Two-Week Truce

Auto Production Under Watch; Price Hikes Loom As War Hits FY27 Forecasts

By Shubhangi Bhatia

What?

India's automobile sector is navigating its most significant external shock since the Covid-19 pandemic. The West Asia conflict has triggered a cascade of disruptions — gas shortages, petrochemical supply squeezes, rising input costs and freight burdens — that are beginning to bite across the value chain, from component makers to dealership forecourts.

Mass market car prices are set to rise, with Maruti Suzuki signalling an imminent revision and Tata Motors and Mahindra already announcing April hikes. Meanwhile, full-year FY27 wholesale volume growth forecasts have been trimmed to 3-6% from 8% in FY26.

Why?

The conflict has effectively choked gas supplies to industrial users, forcing OEMs to fall back on alternate fuels — energy sources the industry had moved away from for cost and emissions reasons.

"OEMs are falling back on captive coal and diesel plants for gas-dependent manufacturing operations," Puneet Gupta, Director – Automotive at S&P Global Mobility told The Core.

Tier 1 and Tier 2 component makers running gas-dependent processes — foundries, forging, casting and paint shops — are under the most immediate strain, with several units temporarily suspended.

The petrochemical squeeze has been severe: raw materials like styrene and carbon black have seen costs double since the conflict began. "The challenge on cost escalation and input costs exists in a big way. Raw materials like styrene and carbon black have seen a 100% increase in cost," Vinnie Mehta, Director General of ACMA told The Core, adding that certain component makers are already distributing induction cookers to workers to retain its labour force.

Polyethylene prices in Asia have surged 40-50% since the war began, with the squeeze feeding directly into vehicle manufacturing costs.

Why It Matters?

The industry entered FY27 off a record FY26 — 2.96 crore units, 13% YoY growth — powered by GST 2.0 and a strong festive season.

However, Federation of Automobile Dealers Association’s (FADA) latest survey shows 53.2% of dealers have already experienced supply or dispatch disruptions, with 17.1% reporting delays of three or more weeks.

With early hikes now inevitable and production lines under watch, where is the Indian auto industry headed?

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10,000

That is how many flights by Indian carriers to West Asia have been cancelled since the conflict began on February 28, an official from the Ministry of Civil Aviation said.

Fast Facts: Daily flights to the region from India have collapsed from 300-350 to just 80-90, with major hubs including Dubai, Doha and Abu Dhabi reportedly shut, leaving thousands of passengers stranded as global air travel remains severely disrupted.

Setup: Meanwhile, a Ukrainian intelligence assessment found that Russian satellites conducted at least 24 surveys of military and critical sites across 11 Middle Eastern countries in March — with Iranian missile strikes following within days, in what Reuters sources described as a clear pattern of covert Russian support to Tehran.

The scale of the current crisis is without precedence. Fatih Birol, Executive Director of the International Energy Agency, reportedly told French newspaper Le Figaro that the oil and gas crisis triggered by the blockade of the Strait of Hormuz is "more serious than the ones in 1973, 1979 and 2022 together.”

No Gas, No Frying

India’s demand for sugar and edible oil has weakened as commercial LPG shortages disrupt restaurant operations across the country. Supply constraints, linked to the West Asia conflict, have forced eateries and sweet shops to scale back cooking, hitting consumption of oil and sugar-heavy foods.

The Turning Point: Roadside eateries and restaurants are facing gas cylinder shortages, which is reducing their edible oil consumption, BV Mehta, executive director of the Solvent Extractors' Association of India, told Reuters, noting that imports fell nearly 9% in March from the previous month to 1.2 million tonnes.

Flashpoint: Many vendors have cut menus or shut temporarily, underscoring how an energy crunch is rippling through India’s food economy.

Air India’s Double Whammy

Air India is navigating a moment of simultaneous turbulence — a CEO exit and rising fares. Campbell Wilson has resigned after nearly four years at the helm, as the carrier continues to grapple with persistent losses and heightened regulatory scrutiny following a crash last year that killed 260 people.

Flashpoint: The leadership change comes as the airline joins peers, including IndiGo, in revising fuel surcharges, driven by a surge in global jet fuel prices amid the West Asia conflict. Under a new distance-based framework effective April 8, domestic passengers will pay between Rs 299 and Rs 899 depending on route distance.

Overview: On international routes, surcharges will vary by region — starting at $24 for SAARC destinations and rising to $280 for North America and Australia.

Fatigue Rules Bent

The Directorate General of Civil Aviation (DGCA) has temporarily relaxed pilot flight duty time limitations for ultra long-haul international flights, allowing airlines to extend crew duty periods by up to around 1 hour to 1 hour 45 minutes in certain cases. This effectively pushes maximum duty time from about 13 hours to nearly 14 hours 45 minutes for some operations.

Setup: The move comes as carriers face operational strain from longer flight paths due to airspace restrictions linked to the West Asia conflict, alongside the phased rollout of stricter fatigue rules. The Dec 2025 IndiGo crisis—marked by widespread delays and cancellations after tighter pilot duty norms kicked in—highlights how difficult these rules have been to implement operationally.

Implications: The relaxation is aimed at maintaining schedule stability during peak travel demand. However, pilot groups have raised concerns about increased fatigue and potential safety risks. As The Core previously reported, India’s aviation sector is already grappling with a deeper, systemic pilot fatigue issue, making such relaxations contentious.

India Office Market Hits Record

India’s office market set a new benchmark in Q1 2026, achieving its strongest January–March performance despite global macroeconomic uncertainty, according to a CBRE Point of View report. Total office absorption stood at 20.7 million sq. ft., marking a 5% year-on-year increase, with Bengaluru, Delhi-NCR, and Mumbai contributing 67% of leasing activity.

Fast Facts: New completions reached 8.3 million sq. ft., led by Bengaluru, Ahmedabad, and Chennai, which together accounted for 66% of supply. Leasing demand was driven by flexible space operators, technology firms, and BFSI players, alongside steady traction from research, consulting, and e-commerce companies. Domestic firms led with a 43% share, followed by U.S.-based firms at 38%, while EMEA occupiers saw increased activity. GCC leasing touched 9.1 million sq. ft., accounting for 44% of absorption.

Future: The outlook remains stable, supported by sustained occupier demand and expansion strategies. Continued interest from GCCs and the steady rise of flex spaces are expected to underpin growth in the coming quarters. Additionally, a strong supply pipeline and focus on quality assets should keep market momentum intact.

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Indian Markets are Adjusting to The Mixed Signals from the US on The War

On Episode 840 of The Core Report, financial journalist Govindraj Ethiraj talks to Sunil Shah, President at The All India Plastics Manufacturers Association, Jay Kothari, Fund Manager and Senior Vice President, Global Head International Business and Lead Investment Strategist at DSP Asset Managers as well as Dr. Ajit Ranade, Economist and Former Vice Chancellor of Gokhale Institute of Politics and Economics in Pune.

• How Indian markets are adjusting to the mixed signals from the US on the war

• Monsoons could be below average this year

• Analysing the RBI’s move to defend the rupee

• The Government has cut duties on petrochemicals and polymer imports. Will it help India’s plastics industry?