Chinese Automakers’ Supplier payment reforms: Strategy or Compliance

Amid rising pressure from the Chinese government, leading automakers like BYD, Geely, and Xiaomi have pledged to pay their suppliers within 60 days, a significant shift from past practices where payments were delayed for months. This move follows new regulations aimed at protecting small and medium-sized suppliers and stabilizing China’s auto supply chain, which has been strained by aggressive price wars and prolonged payment cycles.

While the reforms appear to be a response to compliance pressure, there’s a deeper strategy at play. Early adopters of the new payment norms are not just avoiding penalties but they’re also positioning themselves as financially strong, trustworthy partners. Paying suppliers on time fosters loyalty, improves product quality, and enhances brand reputation in a highly competitive EV market.

However, many suppliers remain skeptical, awaiting clarity on whether payments will be in cash and how strictly timelines will be followed. Ultimately, whether driven by law or long-term vision, this shift could mark the beginning of a healthier, more sustainable auto industry in China, where trust and timely payments become the norm, not the exception.