Iran Israel US War : Will cars become expensive due to war? Energy crisis will hit the auto sector hard
- A major impact if war disrupts the supply of crude oil
- Impact on automobile sector
- How expensive can cars get?
Iran Israel US War : Iran’s Revolutionary Guards have closed the ‘Strait of Hormuz’ to ships amid rising tensions as world war erupts. Because of that, there has been a great excitement in the global oil trade. The conflict between Iran, Israel and the US is not limited to military action. Now it is likely to affect the economy of the whole world. When the dark clouds of war loom over one of the world’s major oil-producing regions, the impact is not limited to just those countries. It appears globally. If the supply of crude oil is disturbed due to this war related to Iran, oil prices will skyrocket in the international market, which may directly and severely affect the automobile sector.
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Impact on automobile sector
If fuel prices go up, the first and biggest impact will be on the common man’s pocket. As petrol and diesel become more expensive, driving becomes more expensive. When transportation becomes expensive, the prices of everything, including essentials, go up, and inflation rises even further. In such a situation, consumers think more before buying a new vehicle. Due to which the demand of cars in the market decreases. Apart from consumers, automobile companies also face major challenges. Many of the items required for vehicle manufacturing, such as plastics, rubber, synthetic fibers, paints, and various chemicals, are also derived from petroleum products. The increase in crude oil prices also leads to a large increase in the cost of these raw materials, which affects the production costs of companies.
Challenges in production costs and logistics
The oil crisis isn’t just making raw materials expensive. So the cost of electricity and energy in the factories also increases. The transportation cost of transporting the finished vehicles to the dealer through trucks or ships also increases due to increase in fuel prices. All these reasons increase the financial burden on companies. If the rise in oil prices is short-lived, the companies themselves try to keep prices stable by taking losses for a while. However, if this war or crisis continues for a long time and oil prices remain high, companies are forced to raise the prices of cars.
How expensive can cars get?
According to experts, if the war situation remains critical and oil prices continue to rise, the price of cars and bikes may increase by 2 percent to 10 percent. All of these projections are going to depend on how much oil prices rise and how long they remain elevated. In such a time of crisis, there is also a change in the mentality of the customers. When fuel becomes expensive, people prefer cars that give more mileage. This may increase the demand for small cars, CNG models, hybrid and electric vehicles in the market. Meanwhile, the sales of larger and more fuel-guzzling cars may decline.
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