Facing tremendous pressure from the rising input costs and pressure from automakers to cut costs, component suppliers are pushing the automakers hard to agree to add one clause to the deals between the two parties that will empower the component makers to enjoy the benefits of price flexibility.

Keeping in mind that the profit margins are already running under an environment of strain, the OEMs are of a view that owing to the volatile nature of raw material prices, it has become literally impossible to absorb all the cost pressure and it needs to be passed on.

The OEMs are looking for a clause in the deal where, if the prices of the key commodities like steel, zinc, copper or rubber rise beyond 10-12%, they should be able to renegotiate the contracts.

It may be noted here that once the automakers sign a contract with a vendor, it is expected to stay intact till the duration expires.

While Maruti Suzuki signs agreements with vendors for 12 months, which are signed between April and December every year, Hyundai India feels comfortable to stay in a period of close to 6-12 months.