Auto makers activate 'Plan B' as gas crunch hits component suppliers 

OEMs have started to feel components supply crunch

• Auto companies explore producing components in-house
• Production is continuing using parts inventory
• Companies are also stepping up supply chain monitoring

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India’s automobile manufacturers are scrambling to safeguard production as a deepening industrial gas shortage — brought about by the Iran war — ripples through the supply chain, forcing smaller vendors to halt operations and pushing automakers to consider making critical components in-house.

With Tier-2 and 3 suppliers bearing the brunt of the disruption, the supply crunch is threatening to derail production cycles across segments, even as strong vehicle demand keeps pressure on manufacturers to maintain output, industry sources said.

Smaller vendors shut, supply chain stress builds

Auto companies typically maintain component inventories for 30 to 45 days but the gas shortage is beginning to test those buffers.

Industrial clusters in Maharashtra’s Chakan, Pimpri-Chinchwad and Chhatrapati Sambhajinagar in — key auto component hubs —are among the worst hit, with widespread shutdowns reported among smaller units.

“Most Tier 2 and Tier 3 plants in the Chakan belt have shut down. Situation is really bad,” said Jaidev Akkalkote, president of Chakan MIDC Industrial Association and managing director (Partner) of Sahyadri Industries. “We supply to Tier 1 vendors who then supply to Bajaj Auto, Tata Motors, Mahindra & Mahindra.”

Liquified petroleum gas (LPG), a critical input for metal cutting, welding and powder coating, is in short supply, with no immediate substitute available for these processes.

While some companies are rationing existing stocks, others have already halted production for up to 10 days, forcing workforce redeployment.

The disruption is cascading upwards.

Major automakers, including Ashok Leyland, Royal Enfield, Tata Motors, Volkswagen, VE Commercial Vehicles, Piaggio, Mahindra & Mahindra, John Deere, Kubota and Nissan, depend on these smaller vendors. So do Tier-1 suppliers such as Bharat Forge, Varroc, Belrise, Sona Comstar, Delphi, Endurance and Gabriel.

Automakers activate contingency plans

Faced with the risk of prolonged disruption, automakers are activating contingency strategies to keep assembly lines running.

A key fallback is  bringing select component manufacturing in-house to reduce dependence on vulnerable suppliers and free up vendor capacity for more critical parts.

“We are seeing if we can make parts in-house; those which are likely to be impacted by this disruption. We are also seeing how we can help them get supplies of gas,” senior executive at Royal Enfield said, adding that production remains unaffected for now.

Ashok Leyland echoed a similar stance. “We have been managing our production and there has been no decline... For March, we are protected because this is a crucial month for us being the year-end. Nobody can say how it will pan out later,” said Amandeep Singh, President – LCV, International Operations, defence and power solutions.

Companies are also stepping up supply-chain monitoring. “We are in touch with all our suppliers... examining where we can pre-empt if there is any issue,” Singh added.

The urgency is underscored by robust market demand. Passenger vehicle wholesales rose 13 percent year-on-year to nearly 450,000 units in January, while two-wheeler volumes surged 26 percent to 1.92 million units.

The momentum continued in February, with PV volumes up 11 percent and two-wheelers climbing 35 percent, according to industry data.

For now, inventory buffers and contingency planning are helping automakers. But with smaller suppliers already reeling, a prolonged gas shortage could soon test the resilience of India’s auto manufacturing ecosystem.