BYD and top carmakers slash payment terms to boost supply chain stability following regulatory pressure
Several leading Chinese automakers, including BYD, GAC, FAW, Dongfeng, Seres, Geely, Changan, Xpeng, GWM and, Xiaomi, have publicly committed to standardising supplier payment terms within 60 days. These announcements follow the implementation of China’s Regulation on Ensuring Timely Payments to Small and Medium-Sized Enterprises (SME Payment Regulation), which came into effect on June 1, 2025.
The move marks a significant shift in procurement practices across China’s auto sector. Previously, average payment periods for companies like BYD and Geely stood at around 127 days, while others—including SAIC Motor, Great Wall Motor, Series, and Li Auto—hovered closer to 160 days. Nio was reported to extend payments up to 195 days, with Changan exceeding 200 days.
In a series of coordinated announcements late June 10 and early June 11, major state-owned and private carmakers began issuing formal statements aligning with the new regulation. GAC Group was the first to confirm the change, followed by FAW, Dongfeng, Seres, Geely, and Changan. BYD released its statement just after 1:00 a.m. on June 11. Xpeng, as the first among the newer EV startups to respond, confirmed its compliance on June 11.
These companies state that the shortened payment cycle aims to improve cash flow for suppliers—particularly small and medium-sized enterprises (SMEs)—and enhance overall supply chain efficiency. The announcements also signal broader compliance with recent regulatory pressure. The Ministry of Industry and Information Technology (MIIT), State-Owned Assets Supervision and Administration Commission (SASAC), and National Development and Reform Commission (NDRC) have recently intensified their oversight of the automotive industry, especially regarding pricing practices and supplier relationships.
The SME Payment Regulation mandates that all government agencies, institutions, and large enterprises pay SMEs within 30 days of goods or service delivery, with an allowable extension of up to 60 days if contractually agreed. The regulation is legally binding and aims to prevent cash flow stress for smaller suppliers by eliminating excessively long payment cycles. It also prohibits forcing SMEs to accept deferred payments through commercial paper or other non-cash instruments that could delay actual fund transfers.
While the law explicitly targets transactions between large enterprises and SMEs, many automakers—including BYD and Geely—have applied the 60-day limit to all suppliers, regardless of size, indicating a willingness to set higher voluntary standards.
As of publication, some carmakers have yet to issue statements regarding payment term adjustments. These companies may evaluate operational and financial impacts before making similar commitments.
With regulatory enforcement now in place, industry observers believe the 60-day payment term is no longer optional, but a new baseline standard for doing business in the automotive sector. For suppliers, particularly smaller firms, faster payments can ease working capital pressures and reduce reliance on financing. For automakers, however, shorter payment cycles could require more stringent cash flow management and force reevaluations of financial strategies.
