Chinese automaker BYD Company works with over 8,000 suppliers, and less than 1% of them have received emails regarding cost-reduction requests, reported Chinese news outlet Yicai, citing BYD internal sources.
The cost-reduction initiative is being rolled out systematically by sector, and the recent cost-cutting requests were mainly directed at suppliers of electronic controls and sensors, totaling several dozen companies, however, it was not ruled out that these measures might be extended to other supplier categories in the future, the report said, citing another internal source.
Earlier this week, a leak email showed that BYD has requested some suppliers to cut prices from the start of next year. The company said in response on Wednesday that annual negotiations with suppliers are a common practice in the automotive industry.
“Based on large-scale procurement, we set price reduction targets for suppliers. This is not a mandatory requirement, and we are open to negotiation,” it said.
One BYD supplier has confirmed receiving an email from the company requesting a 10% price cut but said that they had yet to agree to the proposal and were still negotiating with BYD.
“If BYD offers a higher order volume, we may consider discussing cost reductions, however, with the current order volume, a 10% price cut would result in us operating at a loss,” the supplier said.
Several BYD suppliers also noted that BYD uses its proprietary financial information platform, DiLink, to settle payments with suppliers through DiLink vouchers, which typically have a redemption cycle of six months, and since these vouchers cannot be directly circulated among secondary suppliers, suppliers must wait until maturity to receive payment, effectively extending the payment cycle.