Gas is critical for energy-intensive automobile processes such as paint shops, metal forging, casting, and heat treatment. Analysts note that switching to alternatives like electricity is not feasible for many manufacturers due to machinery constraints and high capital costs.

Auto stocks remained under heavy selling pressure on Thursday, dragging the broader market sentiment despite a mild recovery in benchmark indices. The Nifty Auto index slipped sharply in early trade and failed to stage a meaningful rebound through the session.

The index settled 3 per cent lower at 25,098, near the day’s low. All its constituents ended in the negative territory. Key laggards included TVS Motor Company, Mahindra & Mahindra, Maruti Suzuki, Eicher Motors, and Tata Motors.

Gas supply concerns rattle auto sector

The latest sell-off in auto stocks comes amid rising geopolitical tensions in West Asia that have heightened fears of natural gas supply disruptions. Market participants are closely tracking developments around the Strait of Hormuz, a critical global energy transit chokepoint, as shipping interruptions through the route could severely affect fuel availability.

Automobile manufacturers rely significantly on natural gas across several stages of the production process. Gas is particularly crucial for energy-intensive operations such as paint shops, forging furnaces, casting facilities and heat treatment processes used for metal components.

Brokerage firm Nomura noted that gas forms a substantial share of energy consumption in automobile manufacturing and warned that shifting to alternative sources like electricity may not be feasible in the near term due to machinery constraints and capital requirements.

The situation remains fluid. Preliminary OEM concerns emanate primarily from lower degree of control on process fuel choices and capital allocation flexibility at smaller component suppliers, Nomura noted.

Adding to sectoral anxiety, the government has moved to conserve fuel supplies by tightening distribution norms. Natural gas has been brought under essential commodity regulations. Priority allocation has been granted to households and transport fuels such as CNG and LPG, raising fears of production bottlenecks for industrial users.

Analysts warn that such restrictions could disrupt manufacturing schedules, particularly for automakers operating with high capacity utilisation and limited inventory buffers.

The move has raised concerns as gas is vital for auto manufacturing, especially in paint shops and metal processing operations, Bonanza analyst flagged.

Analysts flag inflation and cost pressures

Khushi Mistry, Research Analyst at Bonanza, said the decline in auto stocks was largely driven by concerns over fuel availability and rising cost pressures.

“The Nifty Auto Index slipped primarily due to fears of a natural gas supply shortage triggered by escalating conflict in West Asia, raising worries of a fuel-driven inflation surge. The Strait of Hormuz, a vital route for India’s energy imports, has been blocked, cutting off nearly 25 per cent of the country’s natural gas supply,” Mistry said.

The analyst emphasised that natural gas remains essential for several automobile manufacturing processes, especially paint shops and metal treatment facilities, making the sector highly vulnerable to supply disruptions.

Mistry further noted that original equipment manufacturers operating at elevated capacity utilisation levels with low inventory face immediate operational risks. Compounding the pressure, crude oil prices have surged sharply, increasing fears of higher raw material and transportation costs across the automobile value chain.

Brent crude prices have climbed past the US$ 100 per barrel mark, raising fears of higher raw material and transportation costs across the sector, Mistry further said.

Published on March 12, 2026