Industry body Federation of Indian Micro Small and Medium Enterprises (FISME) has approached the Society of Indian Auto Manufacturers that represents automakers, asking it to urge its members to speed up price revisions as well as make faster payments and provide support to suppliers through financing platforms such as the Trade Receivables Discounting System.
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SMEs are struggling with sharp increases in labour and input costs, with wages rising by up to 35% in some regions and overall operating costs increasing more than 35% since March, the FISME said. The federation warned that small suppliers, already operating on thin margins and facing competition from countries like China and Vietnam, are finding it difficult to survive under existing annual pricing contracts.
The industry body has also called for regular dialogue between large automakers and SME suppliers, saying that the long-term strength of India’s automobile industry depends on the sustainability of thousands of small component manufacturers.
In a letter to SIAM president Shailesh Chandra, FISME secretary-general Anil Bhardwaj said MSME component manufacturers are facing intense competition from suppliers in countries such as China, Thailand, Vietnam, Malaysia and Taiwan. ET has seen a copy of the letter, dated May 14.
Unlike vehicle manufacturers operating in a relatively protected tariff environment, MSMEs have limited pricing power, extremely thin margins and weaker bargaining positions within supply chains.Also read: Passenger vehicle dispatches rise 25.4 per cent YoY at 4,37,312 units in April: SIAM
Geopolitical tensions in the Middle East have worsened the situation by driving up energy prices and disrupting logistics, Bhardwaj wrote in the letter. Rising household costs and shortages of cooking gas have also triggered labour unrest in several industrial clusters.
According to the FISME, prolonged protests and near riot-like situations forced many units to agree to wage hikes ranging from around 20% in some states to as high as 35% in Haryana.
Input costs, including consumable oils, tools, power and raw materials, have increased by more than 35% since March, the federation said.
“For MSMEs, this is not a routine cyclical challenge. It is an existential squeeze,” the letter said, adding that many MSMEs remain tied to annual rate contracts and delayed price revision cycles, even as their costs continue to rise immediately and sharply.
The resulting pressure is eroding working capital, increasing debt levels and threatening production continuity, the FISME warned. It stressed that the long-term resilience of India’s automobile industry depends not only on large manufacturers, but also on the sustainability of thousands of tier-II and -III component suppliers operating across industrial clusters.