Automakers are scrambling to contain surging raw material costs through measures ranging from cutting discounts and delaying discretionary spending to stockpiling supplies, as executives warn further price increases could derail demand that rebounded after last year’s tax cuts.
Top two-wheeler and passenger vehicle makers said in recent earnings calls that they are trying to absorb a large part of commodity inflation rather than passing it entirely to consumers, amid concerns that repeated price hikes have already eroded some of the gains from last year's reduction in goods and services tax (GST) rates.
“GST rate cut really uncorked demand and now, with bike prices increasing, part of that reduction has got reversed and, therefore, it will obviously have an effect on the demand environment,” Rakesh Sharma, executive director at Bajaj Auto, said at a 6 May media briefing.
The GST Council cut rates on passenger vehicles and two-wheelers by 10 percentage points in September, easing prices and helping an industry rebound. The tax reduction drove record vehicle sales in fiscal 2026, with two-wheeler sales rising 11% and passenger vehicle sales increasing 8%, according to Society of Indian Automobile Manufacturers.
However, Sharma of Bajaj Auto said more than 30% of these price reductions have been negated by subsequent hikes fuelled by higher commodity prices. According to estimates by electric two-wheeler maker Ather Energy, aluminium, platinum group metals, and other commodities have seen inflation of 40-50% from the previous quarter.
Mahindra and Mahindra, Tata Motors Passenger Vehicles, Ather Energy, Hyundai Motor, and Hero Motocorp have made modest price hikes of 1-3% since the start of the year. However, Maruti Suzuki is holding on, as India’s largest carmaker bets that strong order books and buoyant volumes will help cushion margins.
“We are fortunate today, we have pending orders, but we want that situation also to continue and volume buoyancy should be good. That helps a lot,” Rahul Bharti, senior executive officer for corporate affairs at Maruti Suzuki India, said during the company’s 28 April earnings call. “Of course, we are trying to arrange all commodities at the lowest possible cost, and diversify our supply chain,” Bharti added.
Industry executives, acknowledge that the price increases only partially cover the rise in input costs, which intensified after the outbreak of the West Asia war.
Other manufacturers are tightening spending internally.
India's largest two-wheeler maker Hero MotoCorp said it has accelerated cost-saving efforts and postponed non-essential expenditure to reduce the near-term impact of commodity inflation.
“Internally, we have accelerated our cost-saving programme. We are really looking at postponing some of our discretionary spends, cutting down on our discretionary spends, to just make sure that to whatever extent we can mitigate in the short term,” chief financial officer Vivek Anand told analysts on 6 May.
Discretionary spending typically includes advertising and marketing expenses.
Mahindra & Mahindra has undertaken a broad review of its supply chain covering purchases worth more than ₹1.06 trillion and over 100,000 parts to reduce exposure to disruptions.
“[We] took multiple actions. Increasing inventory in many cases, localizing alternate suppliers, designed to reduce, creating an intelligence desk so we can act quicker on something that happens,” Anish Shah said during a 5 May earnings call. “And that has put us in a stronger place.”
Electric vehicle (EV) makers, meanwhile, are benefiting from robust demand growth and consumer concerns over fuel prices following the West Asia conflict. EV two-wheeler sales rose 22% to 1.4 million units in fiscal 2026.
Ather said that rapid volume growth and market-share gains were helping the company negotiate with suppliers to absorb part of the increase in raw material costs.
“I believe that there is an opportunity for us to trade off some of these hikes with the suppliers,” Tarun Mehta said on 4 May.
Hyundai Motor India said in its earnings call that a mix of calibrated price increases, localization of components and lower discounts would help contain the impact of inflationary pressures.
Analysts say automakers now have little room to keep raising prices without weakening demand.
“With commodity costs remaining inflationary and successive price hikes having neutralized much of the GST-led affordability advantage, manufacturers have limited room left to pass on further costs, without impacting demand,” Vinay Piparsania, founder of MillenStrat Advisory and Research, said. “Cost management has moved from being a periodic exercise, to a daily strategic priority,” he added.