Auto Component Makers Absorbed Cost Surge from West Asia Crisis

India's auto component industry flagged raw material price volatility and rising insurance and freight costs as key headwinds from the West Asia crisis, even as the sector's turnover grew 12.7 percent in FY26.

Presenting the industry's annual performance report, Vinnie Mehta, Director General of the Automotive Component Manufacturers Association of India (ACMA), listed the West Asia crisis alongside the Russia-Ukraine war, US tariffs and Chinese trade restrictions as the industry's key geopolitical headwinds. 

Mehta said price pressure had built up in recent months as the initial supply shock eased. "Even in the last few months, there has been a huge increase in raw material prices. But very few vehicle manufacturers have passed it on to customers. It is really a strategy of the vehicle manufacturer, how much they can absorb," he said.

Component suppliers are absorbing much of that cost themselves. Vikram Pati Singhania, president of ACMA, said the industry had weathered a comparable shock during COVID-19 and had done so again through the West Asia crisis. "The initial shock was to the availability of gas and other raw materials. The industry managed. Vehicle production was not really impacted because of the supply chain. But clearly, there is pressure on the working capital cycle," he said. ACMA was working with the government to explore temporary relief on liquidity for small and medium enterprises, some of which were also being supported directly by larger vehicle manufacturers, he added.

It is worth noting that the petrochemical feedstocks such as ethylene and propylene are priced against crude benchmarks. They underpin dashboards, bumpers, wiring harnesses and seals. Synthetic rubber used in tyres, seals and hoses is also an oil derivative. Industry experts, at the time, suggested tyre input prices need to rise by 50 percent or more to cover higher energy, raw material and logistics costs.

Moreover, India's own exposure compounded the squeeze. Nearly half of India's crude oil imports and about 90 percent of its LPG imports route through the Strait of Hormuz. The government prioritised household cooking gas in the weeks that followed, rationing supplies to industrial users as spot LNG prices briefly rose. "The gas supply has become normalised. We have not seen any let-up in the insurance and trade costs. Hopefully, these will also come down as confidence builds," Mehta said.

"With the West Asia crisis easing and more ships passing through the Strait of Hormuz, this is starting to get resolved," Singhania said.