Summary of Key Points
Recently, two major industry alliances (China Automotive Power Battery Industry Innovation Alliance + Zhongguancun Energy Storage Industry Technology Alliance) issued a set of guidelines for battery and energy storage companies to pay their suppliers. The main requirement is that payments should be made within a maximum of 60 days for small and medium-sized (SME) suppliers, and leading battery manufacturers such as CATL and XINWANGDA have expressed their support for these guidelines. This follows a previous initiative in the automotive industry to improve payment terms from 90 days to 60 days. The issue of delayed payments by the battery industry to its upstream suppliers is more severe than in the vehicle manufacturing sector, and the aim is to alleviate the financial pressure on these suppliers and promote a healthier supply chain. However, implementing these guidelines will likely face several practical challenges.
What Do the Guidelines Require?
The guidelines are quite specific and address the most common issues for upstream suppliers:
1. Clear payment terms: For SME suppliers, payments must be made within 60 days from the date of delivery or acceptance of goods. For larger companies, both parties can negotiate the terms, but monthly reconciliations are required, with the payment period starting from the date of reconciliation.
2. Rapid acceptance: Acceptance of materials and components should be completed within 7 working days, followed by an immediate issuance of a certificate of conformity to prevent suppliers from delaying payments under the pretext that the goods have not been fully inspected.
3. Payment methods: Cash payments are preferred, with bank transfers being the recommended method. If bank acceptance bills (guaranteed by banks) are used, these must be clearly specified in the contract. The use of corporate-issued commercial acceptance bills or electronic payment vouchers should be minimized, especially for SME suppliers.
Why Focus on Battery Manufacturers’ Payment Terms?
The problem of delayed payments in the battery industry is particularly severe:
- Significant capital occupation by leading companies: For example, CATL had outstanding payments and bills amounting to over 300 billion yuan in the first quarter of 2026, with an average payment period of 308 days from the time goods were received. Companies like EVE Energy had a payment period of 265 days in 2024, while Guoxuan High-Tech and Zhongxin Innovation Aviation approached 290 days. This means that upstream suppliers are effectively funding battery manufacturers for extended periods, which can lead to financial difficulties if they cannot turn over their own funds quickly.
- Extension of reforms from the automotive industry: After 17 automakers pledged to pay within 60 days in 2025, the average payment period decreased from 64 days to 54 days. Including the battery industry in these guidelines will help create a closed loop that addresses the issue of delayed payments throughout the entire supply chain.
Will the Initiative Be Successful?
Leading companies like CATL and XINWANGDA have shown their support, and the Ministry of Industry and Information Technology has also provided backing. Eleven key battery manufacturers have introduced specific management measures, which is a positive start. However, success will depend on the actual implementation of these guidelines:
- Lead by example: These companies hold a significant market share in the battery industry, and if they follow the guidelines, smaller suppliers are more likely to do so as well.
- Creating a closed loop: Previously, only automakers were responsible for setting payment terms, but now that the entire supply chain is regulated, the financial pressure on upstream suppliers will be reduced significantly.
- Implementation is crucial: The guidelines are voluntary, and there is no enforcement mechanism. It will be necessary to monitor whether companies actually adhere to them.
Challenges in Implementation
Based on experiences from the automotive industry, potential issues in the battery sector include:
- Hidden extensions of payment terms: Although the official period may be 60 days, the actual payment date could be delayed until the invoice is received or the goods are installed and verified.
- Trade-offs for shorter terms: Some companies might offer shorter payment periods in exchange for lower product prices, shifting the pressure to suppliers.
- Substandard payment methods: Although cash payments are recommended, companies may still use bank acceptance bills or electronic vouchers, which can be risky or difficult to redeem.
Benefits for the Supply Chain
This initiative is beneficial for all parties involved:
- Upstream SMEs: They will no longer have to wait for extended periods to receive payments, allowing them to improve their cash flow and purchase raw materials and pay salaries, thus increasing their chances of survival.
- Battery manufacturers: A stable supply chain ensures a steady supply of high-quality materials, reducing the need for frequent changes in suppliers.
- The entire new energy industry: A healthier supply chain reduces disputes and promotes long-term growth, as the new energy sector is a key national priority.
In summary, this initiative is a crucial step towards resolving the issues that impede the development of the supply chain. However, its success depends on companies' compliance and effective supervision to ensure that the guidelines are not just empty promises but are genuinely implemented.