Summary of Key Points
Last year, 17 major automakers promised to reduce their payment terms with suppliers to within 60 days. This year's first-quarter financial reports show that although the total amount owed by 18 listed automakers has decreased by 87.5 billion yuan, the average payment period has actually increased by 27 days to 216 days, creating a paradox of lower total amounts but longer payment periods. Only 4 automakers have managed to shorten their payment terms (for example, Li Auto reduced it by 45 days), while most are still seeing an extension in payment periods (for instance, Haima Motor's period has increased to 480 days). The China Association of Automobile Manufacturers (CAAM) states that most key automakers have met the 60-day goal, but some are still extending their terms indirectly or facing funding shortages. Implementing shorter payment periods is essentially a “cash battle,” and most automakers' cash reserves are insufficient to cover their obligations.
The Paradox of Fulfilling Promises: Less Money Paid, Longer Delays?
Many might wonder: If the total amount owed is decreasing, shouldn’t the payment period be getting shorter? In reality, the calculation for the payment period (the number of days it takes to pay back the debt) is “amount owed to suppliers ÷ daily purchasing cost.” If an automaker’s total amount owed decreases but its purchasing volume declines even more rapidly, the payment period will actually lengthen. For example, although the total amount owed by 18 automakers decreased by 87.5 billion yuan in the first quarter, the overall purchasing scale shrank even more, resulting in an average payment period of 216 days, up from 189 days at the end of last year. To illustrate: If a company purchased 1 million units per month last year, owed 2 million yuan to suppliers, and had a 60-day payment period, this year it might purchase only 500,000 units per month, owe 1.5 million yuan, and now have a 90-day payment period—this is why we see a situation where the total amount owed has decreased, but the payment period has increased.
Divergent Performance Among Automakers: Some Improving, Some Struggling
- A Few Doing Well: Only 4 automakers have managed to shorten their payment periods. Li Auto stands out, with its period decreasing from 207 days in the second quarter of last year to 162 days (a reduction of 45 days). Geely, GAC BluePark, and BAIC BlueCore also showed improvement.
- Those Lagging Behind: Haima Motor’s payment period has increased to 480 days (an increase of 229 days), Zotye to 461 days (an increase of 132 days), Xpeng to 337 days, and Seres to 337 days.
- Special Cases of Increased Owing: SAIC, Chery, and NIO have seen an increase in their outstanding payments. SAIC’s increase is due to higher sales leading to more purchases (an increase of 20.5 billion yuan over three quarters), Chery by 22.3 billion yuan (a 21% increase), and NIO, as its delivery volume increased, giving it stronger bargaining power to owe more to suppliers (an increase of 19 billion yuan, a 54% increase).
Three Major Barriers to Achieving Shorter Payment Periods
1. Lack of Funds: Reducing the payment period means automakers need to pay faster, but most do not have enough cash on hand. For example, SAIC, BYD, and Chery’s cash reserves (including restricted funds and short-term investments) are insufficient to cover their obligations; only Seres and Li Auto can fully cover them. Without sufficient funds, they must delay payments to protect their own financial stability.
2. Internal Coordination Issues: Implementing a 60-day payment period requires cooperation among finance, purchasing, and production departments. For example, procurement teams need to reconcile accounts promptly, and finance departments must make timely payments. However, many automakers have inefficient internal processes that cause delays.
3. Indirect Extensions through Technicalities: Some automakers claim a 60-day payment period but use incorrect starting points for calculation—instead of starting from the delivery and acceptance of goods, they start from the receipt of invoices or centralized account reconciliation. As a result, suppliers actually receive their money much later than 60 days. Additionally, some automakers require suppliers to lower prices in exchange for shorter payment periods.
What Are Automakers Doing to Shorten Payment Periods?
- Industry Efforts: CAAM’s research shows that most of the 17承诺 automakers have reduced their payment periods to within 60 days (with an average of 54 days), and 4 have achieved periods under 50 days.
- Automaker Actions: Many automakers have established special teams to improve processes (such as switching from monthly payments to ten-day payments and using systems for automated payments to reduce human errors). Some have even allocated substantial funds specifically for paying suppliers. For example, BYD mentioned in its financial report that its payment period has continued to improve, below the industry average.
The Importance of Payment Periods
Payment periods are critical for the entire automotive industry. They represent a “lifeline” for suppliers, who rely on automakers’ payments to pay salaries and purchase raw materials. If automakers delay payments, suppliers may go bankrupt, which in turn affects the supply of parts and components to the automakers. Therefore, CAAM emphasizes that shorter payment periods are fundamental for a healthy industry cycle. Although there has been progress, some automakers still need to address their issues, and this “cash battle” must continue. Automakers either need to find ways to generate more cash or further optimize their processes; otherwise, the promise of 60-day payment periods may remain unfulfilled.
(The entire text is explained in plain language, making it easy for non-financial professionals to understand the logic and challenges behind automakers’ payment periods.)