Tier-1 suppliers · Automotive and auto components
Every OEM price revision, indexation claim and warranty debit reconciled to its part
A tier-1 supplier's margin is set in negotiations with the vehicle maker. It is then settled months later through supplementary invoices, credit notes and debits. We reconcile each of those to the part number and period it belongs to. You then know what every part earned after the OEM finished adjusting it.
In one paragraph
Tier-1 suppliers have their price, payment and quality cost set by a few powerful customers. They supply passenger-vehicle, two-wheeler and commercial-vehicle makers, usually with ₹200–3,000 crore turnover. Plants or warehouses sit close to OEM assembly lines. The processes run on the customer's systems and timetable rather than the supplier's. The chief financial officer or finance head usually leads the work, often with the head of sales.
Chief financial officer or finance head, often with the head of sales
The economics
How the money moves in this trade
Tier-1 prices are negotiated part by part and then changed repeatedly. Changes include annual productivity price-downs and quarterly or half-yearly raw-material indexation for steel, aluminium, rubber or resin. Engineering-change revisions and settlements for customer-funded tooling follow. Many are agreed with retrospective effect. The supplier then issues supplementary invoices or credit notes covering months of past supply, each with its own GST consequence.
OEMs pay on their own cycle, often triggered by goods-receipt in their system rather than by your invoice. They deduct warranty recoveries, quality debits and line-stoppage charges at source. Supply runs to rolling schedules that change weekly, from consignment warehouses near the OEM plant. A supplier that does not reconcile at part-number level loses money in the gaps. Those gaps lie between what was agreed, what was billed and what was paid.
The problem
Where the numbers usually break down
Retrospective price changes are settled in bulk
Price-down and indexation settlements are booked as one credit or supplementary invoice, with no reconciliation to the part numbers and quantities they cover.
Indexation recovery lags the cost
Raw-material increases are paid to suppliers immediately but recovered from the OEM a quarter or more later, and the lag is never quantified.
Warranty debits are accepted unchallenged
OEM warranty recoveries arrive as deductions from payment, without being tested against failure analysis or the agreed sharing ratio.
Goods-receipt mismatches delay payment
Quantities in the OEM's receipt system differ from your dispatch records, and unmatched invoices age quietly in receivables.
Customer-funded tooling is not tracked to recovery
Tooling paid for by the OEM through a lump sum or the piece price is not reconciled to what has actually been recovered.
What we do
The work, and the result each part produces
Part-level price master and settlement reconciliation
A price history for every part number, with each price-down, indexation and engineering-change revision reconciled to the quantities and periods it covers.
Every retrospective settlement is checked before it is accepted.
Raw-material indexation tracker
Your actual input cost movement compared with the indexation the OEM formula delivers, with the claim calculated and the lag quantified.
Under-recovered metal and polymer cost is visible and raised.
Warranty and quality debit review
Each warranty recovery and quality debit matched to the part, the failure report and the agreed sharing basis.
Debits are contested with evidence where they are wrong.
OEM receipt and payment reconciliation
Dispatches, the OEM's goods-receipt records, invoices and payments reconciled by plant and part.
Unpaid invoices are traced to a cause within days.
Customer tooling register
Each OEM-funded tool recorded with its cost, ownership, recovery method and recovered amount to date.
Tooling recovery shortfalls are caught while they can still be claimed.
Part and programme profitability
Contribution by part number and vehicle programme, after price-downs, indexation lag, warranty and logistics.
Quoting for the next programme starts from what this one earned.
Where we start
The first steps of an engagement
Price letters, portal data and debits
We ask for OEM price-revision letters and indexation workings, supplementary invoices and credit notes, the OEM portal's goods-receipt and payment data, warranty debit notes and tooling agreements.
One settlement traced to parts
A recent price-down or indexation settlement is reconciled to the part numbers, quantities and periods it covers, and any difference is listed.
A part-level price master
A price history for each part number is set up, so every later revision is checked against quantities supplied before it is accepted.
A settlement and debit reconciliation
The first report shows settlements reconciled by OEM and quarter, indexation recovered against input cost, and debits accepted or open to contest.
How it is measured
The reports the work is judged on
Each is recorded as a baseline before the work starts, so later reports have an honest comparison.
- Price settlements reconciled, by OEM and quarter
- Indexation recovered against actual input cost movement
- Warranty and quality debits accepted, contested and reversed
- OEM receivables by cause of delay
- Customer tooling recovered against invested
- Contribution by part number and programme
Who it suits
Written for, and not the right fit for
- You need only the auditor's certificate on an incentive claim, or a statutory or tax-audit report — those are signed by an independently engaged CA.
- You want an ERP or supplier-portal integration built; we work inside the systems you already run.
- Tier-1 suppliers to passenger-vehicle, two-wheeler, tractor or commercial-vehicle makers.
- Multi-plant suppliers with consignment warehouses near OEM assembly lines.
- Finance teams preparing for an OEM commercial review or a new programme nomination.
Services
Services this work draws on
Costing and profitability
What each product, line and customer really contributes.
Explore service ↗Internal controls and risk
Controls sized to your business, documented and actually tested.
Explore service ↗MIS and financial planning
Reporting built around the questions you actually need answered.
Explore service ↗GST, TDS and tax compliance
GST, TDS and income-tax prepared from reconciled data, not a working file.
Explore service ↗Every other service, also available in this trade
Common questions
Questions owners in this trade ask
How should retrospective price changes be handled for GST?
Generally through supplementary invoices, which the GST law treats as debit notes, or credit notes that reference the original supplies. Credit notes must be declared within a time limit after the year end, and your output tax only falls once the OEM has reversed the matching input credit. We reconcile the settlement to part and period first, so the GST documents rest on the right quantities.
How do we challenge OEM warranty recoveries?
We give you the evidence — debit by part, failure, period and sharing basis — so your quality and commercial teams can negotiate from it. The negotiation itself stays with them.
How do we reconcile different OEM indexation formulas?
Each OEM's formula is applied to its own parts and compared with your actual purchase cost. It's the comparison that's usually missing, not the formula.
5th Quadrant prepares reconciliations, claims data and reporting. Auditor certificates required for production-linked incentive or other government claims, statutory audit and tax-audit reports are signed by an independently engaged licensed professional, and the claim filing itself remains the client's own responsibility. Full detail is on our Professional Scope page.
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