India’s auto sector faces war-driven cost and supply challenges

India’s auto sector is bracing for near-term disruption as the Iran war begins to ripple through costs and supply chains, according to a Society of Indian Automobile Manufacturers report. The industry body flags risks from rising crude prices, higher input costs, currency volatility, and shipping disruptions.

Cost pressures build: Elevated oil prices are expected to push up fuel and logistics costs further, while higher commodity prices and freight rates could squeeze profitability across manufacturers and suppliers. A “stable geopolitical environment will help build confidence [in] the industry, which can in turn drive further growth,” the report said.

Why it matters: In FY 2025-26, India shipped over 5.3 mn vehicles globally. The Middle East held its spot as India’s third-largest export region, accounting for approximately 18% of all passenger vehicle exports, trailing Africa at 28% and Latin America at 25%. While buyer interest remains strong, especially in entry-level segments, conversion to actual sales is slowing. Export volumes may also come under pressure as global trade routes face disruptions, Reuters reports, citing analysts.

Sector resilience holds: The concerns follow a strong FY 2026, with passenger vehicle sales rising 7.9% to 4.6 mn units and two-wheeler sales up 10.7%, supported by earlier tax cuts. The current situation underscores the need for diversified supply chains and energy sources, as prolonged geopolitical stress could test the sector’s growth momentum, analysts told the newswire.