Automakers promise a 60-day payment term, suppliers respond with six uncertainties

Starting from the evening of June 10, 2025, multiple car companies publicly committed to keeping the payment terms for suppliers to no more than 60 days. As of the time of publication, a total of 17 car companies have made this commitment: GAC Group, FAW Jiefang, Dongfeng, Seres, Geely, Changan, SAIC, BYD, Chery, Great Wall, BAIC, XPeng, Xiaomi, Leapmotor, Li Auto, Nio, and Jiangling Motors.

In addition to the 60-day payment term commitment, SAIC and BAIC have further committed not to use settlement methods that increase financial pressure on suppliers, such as commercial acceptance bills. FAW Jiefang and Jiangling Motors have also added commitments to streamline approval processes and utilize digital technology to achieve real-time monitoring of all process nodes related to contract execution, invoice matching, and payment applications, ensuring that every payable amount is paid on time.

The car companies' commitment to a maximum payment term is primarily in response to the revised "Regulations on Ensuring Payment to Small and Medium-sized Enterprises," which came into effect on June 1, 2025.

Article 9 of the regulations states: "Government agencies and public institutions purchasing goods, projects, and services from small and medium-sized enterprises shall pay within 30 days from the date of delivery of the goods, projects, and services; if otherwise agreed in the contract, the agreement shall prevail, but the payment period shall not exceed 60 days. Large enterprises purchasing goods, projects, and services from small and medium-sized enterprises shall pay within 60 days from the date of delivery of the goods, projects, and services; if otherwise agreed in the contract, the agreement shall prevail, but the payment period shall be reasonably agreed upon according to industry norms and trading practices and paid in a timely manner, and it shall not be stipulated that payment to small and medium-sized enterprises is conditional on receiving third-party payments or that payments to small and medium-sized enterprises are made according to the progress of third-party payments." In addition to the 60-day payment term, the regulations also stipulate that payment shall not establish "back-to-back" clauses, meaning that payment is not contingent upon receipt of payment.

Logically, car companies' commitment to better payment terms should make suppliers happy, but almost every comment section of related reports has turned into a complaint forum for suppliers, and the points of complaint are highly consistent: changing the payment term is good, but changing only the payment term is useless because suppliers face too many hurdles to get paid by car companies.

01 First Hurdle: Bidding and Designation

"Congratulations to everyone for reaching the industry international standard passing line."

This was the first sentence from Mr. Xu Fan, the head of a medium-sized domestic supplier, commenting on the car companies' commitment to payment terms, after which he opened up the discussion.

The payment term is not actually a big issue; now suppliers want to get business from car companies, and every hurdle is difficult to pass, especially for many new businesses related to research and development, which are hard to guard against.

These new businesses related to research and development are different from general procurement because R&D involves risk. Therefore, during the development phase, multiple suppliers are usually not invited to bid together; instead, they collaborate with technically reliable and experienced suppliers to share risks, promising the scale of the first batch of purchases after successful development.

However, some car companies now introduce backup suppliers (B) during the development phase, and this B can immediately promise low prices and long payment terms. Why? Because B can openly infringe on the intellectual property rights of the preferred supplier (A), and there have even been instances where car companies brought A's technical personnel to technical coordination meetings, with the actual purpose of explaining technical know-how to supplier B When entering the mass production stage, car companies directly pressure Supplier A to make concessions by using the prices and payment terms of Supplier B. Considering the procurement scale promised by the car companies initially, suing the suppliers incurs too high costs, and the time costs are negligible; they cannot afford to lose new business.

As a result, Xu Fan's company has already given up on promoting new technologies domestically.

A mid-level manager from a battery raw materials company told Caijing: "The current procurement bidding has become almost abnormal, with bids happening more frequently. Previously, it was on an annual basis, now it’s quarterly, and some clients are even considering whether to bid monthly."

The design of the bidding system is particularly harsh. Caijing learned from several battery companies that a certain car company's bidding page allows you to see your bid ranking directly. During the bidding, it clearly states how much the cheapest bid will supply, how much the second place will supply, and how much the third place will supply, forcing suppliers to squeeze out almost all their profits and then find ways to reduce costs themselves. Moreover, after the bidding, if raw material prices rise, it is ignored; if raw material prices fall, the winning supplier must lower their prices, or the bidding will be restarted immediately.

As for cost reduction methods, taking a new type of thermal insulation material between battery cells as an example, the initial design was painted in a "field" shape, which was later simplified to a "sun" shape, and then to "mouth" and "two." Is this practice against the rules? No, because even if it is not painted at all, it does not affect the product's compliance with national standards and can meet the client's procurement standards, but the reliability and quality of the product collapse in this gradual reduction of specifications.

Thus, a frequent complaint from suppliers is the demand to cancel the lowest bid winning.

02 Second Barrier: Process Confirmation Barrier

"Can you imagine? I currently have a process confirmation, but I can't find the contact person, calls go unanswered, and I can't get through the crowd at the door. Millions, and I have no way to start."

This is a complaint from a project manager at a domestic automotive software supplier.

She casually said, "I'm leaving next week, and I'm currently handling the handover. The most troublesome part of the handover is the business stuck in these process confirmations. Fortunately, these will no longer be my concern. Now when I walk on the street, my first reaction to every car is to think about how much this brand still owes me, which projects are still unsettled. It's really unbearable."

Xu Fan is also particularly helpless about the situation stuck in the process confirmation stage. He said this situation is most likely to occur with development fees. When suppliers work for car companies, the work is mainly divided into production and development types. If this development work belongs to a newly established project of the car company, and that project is canceled, then there is little hope of recovering that money.

The contact person from the car company is not maliciously defaulting on payments; due to project cancellations, some development work has already been done, but if it was not confirmed and the process was not completed before the project was canceled, then no payments can be made under that project name afterward. Therefore, well-connected car companies and suppliers will negotiate to include the previously owed development fees in the budget of the next project, paying under the name of the new project. However, if there are no new projects afterward, the supplier will most likely have to accept their misfortune What makes suppliers most uncomfortable is that payments stuck in the process confirmation are difficult to litigate, as there is no confirmed workflow, and thus no sufficient evidence. Even if they go to court, they can only claim rights based on the percentage of the total amount according to the already confirmed process.

03 Third Barrier: Online Acceptance Check

The online acceptance check is a key process for suppliers to provide products and services to automakers. Once the goods and services provided by the supplier complete the online acceptance check process, the supplier can confirm revenue. However, the standards for online acceptance are highly flexible and almost entirely determined unilaterally by the automakers.

For example, for components, the parts provided by the supplier do not count as completing the online acceptance check once they enter the automaker's warehouse. Some automakers wait until the components are sent to the production line, while others wait until the complete vehicle is off the production line to consider acceptance complete. Moreover, during the storage period from entry to acceptance, some automakers charge suppliers storage fees for the components stored in their warehouses.

The online acceptance check for development work is even more complex. New component development is somewhat better; once the drawings and processes are confirmed, acceptance can proceed. However, many automakers will withhold a certain percentage of the payment to the supplier as a quality guarantee deposit, ensuring that the design is defect-free before paying the final payment. But the determination of this defect-free status is highly flexible; if the relationship is good, acceptance is easy, but if the relationship is poor, nitpicking begins.

The online confirmation for software is the most complicated. Almost every type of software delivery process is different, and these software products are often associated with related hardware. Some automakers accept software services based on the total delivery of the devices carrying the software. For example, the confirmation of in-car software needs to be linked with screens, chips, and sensors. The time for automakers to accept the in-car assembly may not be long, but the payment terms that software suppliers endure are actually several times longer than that of the in-car assembly. Additionally, if there are issues with the total delivery of the in-car assembly, software suppliers will also face deductions.

However, automakers also face their own difficulties during the acceptance phase. For instance, physical acceptance is easier, while non-physical acceptance, such as software and services, has vague regulations. To be safe, automaker staff design acceptance standards based on physical delivery processes, which inevitably leads to mismatches for non-physical items.

Withholding quality guarantee deposits is also an industry practice. Previously, when suppliers had high profits, they fully accepted the quality guarantee deposits. However, now that profits are only a few percentage points, the quality guarantee deposits exceed the total profit, making it difficult for suppliers to bear. But if automakers do not withhold, they face risks. Raising prices would mean failing to meet the cost reduction targets set by superiors, which would jeopardize everyone's performance. Both automakers and suppliers are in a tough spot.

04 Fourth Barrier: Reconciliation and Invoicing

According to general procurement regulations, the payment term starts from the date the invoice is posted. However, many suppliers may have to bear the monthly time cost during the invoicing process.

A mid-level manager from an automaker supplier told Caijing: “There is a lot of operational flexibility in the invoicing process. Some goods have dynamic pricing, and if the prices are not finalized, the invoice cannot be issued; when the goods arrive, if the manufacturer's system does not match the supplier's data, the invoice cannot be issued; once the data matches, if you send the invoice over, they may stipulate that invoices can only be accepted before a certain date, resulting in it still not being posted, and it can only be recorded in the next month, which means the payment term starts from the next month.” As for the more outrageous reasons like not receiving invoices, unclear stamps requiring reissuance, system upgrades, etc., there are always innovative excuses. From the completion of the online acceptance by the car companies to the submission of invoices into the car companies' systems, this process takes at least a month and up to two months, and this time does not count towards the payment period.

05 Fifth Barrier: Approval and Payment Barrier

Finally, we arrive at the stage where the payment period begins to be calculated. By the time this stage is reached, suppliers are usually quite resigned, and the subsequent barriers are not as uncertain as the previous ones; it’s just a matter of waiting for the payment. Sometimes car companies may delay payment for a few days citing reasons like payment system failures, but due to contractual agreements and the new regulations under the "Regulations on Ensuring Payment to Small and Medium-sized Enterprises," suppliers should find this stage less difficult.

However, Xu Fan still reminds, "The promises made by car companies cannot just be taken at face value; we must also look at how they are implemented. We need to see if there are any excess payments by the end of this month and whether any car companies attempt to modify the payment terms in the contracts. If it’s not in black and white and backed by real money, there’s no certainty."

The project manager from the aforementioned software supplier also mentioned that her colleague called the contact person at the car company after seeing the news to ask if the payment period would be adjusted, and the contact person replied that he was also waiting for a notification.

A mid-level manager from a car company supplier stated that car companies tend to link payment periods with prices. If a car company negotiates a price reduction and the supplier does not accept it, it’s not surprising if payments are delayed for a year. Now, whether this payment period commitment will be followed by a price reduction demand leaves suppliers feeling uncertain.

06 Sixth Barrier: Acceptance Bill Barrier

This is the final barrier and the one that many suppliers despise the most. The car company has made the payment, but it is not in cash or wire transfer; instead, it is in the form of an acceptance bill, with better cases being bank acceptance and worse cases being commercial acceptance.

An acceptance bill is a promise to unconditionally pay the face amount of the bill on its maturity date. If the entity promising payment is a bank, it is called a bank acceptance bill; if the entity is a company, it is called a commercial acceptance bill.

Xu Fan expressed his strong dissatisfaction with the mention of acceptance bills: "The payment period is not really a big issue; cancel the acceptance!" He stated that his company only accepts bank acceptance bills and does not accept commercial acceptance bills at all. This is mainly because the business they do is either too difficult or too small in volume, with fewer competitors, allowing them to be more assertive with payment terms.

Another important reason Xu Fan does not accept commercial acceptance bills is that the liquidity of commercial acceptance bills issued by car companies is generally poor. Often, they can only be discounted conveniently at certain special companies, and the cost is not low, which feels like being skinned again. Most of the time, this "skin" is not taken by the car companies themselves but by certain individuals within the car companies. He is very concerned that needing to discount may force him to take sides among the car company executives, which could pose unpredictable risks for future business.

This time, SAIC and BAIC, in addition to committing to a 60-day payment period, specifically added that they would not use commercial acceptance bills. Many suppliers have stated that the commitment to not use commercial acceptance bills is much more sincere than the 60-day payment period

07 Infinite Involution, No Winners

Whenever the topic of payment terms comes up, foreign-funded car companies are always positively compared, making timely payments and leaving profit margins for suppliers. Is this the benevolence of foreign-funded car companies towards suppliers? Of course not. In fact, the liabilities of car companies consist of two parts: accounts payable to suppliers and loans or bonds payable to banks and financial institutions. The proportion of liabilities owed to suppliers is quite high for domestic car companies, while foreign-funded car companies generally owe more money to banks and financial institutions.

So, whether to pressure suppliers or borrow from banks is a cost consideration for car companies. However, under rapid development, domestic car companies, as the chain leaders in the industry, focus solely on their own growth without considering the upstream and downstream enterprises in the supply chain. It is an undeniable fact that they have not played the positive role that a chain leader should.

Chinese car companies have actually never acted as chain leaders; for decades, they have been struggling in the quagmire, excelling at sacrificing everything to bring down the emperor. Now they must learn not only to thrive themselves but also to help everyone else thrive together, which is a brand new challenge.

In the past few years of rapid development, car companies have only focused on the sales market, using the cost-performance strategy that Chinese companies excel at to turn the Chinese automotive market into the lowest-priced market for similar models globally. All the suffering endured by suppliers has turned into price reductions for car companies. However, even consumers who directly benefit from this strategy are starting to doubt it; they wonder if such cheap cars might have problems.

Yang Hongze, chairman of Che Lian Tian Xia, believes that car companies' commitment to a 60-day payment term for suppliers is an important step towards healthy development and mutual growth in the industry, a hard-won and encouraging change. However, he hopes that each manufacturer can further clarify the details:

Is the payment term calculated from receipt or invoicing? Is it based on the current month’s invoice or the next month’s? Is the invoicing month included in the payment term? Is the payment method cash or a bank acceptance bill? Is it bank acceptance or commercial acceptance? What is the relationship between the acceptance bill's term and the payment term? When does the 60-day payment term take effect? Will historical payables exceeding the 60-day payment term be settled in one go?

These questions certainly cannot be expected to be resolved in the short term, but the widespread attention this commitment has garnered indicates that everyone hopes to engage in market competition in a transparent, fair, and orderly environment, because in an infinitely involuted market, there are ultimately no winners.

To fundamentally change the current uncomfortable situation for everyone, Mr. Xu Fan expressed his view with a particularly simple statement: “Leave a line for others, so you can meet again in the future. Don’t always think about whether you feel uncomfortable, as long as you can disgust your competitors. If you keep thinking about disgusting others, in the end, it will backfire on yourself.”

Authors: Yin Lu, Gu Lingyu, Source: Caijing Magazine, Original Title: "Car Companies Commit to 60-Day Payment Terms, Suppliers Respond with Six Uncertainties"

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