Chinese Auto Parts Suppliers Rise as Carmakers Commit to Timely Payments

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Shares of companies within the Chinese automotive supply chain experienced a significant jump following commitments from several automakers, including BYD, SAIC Motor, and Xiaomi Auto, to make timely payments to their suppliers. Wanxiang Qianchao, Langbo Sealing Technologies, and Tianlong Electronics each hit the daily trading limit of a 10% increase. Longhorn Automotive Electronic Equipment rose by 7.2%, while Dcenti Auto Parts gained 2.7%.

A group of seventeen Chinese automakers—such as BYD, Changan Automobile, Chery Automobile, GAC Group, Great Wall Motor, Leapmotor, Li Auto, Nio, Seres Group, Xiaomi Auto, and Xpeng Motors—announced yesterday their support for an initiative led by the China Association of Automobile Manufacturers. They are urging automakers to pay their suppliers within 60 days.

An official from the Ministry of Industry and Information Technology explained that extended payment cycles put increased survival pressure on supply chain firms. The goal of the initiative is to encourage automakers to honor their payment commitments and foster a more standardized and sustainable development environment for the automotive sector.

Since committing to this effort in June, progress has been made. For instance, Xpeng’s chairman, He Xiaopeng, mentioned in July that the company was working on adjusting its payment schedule. Data from a recent survey showed that FAW Group, GAC, and Seres have already reduced their payment periods to within 60 days.

In the first half of this year, the accounts payable and notes payable for 14 of the 17 automakers decreased compared to the end of last year, according to National Business Daily. The most notable reductions were seen at Changan Auto, Geely Auto, and SAIC, which saw declines of CNY 24.1 billion (approximately USD 3.4 billion), CNY 10.6 billion, and CNY 8.1 billion (about USD 1.1 billion), respectively. Changan Auto, BAIC BluePark New Energy Technology, and GAC recorded the highest percentage decreases.

Last year, the average payment period for 12 of these 17 automakers was around 170 days, with BAIC BluePark having the longest at 248 days, followed by Xpeng at 233 days, and Changan Auto at 200 days. GAC maintained the shortest cycle at 108 days, while BYD and Geely Auto averaged about 127 days.