Why New Cars Are Getting Costlier in 2026 — Inside India's Steel, Freight and CNG Squeeze

The Cost Squeeze Behind the Showroom Price

India's car market is enjoying one of its best runs in years. Passenger vehicle sales rose 22 percent year on year in September, and sales in the first half of FY27 climbed 28.3 percent to 2.64 million units. Yet the same companies posting those numbers are quietly warning buyers that the good news on price may be over. A surge in the cost of steel, aluminium, CNG and shipping is squeezing margins, and more price hikes are expected once the festive season ends.

The numbers tell the story. HR steel, the basic flat steel that forms a car's structure, rose 30 percent year on year to a 12-month high of ₹65,000-66,750 a tonne in September. CR steel traded at ₹71,125-73,375 a tonne, about 28 percent higher than the ₹56,000-57,000 a tonne it fetched a year earlier. Aluminium was up 23 percent at $3,276.80 a tonne. The auto sector alone consumes 9 percent of India's HR steel and 21 percent of its aluminium, so these moves hit the industry harder than most.

Every Input, Everywhere, at Once

Steel and aluminium are only part of the problem. Coking coal, copper, zinc, polypropylene, EPDM rubber and CNG have all peaked within the past year. In Delhi, CNG prices in September 2026 were 13 percent higher than a year earlier, 4 percent higher than the previous month, and at their highest level in 12 months. In Mumbai, they were 9 percent higher year on year. For a market where factory-fitted CNG variants are a fast-growing category, that is a direct hit on running costs as well as manufacturing costs.

Then there is freight. The Baltic Dry Index, which tracks the cost of shipping raw materials by sea, climbed to 3,408 points in September, a 60 percent jump over the 2,124 points it recorded a year earlier. Geopolitical uncertainty is driving that volatility, and shipping costs are largely beyond any single manufacturer's control. Commodity costs make up as much as 60-65 percent of a carmaker's total cost base, so when several of them rise together, the pressure is immediate.

Who Is Passing It On

Most major carmakers, from Maruti Suzuki and Hyundai to Tata Motors, Toyota and Mercedes-Benz, have already taken two or three rounds of price hikes this year. Maruti's Partho Banerjee said the company is not looking to raise prices again during the festive season but is keeping a close watch on input costs, noting that value engineering can only stretch so far before calibrated increases become necessary. Toyota's Sabari Manohar described raw-material prices as highly volatile. Mercedes-Benz India's Santosh Iyer said the company absorbed a large part of the pressure but still had to implement three adjustments this year, ranging 1-2 percent across the portfolio, and pointed to adverse currency moves alongside shipping and material costs.

Beyond Cars: The Squeeze Hits Every Segment

The cost pressure is not confined to passenger cars. Two-wheeler production rose 10.8 percent year on year in the latest monthly data, and scooters and motorcycles are just as exposed to steel and, increasingly, to CNG and battery input costs. Three-wheeler makers, many of them betting on electric and CNG powertrains, face volatile prices on both fronts. And commercial vehicle manufacturers, which use far more steel and rubber per unit, feel the swings most acutely even as freight demand keeps order books healthy.

September's wholesale data from SIAM shows how broad the recovery has been: passenger vehicle dispatches rose 22 percent to 4,54,574 units, two-wheelers 13.5 percent to 2.46 million units, and three-wheelers 16 percent to 98,162 units. Over the first half of FY27, passenger vehicle sales climbed 28.3 percent to 2.64 million units, commercial vehicles 23.8 percent to 5,64,255 units, two-wheelers 17.6 percent to 12.09 million units and three-wheelers 26.3 percent to 5,01,879 units. Utility vehicles now make up 68 percent of all cars sold, a mix shift that raises the average steel and aluminium content of every vehicle built.

The paradox is that demand is strong enough to absorb higher prices for now. SIAM president Shenu Agarwal credited improved affordability after the GST reset, resilient rural and urban demand, healthy freight movement and infrastructure-led activity for the strong first half. But he also flagged inflationary pressures, potential interest-rate increases and geopolitical uncertainty as risks to the outlook. In other words, the industry is confident about demand and nervous about costs at the same time.

How Carmakers Are Responding

Manufacturers have three levers, and they are pulling all three at once. The first is price: calibrated increases, spread across two or three rounds a year rather than one shock. The second is value engineering — redesigning parts, renegotiating supplier contracts and shifting to lighter materials to shave cost without hurting the product. The third is mix: pushing buyers toward higher-margin variants and trims, where a 1-2 percent hike is easier to absorb.

Maruti Suzuki, which sells the most cars in India, has been explicit that value engineering has limits. Its marketing and sales head, Partho Banerjee, said the company is not looking to raise prices again during the festive season but is watching input costs closely, and warned that beyond a point, calibrated hikes become unavoidable. At the luxury end, Mercedes-Benz India's Santosh Iyer pointed to a triple whammy of shipping, raw-material and currency costs — the euro's appreciation against the rupee has quietly eroded the benefit of GST cuts, he noted, even as the company tries to offset pressure with lower-EMI schemes.

For suppliers, the squeeze is even tighter. Component makers typically operate on thin margins and fixed-price contracts, so a 30 percent jump in steel is absorbed before it reaches the carmaker. Some of that pressure eventually surfaces as renegotiations, and occasionally as quality compromises that buyers never see. The healthiest response is collaboration: shared cost-reduction programmes, longer contracts and joint investment in localisation — which is exactly what Hyundai's push from 83 percent to 92 percent localisation in Maharashtra is designed to achieve.

There is one more lever that rarely gets mentioned: financing. When input costs rise and prices follow, the monthly EMI becomes the deciding factor for most buyers, not the sticker price. That is why carmakers lean on low-interest schemes, longer tenures and exchange bonuses during the festive season. A 1 percent hike in the ex-showroom price can be masked by a subvented interest rate, at least for the first few years of ownership. The buyer who looks only at the EMI, and not at the total cost of ownership, is the one most likely to be surprised later.

Why the Festive Season Is a Buffer, Not a Shield

Carmakers are reluctant to raise prices during Navratri and Diwali, when demand peaks and discounting is already heavy. That is why the hikes have paused for now. But the pause is tactical. Once the festive window closes and the year-end scramble begins, the industry has signalled that further increases are on the table if input costs stay elevated. Buyers who are close to a decision should factor that into their timing: booking during the festive offers may lock in today's price and stack a discount on top.

What It Means for Buyers

For anyone shopping for a c ::KEY_NUMBERS:: HR steel rise | 30 percent year on year CR steel rise | 28 percent Aluminium rise | 23 percent Commodity share of car costs | 60-65 percent Expected FY27 sales growth | about 10 percent ::TLDR:: HR steel hit a 12-month high of ₹65,000-66,750 a tonne in September Delhi CNG prices were 13 percent higher than a year earlier The Baltic Dry Index jumped 60 percent, lifting freight costs Carmakers have taken two to three price hikes already and may take more after the festive season ::CHART:: type: bar title: Input cost inflation, September 2026 (percent, year on year) labels: HR steel values: CR steel source: Aluminium ::GLOSSARY:: HR steel | Hot-rolled steel, the basic flat steel used in a car's body structure Baltic Dry Index | A global measure of shipping freight rates for raw materials EPDM | A synthetic rubber used in seals and weatherstripping Value engineering | Redesigning parts to cut cost without hurting quality ::PULLQUOTE:: The car on the showroom floor is a bundle of steel, aluminium, plastic and freight — and every one of those inputs is now more expensive than a year ago. ::PROS:: Strong festive demand is letting carmakers pass on some costs Value engineering is limiting the impact on buyers H1 FY27 sales are still up strongly despite hikes ::CONS:: Commodities make up 60-65 percent of a carmaker's cost base Freight and forex pressures are beyond any one company's control Another round of hikes is likely after the festive season ::POLL:: Will you buy your next car before or after the festive season ends? || Before — lock in today's price || After — wait for offers || Still deciding ::SOURCES:: SIAM Commodity Price Monitor, The Economic Times