Deposit Ratio: 30% is the Standard
Industry practice dictates a 30% deposit for complete electrical assembly units (30% upfront + 70% before shipment). Standard equipment typically requires a 30% prepayment; custom or project-specific equipment requires 30%–50%;
and large projects involve phased payments (e.g., 30% deposit + production installments). Industry insiders note that the deposit amount follows established norms: 30% for standard equipment (to lock in the order and procure components) and 30%–50% for high-spec custom equipment (due to high production investment).
These ratios are stipulated in the contract—often including a clause requiring the recipient to refund double the deposit amount in the event of a breach—and may be higher for new clients.
Deposit Reference (Based on Industry Practice)
- Standard complete equipment: 30% prepayment (deposit), with the remaining 70% balance paid before shipment;
- Custom/High-spec equipment: 30%–50% prepayment (due to high investment in custom production);
- Large projects (box-type substations/transformer stations): Phased payments (30% prepayment + 30% production payment + 30% shipment payment + 10% quality retention money);
- Standard components: 50%–100% prepayment for small orders (low risk due to small amounts);
- New clients: Prepayment ratio may be higher (e.g., 50%) to mitigate the risk of order cancellation.
Key Points Regarding Deposits
First, specify the ratio in the contract.
Clearly stating the deposit ratio and balance payment milestones helps prevent disputes.
Second, define breach terms. Stipulating deposit penalties (e.g., the recipient must refund double the amount if they default) protects both parties.
Third, distinguish between a “deposit” and a general “prepayment.”
Distinguish between a “deposit” (serving as a performance guarantee) and a “prepayment” (partial payment for goods) and specify this clearly in the contract.
Also, implement a new client assessment process: require higher prepayments from new clients and lower ones from established clients (based on accumulated trust).
Pitfalls to Avoid
First, “excessively high deposits.”
Paying the full amount upfront before customization creates a risk of the manufacturer absconding;
control the ratio. Second, “ambiguous deposit nature.”
Lack of clarity regarding whether the payment is a deposit or a prepayment leads to disputes over breach of contract;
define this clearly in the agreement.
Third, “absence of penalty clauses.” Deposits without associated breach penalties lack binding force;
stipulate penalties explicitly.
Trends and Reminders
Deposit payments are shifting toward “digitalization”: electronic contracts and online payments (with escrow-like protections) enhance security, while supply chain finance alleviates capital pressure.
For both parties, the recommendation is to “contractualize ratios, include breach penalties, and clearly define the payment’s nature.”
Clear deposit ratios ensure stable cooperation.
