The ongoing conflict in West Asia could create adverse implications for India’s automobile sector and pose short-term challenges, including an indirect impact on vehicle demand, Society of Indian Automobile Manufacturers President Shailesh Chandra said on Tuesday.
He said while the domestic automobile industry ended the 2025–26 financial year from a position of strength, emerging geopolitical tensions in West Asia need close monitoring as they may affect multiple aspects of the sector.
Chandra noted the evolving situation could have ripple effects on automotive production, input availability, commodity pricing, fuel costs, and freight rates. These combined pressures, he said, may create near-term challenges for the industry and could indirectly influence demand for vehicles.
Highlighting current operational concerns, he said supply disruptions have already led to shortages of key inputs such as propane and ethylene, which are essential for manufacturing processes including paint shops and heat treatment operations. He added that the situation has also resulted in rising costs and constraints across several petrochemical and other critical raw materials.
Chandra further pointed out that global logistics conditions have become increasingly volatile, with shipping costs rising due to route diversions and longer transit times. However, he clarified that there have been no production stoppages so far, although the situation remains ‘precarious’.
He explained that supply visibility, which earlier used to be available every few days, has now become less consistent, adding that the industry is currently under stress but is actively managing the situation. The sector, he said, remains in close coordination with the government to explore possible solutions.
While companies have so far been able to maintain operations, some are resorting to air freight to manage intermittent supply disruptions. However, he cautioned that the situation could worsen if geopolitical tensions persist or escalate.
Chandra also warned that sustained pressure on commodity prices could eventually lead to vehicle price increases, though the extent would depend on how much of the cost OEMs are able to absorb. He said clearer trends on pricing and input costs are expected to emerge in the next four to five weeks.
Also read: India Inc bets on mid-level talent
He added that rising fuel prices, if they occur due to prolonged conflict, could also affect consumer demand. While inquiries in the market remain strong, he observed that conversion into actual purchases is slowing in certain segments, particularly entry-level vehicles. However, he clarified that overall industry growth has not yet been impacted on a year-on-year basis.
On the supply side, he noted that many companies that previously relied on LPG have shifted to PNG and are exploring more efficient energy usage methods to manage operational costs.
Addressing concerns over labour availability in certain manufacturing units, particularly among component suppliers facing domestic LPG-related issues, he said the impact has been limited and restricted to a few pockets, without any significant disruption to operations.
Chandra also indicated that higher fuel prices could accelerate demand for electric vehicles, as consumers may increasingly shift toward more cost-efficient mobility options if conventional fuel costs rise sharply.
Follow us
