BYD launches the "Account Period War"

Author | Zhou Zhiyu

Editor | Zhang Xiaoling

In the past three years, the Chinese automotive market has been engulfed in the smoke of "price wars." However, a warm current that runs counter to the "price reduction tide" has quietly emerged.

Starting from the announcement made by GAC Group on the evening of June 10, within less than 12 hours, more than 10 car companies expressed their intention to respond to the national call by unifying the payment terms for suppliers to within 60 days. BYD also followed up with a statement in the early hours of June 11. A "payment term war" has thus begun.

Although there are still doubts within the industry about how to significantly shorten the payment terms for suppliers to within 60 days, one thing is certain: this collective action by automakers signifies a profound change in the rules of the game in the Chinese automotive industry.

As car companies spare no expense and engage in fierce price wars for market share, leading to a continuous decline in industry profit margins and even approaching survival thresholds, this move to "benefit" suppliers, or rather, to regulate the financial relationship with suppliers, undoubtedly stands out as particularly striking and meaningful.

How the automotive giants, including BYD, align their words and actions to fulfill their promises will be key in the coming period. Whether this sudden "payment term war" will become a crucial part of the Chinese automotive industry's transition from barbaric growth to high-quality development, and from scale expansion to value enhancement, remains to be seen by both the industry and the public.

Turning Point of the "War of Words"

In the past two weeks, the public opinion storm surrounding some leading companies, especially BYD, has stirred the hearts of investors. The issue of supplier payment terms has become the "eye of the storm."

First, Great Wall Motors Chairman Wei Jianjun spoke out about the operational risks that exist in the automotive industry and the supply chain issues. Subsequently, the "war of words" among executives from car companies, including Geely, at the Chongqing Auto Show further pressured the reputation of the entire industry chain and market confidence.

At last week's annual shareholder meeting, BYD Chairman Wang Chuanfu was seen choking back tears several times. In response to shareholders regarding the recent public opinion storm, Wang Chuanfu stated that BYD never undermines others and only focuses on doing its own job well.

These public exchanges are not merely a contest of pride between companies but also a representation of the industry's deep structural dilemmas and the pains of transformation.

The entire automotive industry chain has also been on a downward trend amid this debate. After BYD's stock price hit a historical high of 416.98 yuan per share on May 23, it has been on a downward trajectory, with a decline of over 18% at one point. The stock prices of Geely, GAC Group, and others have also experienced varying degrees of decline.

This situation has reached a turning point with a series of announcements.

Starting from around 8 PM on June 10, when GAC Group took the lead in announcing its commitment to control supplier payment terms within 60 days, a "new payment term policy" sweeping the industry quickly unfolded.

Dongfeng Motor followed suit, and within just a few hours, heavyweight players such as FAW Group, Changan Automobile, Geely, Chery, Seres, and the industry focus BYD all issued statements through official channels, with the core content highly consistent—responding to the national call, ensuring efficient turnover of supply chain funds, and shortening supplier payment terms to within 60 days Behind the collective action of car companies lies the push of the "invisible hand."

The newly revised "Regulations on the Payment of Funds to Small and Medium-sized Enterprises," which will officially take effect on June 1, 2025, provides the most direct legal basis and policy support for this transformation. The regulations clearly state that large enterprises must pay for goods, projects, and services purchased from small and medium-sized enterprises within a maximum of 60 days from the date of delivery, and emphasize that "small and medium-sized enterprises must not be forced to accept non-cash payment methods such as commercial bills, nor should non-cash payment methods such as commercial bills be used to indirectly extend payment terms."

At the same time, industry regulatory departments and organizations, including the Ministry of Industry and Information Technology, the National Development and Reform Commission, the State-owned Assets Supervision and Administration Commission, and the China Association of Automobile Manufacturers, have repeatedly voiced their concerns about the increasingly severe "involution" phenomenon in the automotive industry, emphasizing the need to maintain a fair competitive market order and ensure the stability and security of the industrial and supply chains.

A relevant official from the Ministry of Industry and Information Technology clearly expressed support for the China Association of Automobile Manufacturers' initiative to "maintain fair competition order and promote healthy industry development," stating that there are no winners in chaotic "price wars," and there is no future. The ministry will increase efforts to rectify "involution-style" competition in the automotive industry.

The collective announcement by car companies to shorten supplier payment terms is like a "shot in the arm" injected into the continuously pressured automotive supply chain, and the capital market quickly responded positively.

The automotive and parts sector also swept away the gloom of the past two weeks, with significant gains on June 11, including BYD and SAIC Group rising over 2.5%.

The "Payment Terms" in the Eye of the Storm

When major car companies loudly announced their "60-day payment term commitment," it undoubtedly stirred considerable waves among the long-pressured supplier community. This commitment is like a long-awaited ray of hope, shining into the automotive supply chain long shrouded by extended payment terms and financial pressures.

In recent years, the Chinese automotive industry has sunk deeper into the quagmire of "price wars." Automakers, in order to survive and develop in fierce market competition, have passed on enormous cost pressures to the upstream supply chain. Extending payment terms has become one of the most commonly used and direct "financial tools" for manufacturers, allowing them to occupy supplier funds to beautify their own cash flow statements and operational data.

According to incomplete statistics from Wall Street Journal, the average Days Payable Outstanding (DPO) for domestic listed car companies previously reached over 170 days, with some companies exceeding 240 days, in stark contrast to international giants like Toyota and Volkswagen, which typically control their DPO at around 40-50 days. This significant gap starkly exposes the extremely unequal status between automakers and suppliers in the domestic automotive supply chain.

A manager from an automotive interior parts factory lamented that in the past, supplying to joint venture brands, although the product standards were strict, as long as the products passed inspection, payments could be received within the agreed payment terms; whereas now, supplying to certain domestic brands often involves longer payment terms and a lack of the respect they deserve.

In this context, the "60-day payment term" commitment is akin to a strong tonic. It gives suppliers hope and the possibility of returning to a normal business order. If this commitment can truly be implemented, it will greatly alleviate the financial pressure on suppliers, reduce their financing costs, and enable them to invest more resources into technological research and capacity enhancement, thereby forming a healthier industrial ecosystem However, a beautiful vision cannot easily dispel the long-standing gloom in the hearts of suppliers. Years of being "squeezed" have made them instinctively skeptical of the commitments made by the OEMs.

The suppliers' doubts mainly focus on how much "gold content" the "60-day payment term" actually has, and whether the OEMs will use various means to circumvent this seemingly strict regulation.

A senior supply chain professional told Wall Street Insight that there is still a lot of ambiguity in the industry regarding whether the starting point for the "60 days" is the date of goods delivery, the date of acceptance, or the date of invoicing. The differences among these can be vast. If the calculation starts from the date of goods delivery, the suppliers' rights can be maximally protected. However, if it starts from the date of invoicing, and the OEMs can use their dominant position to delay acceptance and invoicing for various reasons, then the actual payment cycle could still be extended to 90 days, 120 days, or even longer.

A supplier providing goods to a local state-owned vehicle manufacturer reported that the manufacturer directly requested a 10% discount on the invoice this month, effectively forcing the supplier to lower prices by 10%.

Another industry association expert candidly stated to Wall Street Insight that it is currently very difficult for OEMs to implement the 60-day payment term.

However, some suppliers are optimistic. In this collective commitment, SAIC Group and BAIC Group not only promised to shorten the supplier payment term to within 60 days but also clearly stated that they would completely eliminate unreasonable settlement methods that increase financial pressure on suppliers, such as commercial acceptance bills.

Relevant supply chain personnel pointed out that if other industry giants can also follow suit and strictly enforce similar commitments, then the overall industry atmosphere may fundamentally change.

Automakers Face "Financial Examination"

This "payment term war," driven by policy and led by top enterprises, is a welcome relief for long-pressured suppliers, but for the OEMs themselves, it is akin to a severe "stress test" of operational and financial management.

Standardizing the supplier payment term to within 60 days, a seemingly simple commitment, tests the true financial health of the automakers, their refined operational management capabilities, and their overall strength in a fiercely competitive market.

"The challenge of settling cash within a 60-day payment term poses too much operational pressure on OEMs," a relevant person from a domestic intelligent driving solution supplier bluntly stated.

In the past, extending the payment cycle for suppliers was an important means for many automakers, especially new car manufacturers, to maintain operations and beautify financial reports. By occupying upstream suppliers' funds without compensation, automakers could significantly alleviate their cash flow pressure and invest more funds into "burning money" areas such as R&D, marketing, and capacity expansion.

Now, with "60 days" becoming the new industry benchmark, this financial "lifeline" has been abruptly shortened, and the financial endurance of different automakers will face unprecedented severe tests.

According to Wind data, the accounts payable and payment cycles of mainstream domestic automakers are generally over 100 days. For example, BYD, by the end of 2024, is expected to have accounts payable of 244 billion yuan, accounting for 31% of revenue, with an average payment cycle of 127 days to upstream suppliers; during the same period, Geely Holding has accounts payable of 182.4 billion yuan, with a payment cycle of 127 days; and Seres has accounts payable of 68.5 billion yuan, accounting for 47% of revenue, with an average payment cycle of 166 days Among the new forces, Li Auto's accounts payable amount to 53.6 billion yuan, accounting for 37% of its revenue, with a payment cycle of 165 days.

If we look at the debt repayment capability of mainstream car companies using the data "(monetary funds - interest-bearing liabilities - operating liabilities) / total assets," only Changan Automobile among the top 10 A-share car companies (not included in the comparison due to different accounting standards in Hong Kong and the US) has a positive figure. However, companies like BYD have a relatively high net cash flow from operating activities, which can cover the gap in "(monetary funds - interest-bearing liabilities - operating liabilities," but this also means they need to rely on strong operational cash generation capabilities to support their massive debts and accounts payable to suppliers.

When a 60-day payment becomes a hard requirement, car companies need to use huge amounts of their own funds to fill the gap previously "blood-supplied" by suppliers, posing a direct challenge to cash flow management.

Some car companies have a ratio of net operating liabilities to total assets exceeding 70%, indicating that their astonishing growth rate is largely built on the "payment terms" from suppliers. This model can be sustained when sales are booming, but once growth slows or strict enforcement of 60-day payments is required, their cash flow will face extremely severe tests.

This "financial examination" clearly divides car companies into different camps. For leading car companies, they only need healthy cash flow to relatively easily cope with shortened payment terms; however, for companies that are still continuously losing money, have negative operating cash flow, or are highly reliant on financing, shortened payment terms are undoubtedly a further blow.

Reshuffling in Growing Pains

The Chinese new energy vehicle industry has experienced rapid development over the past few years, often referred to as a "golden era," with production and sales ranking among the top in the world. In the first four months of 2025, retail sales of new energy vehicles grew by as much as 35.7% year-on-year. However, beneath this prosperous scene, the "growing pains" are becoming increasingly prominent.

The most prominent contradiction is the industry's dilemma of "sales growth, shrinking profits." Although the market scale continues to expand, the brutal price war is the main reason for this situation.

To compete for market share, car companies have invested heavily in price competition, leading to a significant decline in overall industry profitability. The profit margin of China's automotive industry in 2024 was only 4.3%, and further shrank to 3.9% in the first quarter of 2025, falling below the average level of manufacturing. When a company's profit margin falls below 3%, its basic R&D investment will be difficult to sustain, while technological innovation is precisely the core driving force for the transformation and upgrading of the automotive industry.

In addition, the phenomenon of product homogeneity is becoming increasingly serious, exacerbating irrational competition in the market. Against this backdrop, car companies have treated supplier payment terms as an important "reservoir" and "buffer," extending payment cycles to alleviate their cash flow pressure caused by price wars and high investments, which has become a common practice. Therefore, the outbreak of this "payment term war" can be seen as a concentrated manifestation of various contradictions accumulated to a certain extent during the rapid development of the new energy vehicle industry.

It brings a glimmer of hope for the market, which has been suffocated by the oppressive atmosphere of "price wars" and "involution," for a reconstruction of order. Over the past two years, the "price butchers" in the Chinese car market have run rampant, with price cuts affecting almost all brands and models, compressing the industry's average profit margin to a historical low Data shows that the average profit margin of China's automotive industry has fallen to a low of 4.3% in 2024, and further declined to 3.9% in the first quarter of 2025, far below the average level of China's manufacturing industry.

This competition, which sacrifices profits for market share, has left investors and participants in the industry chain deeply fatigued and worried.

The "account period war," aimed at regulating the market and stabilizing the supply chain, will objectively play the role of an industry "cleaner," accelerating the elimination of weak car companies with weak financial foundations and a lack of core competitiveness.

Research reports from investment banks indicate that China's automotive market has transitioned from the era of total volume dividends to a phase of stock competition and structural adjustment. In this process of the industry moving from growth to maturity, the increase in market concentration and the elimination of backward production capacity are inevitable trends. The emergence of the "account period war" will undoubtedly become a catalyst to accelerate this process.

In this process, competition will continue. Gong Min, head of UBS Investment Bank's China automotive industry research, pointed out in a response to Wall Street News that although the industry is slowly consolidating, price competition in China's automotive market will persist. The fundamental reasons include reduced marginal costs, industry fragmentation, and the raising of funds through capital markets, local governments, and supply chains.

Currently, China's automotive industry is at a critical historical juncture of transforming from "growing large" to "growing strong." The "account period war" led by leading companies such as BYD, although it will bring short-term pain to the industry, is a necessary step for promoting high-quality development in the long run.

The core of this transformation lies in reshaping a healthier and more sustainable automotive industry ecosystem. When companies can no longer easily relieve pressure by occupying upstream funds, they must pay more attention to endogenous growth drivers and efficiency improvements. This means that the focus of competition in the industry must shift from simple price comparisons to deeper value creation.

If the commitment to a "60-day account period" can be executed without fail and fulfilled in cash, bank acceptance bills, and other high "gold content" ways, it will undoubtedly inject a shot of adrenaline into the long-pressured automotive supply chain. For car companies, this is a severe "financial exam" and "management exam," where the strong will remain strong, and the weak may accelerate their exit.

The "60-day account period" measures not only the timeliness of a company's payment of accounts but also its comprehensive survival ability and development potential under the new market rules. Regardless, this "account period war," jointly participated in by leading companies such as BYD and rapidly sweeping across the entire industry, is pushing the Chinese automotive market to complete its "coming-of-age ceremony" toward maturity in a somewhat brutal yet incredibly real way. This is the price that China's automotive industry must pay to transition from "large" to "strong," and it is the prologue to its advancement to a higher stage of development