In response to Chinese automakers demanding lower prices from suppliers, Tesla (TSLA, Financial) has announced a reduction in its payment cycle to about 90 days. This was highlighted by Tesla Vice President Tao Lin, who emphasized the mutual success between Tesla and its suppliers, many of whom are local partners for their Shanghai "Gigafactory." The change in payment terms is part of Tesla's strategy to use technological innovation to improve efficiency and reduce costs.
Tao Lin also stressed the importance of protecting supplier interests while maintaining investment in R&D and production to offer better prices and products to consumers. The extended payment cycle has become a common cost-reduction tactic among some automakers, which can significantly impact small to medium-sized suppliers.
Separately, BYD (002594-CN) reportedly asked suppliers for a 10% price cut starting January 2025. This move was clarified as a negotiation typical in the automotive industry and not a mandatory requirement.
