears issues faced by small and medium-sized enterprises (SMEs) and foster a more equitable business environment.