India’s automobile dealers have warned of possible supply and dispatch disruptions in the near term as the West Asia conflict drives up input costs, even as the industry closed FY26 on a strong note, Reuters reported.
The conflict has pushed up oil and gas prices, raising fuel and logistics costs across the auto supply chain, while also increasing prices of key metals such as aluminium, copper and steel used in vehicle manufacturing.
A survey cited by Reuters showed that more than half of dealers experienced some form of supply or dispatch disruption linked to the conflict, with 17.1% reporting significant delays of three weeks or more.
Rising fuel prices are also beginning to weigh on demand, with 36.5% of dealers saying higher fuel costs are moderately to significantly affecting customer purchase decisions, particularly in the commercial vehicle segment, the report said. Automakers are already responding to cost pressures. Maruti Suzuki said it is likely to raise prices as commodity costs increase due to the ongoing geopolitical tensions, the report added.
FY26 ends strong, but growth may moderate
Despite these headwinds, the sector ended FY26 on a high, supported by improved affordability and demand recovery in the second half. Passenger vehicle sales rose 21.48% year-on-year in March, while two-wheeler sales grew 28.68% and commercial vehicle sales increased 15.12%, Reuters reported.
Passenger vehicle growth is expected to slow in FY27. Brokerage firm Nomura estimates it at around 8%, while Crisil is more cautious with a 3–5% projection, citing geopolitical risks, a high base and fading pent-up demand. Industry experts say the strong recovery seen in the second half of FY26, driven by GST-led price cuts and festive demand, may not continue at the same pace.
Supply-side pressures emerge
Gas shortages linked to the West Asia crisis are affecting Tier-3 and Tier-4 suppliers, with industry estimates indicating that around 7,500 MSMEs in the Pimpri-Chinchwad belt are shut or at risk. Several units are operating below capacity due to elevated energy costs.
While large automakers have so far maintained stable production, any prolonged disruption at the supplier level could begin to affect output in the coming months.
FADA flags uncertainty ahead
The Federation of Automobile Dealers Associations (FADA) said the broader operating environment has turned uncertain due to the conflict.
FADA added that rising fuel prices and potential price hikes by automakers could further weigh on demand.