On June 29, the China Automotive Battery Innovation Alliance (CABIA), together with the Zhongguancun Energy Storage Industry and Technology Alliance (CNESA), jointly released an initiative calling for standardized supplier payment practices across the power and energy storage battery sectors. The proposal aims to improve payment discipline, implement China’s Regulation on Ensuring Payments to Small and Medium-sized Enterprises, and improve cash flow across the automotive supply chain. Following the release of the initiative, major battery manufacturers including CATL, CALB, Sunwoda and BYD subsidiary FinDreams Battery issued statements endorsing the proposal. The companies said they would continue refining their payment mechanisms, safeguard suppliers’ legitimate interests, and promote a more transparent and standardized supply chain. CATL issued a statetement to implement the initiative The most closely watched provision sets a clear payment deadline for SME suppliers. Under the initiative, if a supplier qualifies as a small or medium-sized enterprise, payment terms must be calculated from the date goods are delivered or accepted and may not exceed 60 calendar days. If the due date falls on a statutory holiday, payment may be postponed accordingly. The initiative also encourages companies to use cash-based payment methods, including bank transfers and wire transfers, while gradually reducing reliance on commercial acceptance bills and electronic payment instruments. Payment initiative released by CABIA and CNESA For SME suppliers, companies are encouraged to make payments entirely in cash. Beyond payment terms, the initiative also introduces standardized requirements covering purchase order confirmation, contract signing, goods acceptance and settlement procedures. For example, purchasers are advised to complete inspections within seven working days after receiving materials or components and promptly issue acceptance certificates to prevent payment periods from being extended because of lengthy inspection processes. The initiative reflects growing attention to supplier payment cycles across China’s automotive industry in recent years. Power batteries account for roughly 30% to 40% of the manufacturing cost of a new energy vehicle, making them the single largest cost component. CATL battery Battery manufacturers occupy a pivotal position in the supply chain, sourcing materials from upstream suppliers while supplying automakers downstream. Extended payment terms can therefore transmit financial pressure throughout the supply chain, particularly affecting smaller suppliers. In fact, the effort to shorten payment cycles did not begin with battery manufacturers. In June last year, China’s State Council revised the Regulation on Ensuring Payments to Small and Medium-sized Enterprises. Subsequently, 17 major automakers publicly committed to capping supplier payment terms at no more than 60 days. In September, the China Association of Automobile Manufacturers (CAAM) issued an initiative promoting standardized supplier payment practices among vehicle manufacturers, with most companies subsequently adjusting both new and existing contracts. According to a CAAM survey released in February this year, the vast majority of major automakers have reduced their average supplier payment period to around 54 days, about 10 days shorter than a year earlier. Four companies have already lowered their average payment cycle to below 50 days. With both vehicle manufacturers and battery producers now adopting similar standards, payment practices across China’s NEV supply chain are gradually becoming more standardized and transparent.
Liked by Camille Bouchard, Jackson Wilson
Liked by Camille Bouchard, Jackson Wilson
Liked by Camille Bouchard, Jackson Wilson