Rising Raw Material Costs Hit EV Margins

Indian automakers are facing one of the sharpest increases in raw material costs in recent years. Despite strong growth in vehicle sales, rising prices of metals, rubber and battery-related inputs are putting pressure on profitability. According to SIAM Commodity Price Monthly Monitor, two-wheeler sales increased 24.3% year-on-year, while passenger vehicle volumes rose 26.3%.

Hot-rolled steel, used in vehicle chassis and body panels, was priced between ₹60,625 and ₹62,463 per tonne in August, up around 20% from a year earlier and 1.1% from July, reaching a 12-month high. Natural rubber prices increased 42% to ₹278.76 per kg, while synthetic polybutadiene rubber used in tyre production rose 59% to ₹270.61 per kg. Carbon black prices also climbed 47% to ₹155.42 per kg.

EV-related battery and electrical component costs have also risen sharply. Copper, widely used in vehicle wiring and electric motor windings, increased 49% to $14,353 per tonne, while lithium carbonate, a key battery material, more than doubled, rising 106% to $19.30 per kg. The increase in these input costs is adding pressure to both conventional vehicle and electric vehicle supply chains.

The higher material costs are also affecting tyre manufacturers, which are facing simultaneous increases in natural and synthetic rubber prices. CEAT and JK Tyre have announced price hikes ahead of the festive season. Meanwhile, global automaker operating margins have declined to around 4.8%, according to the data cited, adding further pressure on manufacturers to manage costs while maintaining sales growth.

To support localisation and reduce dependence on imported inputs, the Ministry of Heavy Industries has allocated ₹2,818.9 crore under the Auto and Auto Component Production Linked Incentive (PLI) Scheme for FY2026-27. The initiative aims to promote domestic manufacturing of high-value components and reduce exposure to global supply-chain risks. The coming quarters will test automakers’ ability to manage rising input costs while sustaining volume growth and protecting margins.