Hyundai CEO: Middle East loss not easily offset elsewhere

Hyundai will not be able to fully replace Middle East sales volumes lost to the Iran conflict, Chief Executive José Muñoz said on 20 April, citing manufacturing constraints and region-specific vehicle specifications that make rapid reallocation to other markets impractical. Muñoz described the Middle East as the automaker’s highest-margin region—not a mass-volume market by any means, but one whose loss still carries a disproportionate profit impact.

The constraint ultimately boils down to regional adjustments. Vehicles configured for Middle Eastern markets carry different equipment, software, and certifications from those destined for other regions. Thus, they cannot simply be redirected when a demand shock happens. Adapting production lines is no less costly or time-consuming. To be sure, some volume is being absorbed by North America, but plant throughput and model mix limit how much can shift in the near term. “You cannot just simply derive cars that are meant to go from one market to another,” Muñoz said.

The loss deepens a supply chain disruption that has already reshaped Hyundai’s operations in undesirable ways. The automaker confirmed earlier in April that it is rerouting ships around the Cape of Good Hope, adding ten to 15 days to transit times for components shipped from South Korea to Europe. Muñoz previously described the severity of current conditions in foreboding terms—to quote, “globalisation is over”. He also said that supply chain decisions that had previously been made annually are now taken on a weekly basis.

Hyundai had been expanding steadily in the Gulf before the crisis, with strategies covering both Gulf Cooperation Council countries and parts of North Africa. A manufacturing plant in Saudi Arabia, originally targeted to open in the fourth quarter of 2026, was part of a longer-term regional investment strategy that the conflict has left in an uncertain position. Recovery, Muñoz said, depends heavily on how long the crisis persists.

There is some upside, even if the broader picture is grim. Muñoz noted earlier in April that first-quarter sales of electrified vehicles rose significantly year-on-year, driven partly by higher fuel prices pushing buyers toward hybrids and battery-electric options. Still, the automaker is sticking to its more conservative recalibration of its electrification strategy: the Georgia plant, initially planned as a battery-electric facility, will begin producing hybrids from 2027.

Disruptions in the wake of the Strait of Hormuz blockade is not unique to Hyundai. Toyota cut approximately 40,000 units bound for the Middle East across March and April; Mazda subsequently announced a similar move. Luxury segment losses in the Gulf, where bespoke and high-margin orders represent a disproportionate share of global profitability for brands including Bentley, Rolls-Royce, and Ferrari, have been severe.