Hyundai reroutes ships amid Hormuz disruptions, as US market remains volatile

In a pursuit to keep up the production momentum, Hyundai Motor Co. is rerouting ships containing goods essential to production around Africa to avoid the Strait of Hormuz. The automaker has detailed how global supplies were being impacted due to the strained movement of goods. Hyundai has stated that the shift is a part of a bigger plan to rework its operations to insulate the company from supply chain shocks.

Hyundai is also seeking to source more components locally in Europe rather than shipping them from South Korea, a path that would require passing through the Strait of Hormuz.

The South Korean brand has further mentioned that it is keeping more inventories on hand as a buffer against shocks since the global pandemic upended supply chains. All this while trying to pacify a volatile market in the US going through affordability challenges, rising gas prices, and loss of electric vehicle incentives pressure sales.

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In the recent past, Bahrain’s Alba, one of the world’s largest aluminum smelters, had declared a measure on deliveries and planned to cut output by 19%, citing its inability to ship through the Strait of Hormuz.

In the aftermath of such sprawling cuts, Toyota had cut production of its vehicles that relied on Gulf aluminum supplies by almost 40,000 units over two months. News reports further suggested that Gulf smelters that supplied Toyota, Nissan, BMW, and part makers for Mercedes-Benz, and hundreds of other automotive customers worldwide are defaulting on contracts or closing down.

Since Japanese automakers, including Toyota and Nissan, sourced the majority of their processed steel from the Middle East, Toyota's CEO Koji Sato has said at a recent press conference, “If this situation prolongs, needless to say, there’s going to be procurement problems.” In the coming days, it’s possible that Hyundai’s way of avoiding the strait becomes a blueprint for other struggling manufacturers as well.