China’s BYD says to ‘actively respond’ to supplier payment initiative

HONG KONG: China’s BYD said on Monday it would actively respond to an industry initiative that fleshes out rules on automakers making timely payments to suppliers, joining others in complying with a government call against price wars.

The Chinese electric vehicle giant said it will focus on order confirmation, delivery and acceptance, payment and settlement, and contract duration among other key links in ensuring timely payments.

The statement and similar pledges by major Chinese automakers including SAIC Motor, Changan, Chery and Xiaomi followed an initiative by China’s Association of Automobile Manufacturers earlier in the day.

The CAAM proposal addresses concerns over potential loopholes in honouring an industrywide commitment in June to make supplier payments within 60 days.

The initiative specifies that the acceptance of goods shall in principle be no more than three working days, which would be the start of the 60-day payment period, according to an association statement.

The payments should be made via cash or bankers’ acceptance, it added.

The payment involves a complex process and due to automakers’ different supply chain management systems, their honouring the promises varies, the association said.

Chery, for instance, said last month it had shortened the average supplier payment period to 47 days, while other automakers were generally vague about the exact length of their payments.

In an action plan released over the weekend, China’s industry ministry vowed tighter regulation of the auto industry grappling with insufficient demand and “disorderly competition.”

It set vehicle sales targets for this year lower than CAAM’s forecasts early this year.