Recent reviews highlight that both BYD and SAIC have recently exerted pressure on their suppliers to reduce costs for the 2025 model year. The value disparity appears destined to persist for quite some time without significant resolution.
Prior reports highlighted anecdotal evidence suggesting suppliers were coerced into offering prices significantly lower than cost to secure large orders from manufacturers. New evidence from recent events further supports the notion that this phenomenon is indeed unfolding.
Information originating from BYD stems from an email dispatched by He Zhiqi, the Government Vice Chairman of BYD Group and Chief Working Officer for Passenger Automobiles. The company’s procurement department, in a recent email, suggested a reduction of 10% in the amount paid to suppliers, effective January 1st, 2025, with regards to BYD’s supplier agreements.
SAIC’s Maxus division dispatched a letter to its suppliers on November 25, extending an invitation for partner companies to participate in a comprehensive cost-reduction initiative aimed at trimming prices by 10%.
The Supplier Alliance and Innovation Centre (SAIC) letter specifies five key collaboration methods that Maxus anticipates from its suppliers to foster a productive partnership. Companies are required to develop innovative, proactive strategies for sourcing raw materials, such as exploring alternative suppliers or implementing lean production techniques to minimize material usage. Therefore, it prompts suppliers to propose innovative ideas for process enhancements that can boost productivity and minimize inefficiencies.
The third stage involves the application of value analysis and value engineering methodologies to assess and optimize value. Maxus empowers suppliers to leverage their unique strengths by partnering with SAIC in co-design initiatives, driving proactive optimization of component prices through systematic collaboration. To further streamline operations, Maxus aims to refine its logistics and distribution strategies, ultimately reducing packaging and logistical costs and optimizing load volumes for greater efficiency. Ultimately, the measures aim to foster long-term relationships, enabling more effective planning of future cost-saving initiatives.
BYD’s response to the matter came from Li Yunfei, General Manager of its Model and Public Relations Division: “Annual negotiations with suppliers are a common practice in the automotive industry.” We propose flexible value-based discount targets for suppliers, which are voluntary and open to negotiation.
SAIC Maxus remains mum, refusing to issue a formal response. The corporation predicts that quantity-based pricing will dominate the Chinese automotive industry in 2025. The disparity between supply and demand in the market is unlikely to be resolved swiftly, further fueling the value dispute.
BYD insists that the entire supply chain collaborate in order to continue driving down costs. Suppliers are required to submit their cost-reduction plans to BYD by no later than December 15.
Sources: Autohome, Quick Know-how
