Tata Motors is facing renewed pressure on profitability as a significant increase in commodity costs threatens to weigh on margins in its passenger vehicle business. Managing Director Shailesh Chandra said the company is considering another price increase as it assesses the impact of higher energy, freight and raw material costs.

Commodity inflation is expected to reduce margins by around 3 percent of revenue at Tata Motors passenger vehicle division during the July to September quarter, following an estimated 4 percent impact in the previous quarter. The company said the greater concern is the uncertainty surrounding the duration and extent of the cost pressures.

Chandra said Tata Motors has not been able to pass higher costs on to customers at the same pace as the increase in input costs, creating significant pressure on margins. The company has already increased vehicle prices by less than 5 percent, but another increase is expected. Tata Motors has not disclosed the timing or magnitude of the potential price hike.

The increase in commodity and energy costs has been linked to disruptions and higher prices following the Iran war. Rising fuel and freight costs are increasing operating expenses across the automotive industry, while consumers are also looking for alternatives that can reduce running costs.

Higher fuel prices are supporting demand for electric vehicles and CNG-powered cars as consumers seek alternatives to conventional petrol and diesel vehicles. Tata Motors, India's largest electric vehicle manufacturer, has doubled its EV production capacity to more than 16,000 units per month to meet rising demand.

Electric vehicles now account for around 21 percent of Tata Motors total passenger vehicle sales in India, compared with 14 percent a year earlier. At the same time, the share of petrol and diesel vehicles has declined to 52 percent from 59 percent over the same period.

The company also launched the Aeris compact sedan, positioned as a competitive offering with prices starting at Rs 529000. The model is available with petrol and CNG powertrain options, providing customers with an alternative to higher-cost conventional fuel vehicles.

For Tata Motors, the combination of commodity inflation and higher fuel prices presents both a margin challenge and a potential shift in the product mix toward electric and CNG vehicles. The pace at which input costs stabilize and the company's ability to pass those costs on to customers will remain important factors for its passenger vehicle profitability.