According to a report by HSBC Global Investment Research, the auto sector is grappling with rising commodity costs and a potential slowdown in domestic demand, leading to a 10-30% correction in stock prices over the past six months. The report emphasizes that while the medium to long-term outlook for the sector remains positive, significant near-term risks persist. HSBC cautions that commodity price hikes and macroeconomic pressures could negatively impact demand, potentially surprising the market. Valuations for various auto manufacturers have sharply declined, with estimates suggesting a 15-20% correction in earnings estimates, indicating limited valuation cushion if challenges persist. The report identifies two interlinked risks: inflation in input costs driven by commodities and geopolitical tensions, particularly in the Middle East, alongside weaker domestic demand as the economy slows. Investors are advised to remain cautious in the near term, despite the structural optimism surrounding the sector's long-term drivers.