New Delhi:
India’s automobile industry is expected to bear the brunt of lower supplies of components triggered by the ongoing Russia-Ukraine war.
Besides, the industry is expected to face subdued consumer sentiment as OMCs are expected to raise domestic fuel prices in consonance with high crude costs.
Notably, both countries produce key raw materials which are used in components that are key to producing automobiles such as semiconductors.
Currently, Russia is one of the largest producers of Palladium which is essential for memory and sensor chips along with several other rare-earth metals.
On the other hand, Ukraine is a leading producer and exporter of ‘Neon Gas’ that is used for several processes in the manufacturing of semiconductors like etching circuit designs into silicon wafers to create chips.
Notably, while Covid’s impact on semiconductor production eases, the pressure is expected to be build-up from the ongoing geopolitical crisis.
In the last year, the shortage has impacted the production of vehicles, consequently, elongating waiting periods and escalating costs.
On a technical basis, semiconductors play a critical part in the production of internal combustion engines. They are an integral part of all kinds of sensors and controls in any vehicle.
In the first 10 months of FY22, steel and aluminium prices have increased by around 15 per cent and 34 per cent respectively, and Brent crude by around 32 per cent.
This trend is likely to continue or even get accelerated.
“The ongoing tensions between Russia and Ukraine comes at a time when the domestic auto sector is at the cusp of recovery and amidst headwinds like elevated commodity prices and global semiconductor crisis,” said Rohan Kanwar Gupta, Vice President & Sector Head – Corporate Ratings, ICRA.
“A long drawn out war could impact chip supply and constrain production levels across segments, and thus would remain monitorable,” he further added.
The crisis has however spiked crude oil prices which have the potential to push up domestic fuel costs.
At present, India is a major crude oil importer in the world, and for it, the price range is a cause of concern as it may add Rs 20 to Rs 22 in petrol and diesel selling prices.
Lately, petrol and diesel prices have been largely stable over the past 3 months. IANS