West Asia Crisis Hits Auto Supply Chains, But EV Interest Rises: SIAM

Addressing mediapersons here on Tuesday, Chandra painted a nuanced picture of an industry navigating a complex external environment while remaining cautiously optimistic about growth.

"It has definitely created some stress on the supply side," Chandra said, pointing to disruptions in the supply of LPG -- a key input used in auto manufacturing processes such as painting and heat treatment. He said manufacturers were actively working to reduce LPG consumption and shift to alternate processes, while also accelerating the switchover to piped natural gas (PNG) on both the supplier and OEM side.

Freight rates, he noted, have climbed sharply due to uncertainties around shipments, with vessels being forced to take longer routes -- affecting both the import of components and the export of finished vehicles from India.

"If this crisis prolongs, it will definitely be a significant headwind for growth," Chandra warned, while adding that the strong demand momentum seen in the second half of the last financial year continued to provide a degree of optimism.

On the raw materials front, he flagged rising costs of petroleum-based components as well as pressure on aluminium prices, given India's dependence on Middle Eastern countries for high-grade aluminium.

"We can only hope that this war ends as fast as possible," he said.

Asked whether the West Asia conflict could trigger an EV transition similar to how the Covid pandemic accelerated digital infrastructure growth, Chandra said the comparison had merit -- at least in terms of shifting consumer mindsets.

"This has triggered a significant rise in consideration for electric vehicles. People who were not thinking of buying electric vehicles are now definitely curious to know more, given fears around fuel availability, apart from the possibility of rising fuel prices," he said.

He added that manufacturers were also learning to manage resources more efficiently as a direct response to the LPG supply crunch, and that the crisis would likely have a "favourable impact" on electric vehicles going forward.

On whether the West Asia situation had caused any labour shortages at auto plants, Chandra said there were some early signs, but nothing significant yet.

"Some suppliers have reported that workers have gone back to their homes -- but that could also be due to summer vacations or the marriage season," he said, adding that some unrest had been reported in pockets, but he preferred not to comment without knowing the full reason.

Welcoming the Delhi government's draft EV policy, Chandra said any policy measure aimed at faster EV penetration was a positive development. However, he underlined SIAM's broader position that policy should focus on removing barriers -- particularly around pricing and charging infrastructure -- rather than resorting to mandates.

"Our strong view is that there should be greater focus on enablers, and one should avoid going through the route of mandates," he said, adding that the draft policy was yet to be deliberated in detail within SIAM.

- ANI