By Jiahui Huang
Shares of major Chinese automakers rose Wednesday as the companies pledged to shorten payment terms for suppliers amid an intensifying price war in the world's largest auto market.
State-backed Guangzhou Automobile said late Tuesday that the company will commit to paying suppliers within 60 days, a move aimed at ensuring efficient capital flows across the auto industry's supply chains. Government-owned peers Dongfeng Motor and China FAW Group also released their own statements with the same message.
Several other manufacturers, including EV giant BYD, Li Auto and Xiaomi, followed suit on Wednesday, bringing the number of Chinese auto companies that have said they will adhere to the 60-day payment term to more than 10.
Shares of Chinese automakers rose broadly following the announcements, with BYD advancing 4.6% in Hong Kong. Guangzhou Automobile Group climbed 1.8% and Dongfeng Motor was 1.7% higher.
The promises to abide by the new industry norm for payment to suppliers came shortly after the China Iron and Steel Association said that the latest round of price cuts among Chinese EV makers had affected the normal operations of companies in the supply chain.
In a WeChat statement Tuesday, the association said that the EV price war will force iron and steel companies to lower their own prices, further squeezing margins. It also highlighted the tendency of Chinese EV makers to delay payments, putting financing pressure on upstream suppliers.
Analysts viewed this week's developments as a positive sign for both supply-chain companies and automakers. "Now the industry has a common standard," CCB International analyst Qu Ke said.
A brutal price war has gripped China's EV market for more than a year as carmakers seek to appeal to consumers amid weaker spending and an economic slowdown. BYD ratcheted up the competitive pressure last month when it slashed prices on several models, prompting similar moves by its rivals.
The China Association of Automobile Manufacturers has called out the unsustainable practice, saying in a statement late May that the industry should curb excessive use of promotions and halt severe price competition.
Write to Jiahui Huang at jiahui.huang@wsj.com
(END) Dow Jones Newswires
06-11-25 0320ET
