A tightening in the supply of liquefied petroleum gas (LPG), piped natural gas (PNG) and propane is beginning to ripple through the automobile sector, affecting both component makers and vehicle assembly lines, even as manufacturers warn that rising input costs linked to crude could eventually push up vehicle prices.
Automobile companies and their supplier ecosystem depend on these fuels for heat-intensive processes such as casting, forging and paint shop operations. Any disruption in supply risks slowing component output and, in turn, vehicle production across plants.
Domestic Prioritization
Industry executives said the constraints have emerged after the government directed refineries and oil marketing companies earlier this month to prioritise LPG supplies for domestic cooking needs. The directive effectively diverted a larger share of propane and butane streams toward household LPG production, tightening availability for industrial users.
The impact is now being felt across the auto value chain, particularly among component manufacturers.
In a letter to Petroleum Secretary Neeraj Mittal, the Society of Indian Automobile Manufacturers (Siam) urged the ministry of petroleum and natural gas to restore allocation of LPG, PNG and propane to vehicle manufacturers and their ancillary units. The industry body said assured access to these fuels is critical for maintaining uninterrupted manufacturing operations.
Siam said automobile production relies heavily on these gaseous fuels for processes that require stable and controllable heat. Any uncertainty in supply, it noted, could affect production planning and disrupt supply chains across the sector.
Concerns have also been raised by the Automotive Component Manufacturers Association of India (Acma), which has written to the ministry of heavy industries highlighting supply disruptions for component units, particularly foundries and forging facilities.
Acma said many MSME component manufacturers depend on LPG and PNG for daily operations and have limited ability to quickly switch to alternate fuels. “Any disruption or uncertainty in the availability of LPG or PNG could impact production schedules of critical automotive components,” the association said.
The industry body also pointed to variations in regulatory practices across states governing the supply of these gases, which has added to operational uncertainty for manufacturers.
Component makers have sought continued industrial supply of LPG and PNG or a transition window to shift to alternate fuels. Acma has proposed that smaller foundry and forging units be allowed at least a month of continued LPG supply to enable technical adjustments.
MSME Vulnerability
Executives said the issue could extend beyond immediate production disruptions. Several auto manufacturing processes such as paint shops rely on energy inputs whose costs are linked to crude oil. With global crude prices firming up, paint and coating costs are expected to rise, adding to manufacturing expenses.
If the pressure on input costs persists alongside fuel supply constraints, companies may eventually be forced to pass on some of the cost increases to vehicle prices, industry executives said.