Iran Israel US War: If the energy crisis increases, how much will it affect the auto world, how expensive will the vehicles become?

Amidst the ongoing tension in the Middle East, Iran’s Revolutionary Guards have closed the Strait of Hormuz to ships. This ongoing war between Iran and Israel-America can shake the world’s oil trade. When war or tension increases in any major oil producing region of the world, its impact is not limited to that country only, but falls on the economy of the entire world.

If there is a war related to Iran or a major military conflict in the Middle East, then the supply of crude oil will be affected first. A large part of the world gets oil from this region. In such a situation, oil prices start increasing rapidly in the international market. As soon as oil becomes expensive, the prices of petrol and diesel increase, and this increase has a direct impact on the auto industry.

How much impact on auto industry?

• First of all, the impact on common people is visible in the form of fuel prices. Driving will become expensive as petrol and diesel become expensive. When transport becomes expensive, the cost of everything increases, due to which inflation starts increasing. This can also affect the demand for vehicles, because people take decisions more thoughtfully before buying a new vehicle.
• The second biggest impact is on automobile companies. Many of the materials used in making vehicles—such as plastic, rubber, synthetic fiber, paint and many chemicals—are made from petroleum. When crude oil becomes expensive, the price of these raw materials also increases.
• Apart from this, electricity and energy expenditure in factories may also increase. Then the cost of transporting the finished vehicles to the dealer through trucks or ships also becomes high. Due to all these reasons the total production cost of companies increases.

How expensive will cars become?

• If oil prices rise for a short period, companies can keep the prices stable by bearing losses for some time. But if the crisis continues for a long time and oil remains expensive, companies may be forced to increase the prices of vehicles. In such circumstances, an increase of 2% to 10% in the prices of cars and bikes may be possible.
• It will depend on how high oil prices go and for how long they remain. When fuel is expensive, people give preference to high mileage vehicles. Demand for small cars, CNG models, hybrid and electric vehicles may increase.

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