West Asia tensions begin disrupting India's auto supply chain, margins

Bajaj Auto, Hero MotoCorp and Ather Energy flag rising commodity prices, freight costs and supply-chain disruptions as geopolitical tensions weigh on demand and margins

With raw material inflation resurfacing amid escalating geopolitical tensions in West Asia, two-wheeler (2W) makers have begun raising prices as higher commodity, logistics and supply-chain costs start feeding into margins and demand outlook.

 

Escalating geopolitical tensions in West Asia are beginning to disrupt India’s automotive supply chain, with automakers flagging rising commodity prices, logistics bottlenecks, material shortages, and pressure on consumer demand during recent quarterly earnings calls.

 

Companies across the 2W market indicated that the impact is now extending beyond crude oil prices, affecting metals, electronic components, battery materials, and export logistics.

 

Bajaj Auto said the conflict had created a “significant change” in the operating environment, particularly for exports and supply-chain operations. The company indicated that inflationary pressures and disruptions in overseas logistics had started affecting vehicle dispatches and market demand, especially in price-sensitive segments.

  During the company’s earnings call, Rakesh Sharma, executive director of Bajaj Auto, said: “The demand environment softened in April due to general inflation, increased prices of our vehicles, liquefied petroleum gas (LPG) shortages, manpower migration, and the LPG shortage-like effect on consumer sentiment.” He added that “supply-chain difficulties in terms of the LPG shortage, manpower availability, and outbound logistics to overseas markets have impaired availability to service demand by about 10 to 15 per cent”.

 

Bajaj Auto also indicated that the sharp recovery seen in the domestic motorcycle market since October had started moderating, with industry growth slowing from nearly 20 per cent to around 9 per cent amid inflationary pressures and cautious consumer sentiment. The company, however, said premium motorcycles continued to see relatively stronger demand compared to entry-level commuter segments.

 

Apart from softer demand conditions, Bajaj Auto also warned that rising commodity prices could create fresh margin pressure in the coming quarters. Dinesh Thapar, chief financial officer of Bajaj Auto, said the company was seeing “distinct signs of very steep inflation carrying into the next quarter”, adding that “the commodity environment has moved to being sharply inflationary, almost hyper”. He also warned about “the prospect of material availability on the aluminium alloys and polymer front also being very tight”.

 

The company said commodity inflation could have an impact equivalent to nearly 3.5 to 4 per cent of revenue in the current quarter, although only around 40 per cent of the inflation impact had been offset through price hikes taken from April. Bajaj Auto said it was adopting a month-by-month approach to pricing and cost management amid rapidly changing commodity conditions and supply-led inflation shocks.

 

The recent escalation in tensions across West Asia, including the ongoing conflict in Gaza and rising military activity involving Iran and Israel, is starting to create fresh worries for global supply chains and commodity markets. Disruptions around the Red Sea, one of the world’s busiest trade routes, have led to higher freight and insurance costs, while prices of crude oil, metals, and other raw materials have also turned volatile.

 

For India’s automotive industry, which depends heavily on imported components, electronics, and global shipping networks, the impact is beginning to show up in the form of rising input costs, tighter material supplies, and growing uncertainty around exports and production planning.

 

Hero MotoCorp similarly pointed to rising macroeconomic uncertainty linked to developments in West Asia. The company said higher commodity and energy prices were beginning to affect input costs across the automotive sector.

 

During the earnings call, Hero MotoCorp Chief Executive Officer (CEO) Harshavardhan Chitale said: “As 2026-27 (FY27) begins, the broader economy is navigating certain short-term uncertainties due to developments in West Asia that have impacted the entire industry in terms of commodity costs, be it the cost of metals, the cost of gas or, in the recent past, increases in certain labour costs.”

 

Unlike Bajaj Auto, however, Hero indicated that its manufacturing operations and supplier ecosystem had so far remained largely insulated from direct disruptions. The company said it had navigated its supply chain with no disruption at its plants as well as its suppliers, reflecting the resilience and strength of its operations.

 

Hero also said it had implemented price hikes of around 2 per cent across products from April, with increases ranging from ₹700 to ₹3,500 depending on the model. The company indicated that while commodity cost increases were largely passed on through pricing, margins remained under pressure due to higher raw material costs across aluminium, steel, rubber, and plastics, as well as rising costs linked to its electric vehicle (EV) business.

 

Ather Energy highlighted that the geopolitical uncertainty was also exposing vulnerabilities in the EV supply chain, particularly around globally sourced critical materials and electronics. Ather Energy CEO Tarun Mehta said, “2025-26 was not without challenges. Supply-chain challenges, in particular, have been building up through the course of the year.”

 

The company said rising costs of rare-earth materials, batteries, and electronics were emerging as key challenges for the EV industry amid global supply-chain volatility. He added: “What hit us were three big things — rare-earth magnet prices, the spike in memory costs across the world, and the spike in lithium-ion battery prices because of commodity inflation.”

 

Ather said it had already implemented cumulative price hikes of close to ₹4,000 this calendar year and indicated that additional price increases could be considered if cost pressures persist. The company also said its upcoming EL platform is expected to become the biggest source of cost reduction and margin improvement by the end of FY27 as it looks to offset rising battery and component costs.

 

Ather also indicated that elevated raw material prices and supply tightness were likely to persist in the near term. “We do expect the impact to be there in the short term. We expect the hit not just on the supply of materials but also on the cost of all raw materials to remain elevated for a while,” Mehta added.

 

Automakers confront a fresh inflationary bend

 

·         Freight, raw material costs climb as supply chains come under strain

 

·         Bajaj Auto says supply snags hit demand servicing by 10-15%

 

·         Motorcycle industry growth slows from nearly 20% to 9%

 

·         Bajaj Auto flags 3.5-4% Q1 revenue hit from commodity inflation

 

·         Hero MotoCorp raises prices by about 2% amid rising input costs

 

·         Steel, aluminium, rubber, and plastic costs continue to rise

 

·         Ather flags spike in battery, magnet, and electronics costs

 

·         Ather hikes prices by nearly ₹4,000; more hikes possible