Auto production in 'precarious' phase as suppliers feel 'stressed': Siam

Automobile production in India is in a “precarious” phase because a  reduced supply of liquefied petroleum gas (LPG) owing to the conflict in West Asia is affecting the manufacture of components, said Shailesh Chandra, president of the Society of Indian Automobile Manufacturers (Siam), on Tuesday.

 

Chandra said that while headline sales and production numbers had remained strong till now, underlying supply chains, particularly among vendors dependent on LPG, were facing the strain and were “stressed”.

 

“Production-wise I have not seen much impact ... but ‘precarious’ is the word I would use,” he said, adding that suppliers were often providing visibility for just a few days at a time. 

 

“Clarity from suppliers, especially where there was dependence on LPG, in March came every third day about supplies for the next three days. So it has been a bit stressed,” he added.

 

He noted some companies had managed disruption by resorting to costlier logistics such as air freight, even as input costs were rising. At present, there is limited visibility beyond a week.

 

“I can say one week ... we should not be disrupted to that extent,” he said.

 

As the inflation rate continues to rise, workers, including those at automobile and auto component makers, in Noida and Gurugram have protested low wages over the past few days. 

 

In response, the Uttar Pradesh and Haryana governments have increased minimum wages.

 

When asked if the protests had impacted production, Chandra replied: “Not in a big way... but definitely in some pockets.”

 

On the impact of minimum wage increases in Haryana and Uttar Pradesh, he said this could increase costs for an automaker, though it might remain a smaller factor compared to rising commodity (raw material) prices.

 

Despite these near-term concerns, the industry closed FY26 on a strong note, with all segments recording their highest ever annual sales in seven years.

 

According to the Siam data released on Tuesday, sales of passenger vehicles stood at 4.643 million units in FY26, up 7.9 per cent year-on-year (Y-o-Y).

 

Sales of commercial vehicles were 1.08 million units, growing 12.6 per cent, while three-wheelers saw sales of 836,000 units, up 12.8 per cent.

 

Two-wheeler sales reached 21.7 million units, marking a 10.7 per cent increase.

 

March also saw robust momentum, with sales of passenger vehicles at 442,460 units, up 16 per cent Y-o-Y, and two-wheeler sales at 1.976 million units, up 19.3 per cent. He attributed the growth to positive sentiment from reforms in goods and services tax and multiple repo rate cuts.

 

Chandra also flagged early signs of changing consumer behaviour amid uncertainty around fuel prices.

 

“While inquiries for cars are strong, conversion is delayed ... especially at the entry (entry-level cars) side,” he said, adding that this trend had not yet translated into a year-on-year decline in growth.

 

The conflict is also influencing demand patterns, particularly for electric vehicles (EVs). EV sales saw a big spike in March, he said, and a portion of this jump could be attributed to concerns around fuel availability. 

 

“We saw 20 to 30 per cent (of the demand) coming because of the West Asia crisis, at least in our case,” he said, referring to the data from Tata Motors’ passenger vehicle business, where he serves as managing director and chief executive officer.

 

He added that apprehensions around fuel supply were more intense in March, even though retail fuel prices in India had not yet seen a commensurate increase despite a surge in prices of global crude oil in the past one month.

 

“If the retail fuel prices in India also increase, I think there will be uptick in EV demand,” he said.

 

On the outlook, Chandra said growth in the first half of FY27 was expected to remain strong if the conflict did not prolong significantly or lead to sharp increases in fuel and commodity prices.