New rules set to tighten auto sector oversight
China's auto industry is undergoing regulatory reforms to curb disorderly competition and drive high-quality development, with new rules unveiled to standardize the industry.
In the latest move, the Ministry of Industry and Information Technology and the State Administration for Market Regulation issued a notice last week stating that automakers should pay small and medium-sized suppliers within 30 days of acceptance and no later than 60 days.
The notice by the industry regulator and market watchdog sets a red line on payment terms for the first time.
Cash payment should be the default, and commercial bills or supply chain electronic vouchers cannot replace cash when contracts do not specify a payment method. Late payments must carry interest in accordance with the law.
The auto supply chain features a multi-tiered structure dominated by SMEs. Fierce domestic competition in recent years has prompted many automakers to delay supplier payments to ease their own financial pressures, with some payment cycles stretching beyond 200 days, sparking widespread industry concerns.
In June, 17 major automakers promised to cap supplier payment periods at 60 days. The China Association of Automobile Manufacturers later issued an initiative detailing acceptance procedures, payment triggers and methods.
Zhang Xiang, an automotive industry analyst, said SMEs often pre-finance production and have funds tied up for long periods, creating cash-flow pressure. That constrains innovation, capacity upgrades and supply capabilities, weakening the overall resilience of the auto supply chain.
The CAAM noted that the auto industry lacks unified payment-term standards, with varying practices and high levels of non-cash payments affecting supply chain profitability. The notice offers practical guidelines for establishing a standardized payment management system, the association said.
The optimization of payment standards is part of a broader regulatory overhaul. In late August, four authorities, including the MIIT and SAMR, launched a one-year campaign to enhance vehicle production consistency and quality.
The initiative targets issues arising from cutthroat competition and accelerated model launches, focusing on production consistency, reliability, durability, technology testing and validation.
Common industry irregularities include mass-produced vehicles failing to match registered technical parameters, shortened durability tests that compromise vehicle reliability and compressed 18-to-24-month product development cycles that render durability inspections perfunctory.
The regulatory push has been accompanied by a wave of recalls, with the SAMR publishing a series of recall notices in late August. Several automakers are recalling more than 4 million vehicles due to issues with the labeling of interior emergency mechanical handles.
Tesla is recalling 2.93 million domestically produced Model 3 and Model Y vehicles in China because the interior emergency mechanical door handles lack conspicuous labeling and may be hard to identify in an emergency.
Other automakers, including XPeng, Leapmotor, Xiaomi, Geely and Chery, are also recalling vehicles due to similar hazards involving emergency door handles.
Separately, certain Tesla vehicles face additional recalls due to inadequate driver attention monitoring in their advanced driver-assistance systems.
Automakers will provide free warning labels and roll out over-the-air software updates for window control systems, adding a post-crash window-lowering function to improve emergency safety performance.
"While this massive recall primarily resolves interior identification issues and is easy to rectify, its implications are profound," said Ji Xuehong, director of the Automotive Industry Innovation Research Center at North China University of Technology.
"It makes clear that automakers must shoulder accountability for safety hazards and issue recalls in the event of design defects, sounding an alarm across the whole sector," Ji said.
caoyingying@chinadaily.com.cn
