Indian auto industry may face production risks as West Asia crisis impacts supply chain

Along with this, the supply of materials such as chemicals, synthetic rubber, aluminium scrap and petrochemical-based inputs like polypropylene has been delayed due to supply chain disruptions from West Asia.

“>

New Delhi:

Escalating geopolitical tensions in West Asia have raised alarm bells in India’s automotive industry, with auto component makers warning that disruptions in the supply of industrial gases and key imported raw materials could impact production if the conflict involving Iran and US-Israel extends for a longer period.“There are concerns related to gas availability, particularly LPG and PNG, which are widely used in manufacturing processes,” Vinnie Mehta, Director General of the Automotive Component Manufacturers Association of India (ACMA), told ETAuto.Auto component manufacturers involved in coatings and surface treatments rely heavily on such gases and require large volumes for production processes, making value chain disruption a major concern.India relies heavily on West Asia for its LPG needs– nearly 60 per cent of which nearly 90 per cent come through the Strait of Hormuz, according to the Ministry of Petroleum & Natural Gas.

Along with this, the supply of materials such as chemicals, synthetic rubber, aluminium scrap and petrochemical-based inputs like polypropylene has been delayed due to supply chain disruptions from West Asia. This could slow down production for both auto component manufacturers and original equipment manufacturers (OEMs), impacting the industry on both import and export fronts.

Sensing the alarming situation, auto industry bodies, the Society of Indian Automobile Manufacturers (SIAM) and the Automotive Component Manufacturers Association (ACMA), wrote to the Ministry of Petroleum and Natural Gas on March 9, seeking an adequate supply of industrial gases.

“At least one OEM has spoken to us directly about the issue. Our concerns are largely similar because we are part of the same value chain,” Mehta said.

According to people aware of the matter, the government has set up a three-member committee after the industry sought restoration of adequate supplies of LPG, propane and PNG for manufacturing units.“It is requested that the ministry may restore the allocation of LPG / PNG / Propane to the greatest extent possible and provide visibility on the availability of LPG / PNG / Propane supplies for industrial consumers in the automobile sector through a dedicated interface,” SIAM said in a letter to the government seen by ETAuto.“Initially companies may manage using existing inventory of these gases, but once those inventories are exhausted, production lines could face challenges,” Mehta added.

India’s automotive industry, which contributes about 2.3 per cent to the country’s GDP and employs more than 1.5 million people directly, could see broader impacts if the disruptions persist.

“In many cases, workers rely on these facilities for their daily meals. If operations slow down or factories reduce activity, it also affects employees and their welfare, which becomes an additional concern for companies,” Mehta said.

Supply routes strained

Industry stakeholders have also flagged rising freight and logistics costs, longer transit times and shipment delays, which could impact both production and exports.

On the financial front, the industry has raised concerns related to industrial energy support credit and liquidity support to address raw material supply constraints and maintain export competitiveness.

The Gulf region is a significant market for India’s automotive sector, with the region accounting for about 25 per cent of India’s $8.8 billion vehicle exports in 2025, primarily to Saudi Arabia, UAE, and other Gulf nations.

According to reports, several Indian OEMs have delayed shipments to the Middle East and North Africa (MENA) as blockade of key maritime routes, including the Strait of Hormuz, have pushed up freight costs.