With the West Asia crisis impacting exports by small and medium auto component manufacturers, the industry is seeking government intervention through measures such as interest subvention schemes, better insurance coverage and steps to lower raw material costs.
While the government has asked industry bodies such as the Automotive Component Manufacturers Association (ACMA) to submit recommendations to address the challenges, the final measures to be implemented are yet to be decided.
“For component manufacturers, the increase in raw material and fuel prices is the major challenge. We have recommended measures such as interest subvention and some kind of one-time subsidy to the government,” said Nirmal Kumar Minda, executive chairman of Uno Minda and president of ASSOCHAM.
Stating that smaller players are the responsibility of larger companies, Minda said bigger firms would support MSMEs through short-term financing.
Federation of Indian Micro and Small & Medium Enterprises (FISME), on behalf of MSME auto component manufacturers, has written to the Society of Indian Automobile Manufacturers (SIAM) and major OEMs, requesting them to share rising input costs with MSME suppliers, speed up price revisions and payments through the Trade Receivables Discounting System (TReDS), and create a structured dialogue mechanism to address supply-chain stress before it becomes disruptive.
FISME also plans to approach the Commerce Ministry and the MSME Ministry seeking government intervention to help MSME auto exporters navigate the challenges. SIAM told TNIE that it is still analysing the situation and will take a call accordingly.
Several MSME exporters have also flagged that not only are rising costs becoming a challenge, but the inability to pass on higher input costs to customers is hurting margins. Some exporters said that in most cases, auto companies are unwilling to pay inflation-adjusted prices as orders are typically placed for several months at a stretch.
With inflationary pressures mounting, MSME exporters fear a sharp erosion in profitability.
“The higher input cost doesn’t get passed on fully and the margins get affected. We seek government help to keep the material price under control,” said an owner of a auto component manufacturer.
ACMA has also urged the government to introduce additional insurance-related measures to support MSMEs.
