Iran Conflict Disrupts India Auto Exports to Middle East

A widening conflict in West Asia is beginning to hit India’s auto export engine.

Several Indian automakers have delayed shipments to the Middle East and North Africa (MENA) as the US–Israel war with Iran disrupts key shipping routes and sharply raises freight costs. Companies including Tata Motors, Maruti Suzuki India, Hyundai Motor India, and Volkswagen’s local unit are deferring exports of cars and commercial vehicles. They are doing this to avoid emergency surcharges and war-risk insurance premiums. These premiums can reach $2,000 per container.

The Strait of Hormuz — a crucial global trade route — has effectively become unusable after Iran warned that vessels passing through could be targeted. Therefore, rerouting ships around South Africa would significantly increase costs. This has prompted automakers to hold back cargo temporarily.

Industry sources say companies can manage shipment delays for about two to three weeks before storage capacity and working-capital pressures start building. However, any prolonged disruption could hit sales. This is because the region remains a key export market.

Two-wheeler major Bajaj Auto has reportedly paused shipments to Gulf countries, which account for about 3% of its exports. Some African shipments are also facing delays due to container shortages and port challenges.

The Middle East and North Africa region contributes between 8% and 40% of total export volumes for major automakers. Maruti Suzuki earlier said the Middle East accounted for about 12.5% of its exports in the financial year ended March 31. Meanwhile, Hyundai Motor India derives nearly 40% of its overseas volumes from the region.

The larger concern is rising costs. Freight expenses, typically 1% to 3% of revenue for automakers, are expected to climb due to longer shipping routes and higher insurance premiums. In addition, tyre manufacturers may also face pressure from rising crude oil prices, given their dependence on petroleum-based inputs.

Reflecting these worries, the NSE Nifty Auto Index has fallen about 3.9% since the conflict escalated. Investors are assessing the potential hit to export volumes and profit margins.

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