AgenciesRussia's invasion of Ukraine may turn out to be a double blow for Indian personal vehicle buyers. Prices may go up on rising input cost on the one hand, while the waiting period for vehicles will likely get longer for consumers on the other with expectations of further disruptions in semiconductor supplies.
Vehicle makers ET spoke to said they had not seen any impact yet and were closely watching the situation.
Input cost, which was showing signs of easing, may now see a sudden spike on the back of crude oil crossing $100 a barrel for the first time in seven years and aluminium, a key material in vehicle manufacturing, hitting record high prices.
The prices of precious metals such as rhodium, platinum and palladium, which are used in catalytic converters in automobiles, have reached 30-36-week highs. Russia and Eastern Europe are major suppliers of some of these materials.
The steepest movement has been in rhodium, where the price is up 30% in the current quarter compared with the average of the previous quarter. Aluminium, which accounts for nearly 10-15% of the total raw material cost, has become 20% costlier this quarter and is trading at a record high level around ₹250 per kg.
About 78-84% of the revenue of automakers goes towards raw material cost. Amid the higher raw material cost, the gross margin - an indication of how raw material impacts profitability - has been 8-10% lower than the long-term average of 27-32%.
A possible acceleration in inflation may also lead to hardening of interest rates, raising the vehicle acquisition cost for buyers.
Reuters, citing research firm Techcet, reported that Ukraine supplied more than 90% of the US' semiconductor-grade neon, a gas integral to the lasers used in the chip-making process, while Russia accounted for 35% of its supply of palladium, a rare metal that can be used to create semiconductors.
Vehicle makers ET spoke to said they had not seen any impact yet and were closely watching the situation.
Input cost, which was showing signs of easing, may now see a sudden spike on the back of crude oil crossing $100 a barrel for the first time in seven years and aluminium, a key material in vehicle manufacturing, hitting record high prices.
The prices of precious metals such as rhodium, platinum and palladium, which are used in catalytic converters in automobiles, have reached 30-36-week highs. Russia and Eastern Europe are major suppliers of some of these materials.
The steepest movement has been in rhodium, where the price is up 30% in the current quarter compared with the average of the previous quarter. Aluminium, which accounts for nearly 10-15% of the total raw material cost, has become 20% costlier this quarter and is trading at a record high level around ₹250 per kg.
About 78-84% of the revenue of automakers goes towards raw material cost. Amid the higher raw material cost, the gross margin - an indication of how raw material impacts profitability - has been 8-10% lower than the long-term average of 27-32%.
A possible acceleration in inflation may also lead to hardening of interest rates, raising the vehicle acquisition cost for buyers.
Reuters, citing research firm Techcet, reported that Ukraine supplied more than 90% of the US' semiconductor-grade neon, a gas integral to the lasers used in the chip-making process, while Russia accounted for 35% of its supply of palladium, a rare metal that can be used to create semiconductors.
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