[SMM Analysis] Automakers' Payment Terms Shortened to 60 Days, Ushering in Major Changes in the Automotive Supply Chain

I. Reconstruction of the Survival Landscape for Battery Cell Manufacturers Amidst Payment Term Changes

For a long time, domestic automakers have imposed extremely long payment terms averaging 170-182 days, placing significant pressure on the cash flow of battery cell manufacturers. For instance, if a battery cell manufacturer has a payment term of 180 days, the funds tied up in accounts receivable each year can reach as high as tens of billions of yuan, equivalent to three times the company's annual R&D investment. Shortening the payment term to 60 days means that over 60% of the tied-up funds can be released annually, significantly improving the company's cash flow and granting battery cell manufacturers greater initiative in the global competition for resources.

In the current context of sharp fluctuations in the prices of key mineral resources such as lithium and cobalt, the rapid return of funds enables battery cell manufacturers to participate more flexibly in resource allocation. For example, some companies have begun to increase their procurement from the spot market for lithium ore and even attempt to secure overseas lithium ore resources through equity investments, thereby reducing the risk of raw material supply disruptions. Meanwhile, the alleviation of financial pressure also allows companies to more calmly address the need for equipment upgrades driven by technological advancements, accelerating the construction progress of new-type battery production lines for sodium-ion batteries, solid-state batteries, etc.

II. Dual Variations in Technological Competition and Cost Negotiation

While the shortening of payment terms has brought financial benefits to battery cell manufacturers, it has also introduced new challenges.Some automakers are using the shortened payment terms as leverage to demand simultaneous price reductions from battery cell manufacturers,further exacerbating the already fierce competition in the battery cell industry. According to SMM observations, in some cooperation negotiations, automakers have proposed price reductions of up to 15%, placing extremely high demands on the cost control capabilities of battery cell manufacturers.

In response to this pressure, leading battery cell manufacturers are accelerating their pursuit of efficiency through technological innovation. By optimizing battery material systems and improving production processes, some companies have achieved an 8%-10% reduction in unit production costs. Meanwhile, competition among technological routes has also intensified. The market share battle between ternary lithium batteries and LFP batteries has reached a fever pitch, while sodium-ion batteries are accelerating their industrialization process due to their cost advantages. In this technological competition, the financial advantages brought about by improved payment terms will become a key weapon for companies to seize the technological high ground.

III. The Butterfly Effect of Collaborative Evolution in the Supply Chain

The shortening of automakers' payment terms is driving the entire automotive supply chain towards deeper collaborative evolution. In the traditional model, the relationship between battery cell manufacturers and automakers was primarily a simple supply-demand one, lacking in-depth cooperation in areas such as technological R&D and market forecasting. However, with the improvement in payment terms, the foundation of trust between the two sides has been strengthened, and they are beginning to explore closer cooperation models.

Some automakers and battery cell manufacturers have established joint R&D centers to jointly tackle key technical challenges in battery driving range, safety, and other areas. In terms of capacity planning, both parties have also strengthened collaboration. By sharing market demand data, they have achieved more precise capacity layouts, effectively reducing the risk of inventory backlogs. This deep-level collaboration not only enhances the competitiveness of individual enterprises but also strengthens the resilience of the entire supply chain, enabling it to respond more calmly to market fluctuations.

IV. Opportunities and Challenges in the Global Industrial Landscape

Against the backdrop of the rapid development of the global NEV industry, the policy of shortening payment terms has provided new opportunities for Chinese battery cell manufacturers to participate in international competition. Assuming a leading battery cell manufacturer leverages the capital turnover advantage brought by a 60-day payment term, it can compress the delivery cycle of overseas orders from the original 90 days to 65 days, successfully securing an annual order from a European NEV manufacturer worth 1.2 billion euros. This rapid response capability is accelerating the globalization process of China's battery cell industry. Currently, several domestic enterprises have established production sites in Southeast Asia and Europe.

However, competition in the international market is equally fierce. The EU has set strict carbon footprint standards through the New Battery Regulation, requiring that the full life cycle carbon emissions of battery products must be lower than 60kg CO₂/kWh. This has put pressure on some Chinese battery cell manufacturers that fail to meet the standards to upgrade their technologies. The US Inflation Reduction Act (IRA) imposes restrictions on the sources of critical minerals in batteries, stipulating that at least 40% of the critical minerals in batteries must come from the US or countries with free trade agreements with the US, directly affecting Chinese battery cell manufacturers' exports to the US.

In the process of "going global," Chinese battery cell manufacturers not only face challenges such as technical standards and trade barriers but also need to cope with stricter payment terms from international automakers. For example, some European automakers require payment terms to be extended to 90-120 days and use letters of credit for settlement, increasing capital occupation costs. In response, some enterprises have begun to explore coping strategies: one enterprise has converted payment term losses into manageable financial costs by collaborating with overseas banks and utilizing accounts receivable pledge financing; another enterprise has established a localized supply chain overseas, reducing logistics costs and circumventing trade barriers by procuring raw materials locally and setting up assembly plants.

Shortening automakers' payment terms to 60 days is like throwing a stone into the automotive supply chain, with ripples spreading throughout the entire industry. For upstream battery cell manufacturers, this represents both a rare development opportunity and a severe challenge. In this transformation, only those enterprises that can flexibly respond to market changes, continuously invest in technological innovation, and deepen supply chain collaboration can stand out in the new industrial landscape and propel China's NEV industry toward a higher stage of development.