Steel, Aluminium, Copper Prices Spike, Putting Auto Industry Margins at Risk

A recent report from the Society of Indian Automobile Manufacturers (SIAM) paints a sobering picture of an industry caught between a geopolitical hammer and a commodity anvil. The escalating conflict in West Asia, pitting Iran against a US-Israel axis, has done more than just dominate news cycles; it has sent the cost of making a vehicle North of graph.

While overall vehicle sales have been steady, at least so far, uncertainties stemming from supply challenges have begun to hurt auto companies' margins.

For instance, SML Mahindra revealed in their recent post-results conference call that their Q4FY26 margin was hit by 130bp due to input inflation. While 2–3% price hikes were taken in Q1FY27, company management expects cost pressures to likely persist. With earnings season just beginning, margin pressure is set to dominate conference calls with company leadership. 

The Barrel on high

The most visceral symptom of this fever is, predictably, energy. In March 2026, the European Brent spot price for crude oil averaged $103.13 per barrel. In March 2026, it was 40% higher than the last  year, 44% higher than the previous month and 40% higher than the peak witnessed in the past 12 months.  This surge, reflects a market terrified of supply disruptions in the Strait of Hormuz. For an industry whose logistical arteries depend on diesel, which saw strong precautionary buying this month, the cost of simply moving parts from port to plant has become a major headache.

Forging Through the Fog:

The science of vehicle manufacturing begins with steel, and here the numbers are equally unforgiving. Hot-rolled (HR) steel, the industry’s backbone, saw prices climb 11% year-on-year, reaching as high as Rs 58,625 per tonne. Its more refined sibling, cold-rolled (CR) steel, followed suit with a  16% higher than last year, 6% higher than the previous month, and the 6% higher than the peak witnessed in last 12 months.

The story in non-ferrous metals is one of scarcity and soaring premiums. Aluminium, the darling of light weighting, rose 27% to $3,370 per tonne. Copper, vital for the miles of wiring in modern vehicles, surged 28% to $12,499 per tonne. These are not mere fluctuations; they are structural shifts that threaten to erode the modest  production growth seen in the auto industry  this year.

The Heady Mix of Rare Earths and Rubbers:

If the basic metals are causing a headache, the "noble" metals are inducing a migraine. The cost of Platinum has skyrocketed by 124% since last March, while Rhodium—a critical component in catalytic converters , leaped by 121%. This makes the "green" transition an expensive endeavor, especially as Lithium Carbonate prices have more than doubled (up 109%) over the same period

Even the humble tyre has not been spared. While synthetic rubber prices fell slightly, natural rubber (RSS 4) climbed 10% to Rs 217.35 per kg. To add insult to injury, the Indian Rupee has been battered by the dollar's safe-haven status, depreciating to Rs 92.12 from Rs 86.63 a year ago. In the world of automotive manufacturing, where many high-tech components are priced in greenbacks, this currency slide acts as a secondary tax on every import.

Way forward:

While vehicle production remains robust, the mounting pressure from input costs is unsustainable. As uncertainties in West Asia continue to choke supply lines and the Baltic Dry Index—a measure of shipping costs—sits 50% higher than last year, India's era of affordable mobility faces its sternest test. 

With the war continuing, even as diplomacy takes several twists and turns, automakers and their ecosystem players are keeping their fingers crossed. The continuation of the conflict has the serious potential to derail the Indian auto industry's growth story.