Govt asks auto companies to optimise production as fuel supply concerns grow

The Ministry of Heavy Industries (MoHI) has issued an advisory to carmakers and auto component manufacturers, calling for production optimisation and lower fuel consumption. This advisory was issued in light of growing concerns over potential oil and gas supply disruptions linked to the ongoing Israel-US-Iran conflict, which has majorly bottlenecked commercial tanker movement via the Strait of Hormuz chokepoint over the past month.

1. Reduction in idle and standby fuel consumption advised
2. Factories asked to switch from oil-based fuels to electricity wherever possible
3. Industrial gas supply reportedly down to 80 percent of normal levels

MoHI requests focus on production efficiency and fuel savings

Per a recent report from Reuters, automotive companies operating in India have been urged to streamline operations and reduce idle fuel usage: "Production schedules may be optimised to minimise idle and standby fuel consumption."

The MoHI advisory also recommends shifting factory operations from oil-based fuels to electricity wherever technically feasible, and companies have been encouraged to adopt cost-saving measures, like using recycled aluminium and alternative materials for non-critical applications, as input costs begin to rise.

Interestingly, the Petroleum Ministry recently clarified that contrary to public notions, there is no petrol and diesel shortage and that the current fuel reserves are adequate for around 60 days. Much like the gas supply, the government may be prioritising fuel for the public, and has therefore cautioned the auto industry to limit its fuel usage.

Supply constraints purportedly emerging on the industry side

Since the government is prioritising gas supply for households, industrial gas availability has ostensibly dropped to about 80 percent of standard levels. In fact, component suppliers linked to major carmakers like Maruti Suzuki, Tata, and Mahindra are even beginning to face gas supply constraints, even though vehicle demand remains strong.

This could spell trouble for component production, and consequently, vehicle production, if the Gulf region conflict extends for a prolonged period.