Auto Stocks: Hit by gas crisis! Auto stocks including Maruti, M&M slow down; Big Drop After Iran War – What Next? – market

The increasing tension in the Middle East and the resulting closure of the Strait of Hormuz impacts Indian auto companies in many ways. First, rising oil and gas prices impact the production of key raw materials. For example, rising oil prices may impact paint prices, and gas shortages may impact overall industrial production. Apart from this, rising oil prices can create a recession in the industry. If oil prices increase, customers may reduce purchasing vehicles.

How are auto companies affected?

According to analysts, rising energy prices and gas shortages could impact auto companies on many levels. Its effect can be seen in different ways-

According to Motilal Oswal Financial Services, the auto sector is already facing many challenges. These include rising raw material costs, supply-chain problems and semiconductor shortages.

Why did the gas crisis become a big concern?

According to the report of global brokerage Nomura, India’s LNG supply may be affected due to the ongoing conflict in the Middle East. Nomura says that India has a contract for LNG import with Qatar Energy. But if the supply from Qatar and UAE is affected, then about 48% of the country’s LNG imports may be at risk. The industrial sector uses about 60% of this imported LNG, so its shortage can directly impact manufacturing.

Overall, OEM companies that are operating at excess capacity and have low stock of vehicles may be at risk of some losses in production. Nomura said that all companies included in the coverage (OEM and suppliers) appear to be at risk, because if any one supplier (be it Tier-2 or Tier-3) faces problems in supplying LNG, the production line will stop.

Actually, gas plays an important role in auto production. Gas is used in many important processes in auto manufacturing, such as-

Experts say that it is not easy to replace gas with electricity in a short time because it requires changes in machinery.

Auto Stocks: Which companies are at greater risk of impact?

According to the brokerage report, the companies that may be most affected by the reduction in gas supply are-

Will there be an immediate impact?

Although Federation of Automobile Dealers Association official Sai Giridhar says that at present the direct impact of the gas crisis is not visible on the production of auto companies, but if this situation continues for a long time, then the impact of disruption in the supply chain can be seen on the auto industry.

Overall, the auto sector is currently under pressure due to the energy crisis and Middle East tension. Investors are now keeping an eye on the potential impact on production and supply chains in the coming weeks.

Disclaimer: This article is for informational purposes only and should not be construed as investment advice in any way. ET NOW Swadesh recommends its readers and viewers to consult their financial advisors before taking any money-related decisions.