India's automakers are absorbing the steepest raw material cost surge in years even as vehicle sales climb, a combination that is quietly wearing away at profitability heading into the crucial festive selling season.
Two-wheeler sales rose 24.3% year-on-year, and passenger vehicle volumes climbed 26.3%, but that growth is being offset by a rally in the metals, rubber and battery inputs that make up the bulk of a vehicle's bill of materials, according to SIAM's Commodity Price Monthly Monitor.
Steel, Rubber and Copper Prices Hit 12-Month Highs
Hot-rolled steel, the backbone of vehicle chassis and body panels, ranged between ₹60,625 and ₹62,463 a tonne in August, up 20% from a year earlier, 1.1% higher than July, and at its highest level in 12 months. Automakers are minor players in that market, though; construction accounts for 48% of HR steel demand against just 9% for the automotive sector.
Natural rubber has climbed even faster, up 42% to ₹278.76 a kilogram and also at a 12-month high, while synthetic polybutadiene rubber used in tyre production is up 59% to ₹270.61 a kilogram. Carbon black, another crucial tyre-making input, has risen 47% to ₹155.42 a kilogram.
Lithium Carbonate Prices More Than Double, Squeezing EV Margins
Copper, used extensively in wiring harnesses and electric motor windings, has jumped 49% to $14,353 a tonne and is likewise at a 12-month peak. Meanwhile, lithium carbonate, the key battery chemical, has more than doubled, up 106% to $19.30 a kilogram.
The strain hitting legacy petrol platforms and electric vehicle supply chains at the same time echoes a broader trend. Worldwide OEM operating margins have fallen to about 4.8%, a multi-year low, with a full recovery not expected before 2027.
Tyre Makers Announce Price Hikes Ahead of Festive Season
Moreover, tyre makers in particular are grappling with simultaneous highs in natural and synthetic rubber, which leaves little room for Tier-1 suppliers to absorb further cost increases without relief from either raw material prices or their automaker customers. As a result, legacy tyre makers – CEAT and JK Tyres – have already announced price hikes ahead of the festive season, when Indian car and two-wheeler sales typically peak.
Government's ₹2,818.9 Crore PLI Push to Ease Import Dependence
To cushion the blow at home, the Ministry of Heavy Industries has allocated ₹2,818.9 crore, or roughly $325.6 million, during the Union Budget announcement to the Auto and Auto Component Production Linked Incentive scheme for the 2026-27 financial year, to support manufacturers in localising high-value components and cutting their exposure to imported inputs.
The coming quarters will test whether manufacturers, with earnings estimates for the second half of the 2026-27 financial year already facing downside risk, can protect margins without derailing the volume growth currently masking the damage.