BYD Plans to Change How It Pays Suppliers After Long Delays and Rising Pressure

Post by : Sameer Saifi

China’s electric car giant BYD is planning a big change in how it pays the companies that supply its parts. Several people who know about the situation said BYD wants to stop using its own in-house payment system, called “Dilian,” and instead use bank notes or commercial paper. This is a major shift because BYD has used the Dilian system since 2018, and it has played a big role in how the company grew so fast.

For many years, BYD used Dilian to give suppliers electronic IOUs instead of cash. But many suppliers complained that this system created problems for them. Some said they had to wait a long time to get paid, sometimes close to a year. Others said that if they wanted to turn the Dilian notes into cash early, they had to pay high fees or accept a lower amount. This made it very hard for small suppliers to manage their money.

Experts say one big reason for BYD’s shift may be the pressure from China’s new rules. China’s government wants automakers to pay their suppliers faster and use safer and more transparent payment methods. Many suppliers have struggled in the past year because the electric car market in China has become extremely competitive. Prices are dropping, profits are shrinking, and companies are cutting costs. This put even more pressure on suppliers, who already felt BYD’s payment system was hurting them.

The new regulations say that car companies must pay suppliers within 60 days. They also say suppliers should not be forced to accept non-cash payments like electronic IOUs unless they want to. Even though many carmakers agreed to follow these rules, suppliers say companies still find loopholes. For example, an automaker can delay payment simply by taking longer to confirm that they received the goods.

Sources say BYD’s Dilian system also had other issues. Dilian notes were not directly regulated by China’s central bank, unlike bank notes or commercial paper. This made some people worry that the notes carried a higher risk. Even companies that were not part of BYD’s supply chain sometimes received these Dilian vouchers as payment, showing how widespread the system had become.

BYD did not answer questions about why it is moving away from Dilian, but the company said its system follows the rules and that it has already shortened payment times this year. Still, the change comes at a difficult moment for BYD. Its profits have fallen, its sales have slowed, and it needs a lot of money for its big expansion overseas. Changing its payment system could make it harder for BYD to manage its cash flow, since Dilian helped the company hold on to more money for longer.

According to data from LSEG, BYD took an average of 127 days to pay its suppliers last year. This is much longer than the industry average in China, which was about 108 days. Many global car companies pay their suppliers in less than 90 days, and some even within 60 days. With the new rules and pressure from the government, BYD may not have much choice but to change its system.

Some financial experts have also raised concerns about how BYD reports its debts. One research group said BYD’s real debt might be much higher than what the company reported because of its supply chain financing practices. BYD did not respond to those claims.

For now, suppliers are waiting to see how quickly BYD will make the switch and whether the new payment system will be fairer. Many hope the move will bring faster payments and less financial stress. A change like this could also improve trust between BYD and its suppliers, which is important if the company wants to stay strong in the fast-changing global electric vehicle market.

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