How Iran impacts the automotive market
We unpack how the Persian Gulf conflict affects the global automotive supply chain and its possible consequences for South Africa.
Events in the Middle East risk a generational disruption to global oil and energy supplies, but the closure of the Strait of Hormuz also has several secondary effects.
luminium billet is a crucial primary material for automotive production, used in everything from body panels to cylinder
Aheads. With its immense energy resources, the Middle East is a notable source of bauxite, accounting for 8 % of global production of the metal product, which is shipped through the Strait of Hormuz.
For South African users of automotive-grade aluminium, who are faced with the mothballing of the Mozal smelter in Maputo, less global supply from the Middle East will only increase the price of available aluminium in the market.
HIGH-MARGIN MARKETS
Beyond its importance as an oil and aluminium source, the Middle East, especially countries surrounding the Persian Gulf, are a significant demand market for luxury vehicles and bakkies. Abu Dhabi, Bahrain, Dubai, Kuwait, Qatar, and Saudi Arabia, are all demand markets for luxury vehicles, large SUVs and high-end bakkies. Although it is not a primary export market for South African-built vehicles, NAAMSA members do have export exposure for delivery markets in the Middle East.
An abundance of cheap fuel, spending power, and negligible emissions regulations make these Middle Eastern markets hugely profitable for car companies. Without the usual scheduled frequency of car carriers through the Strait of Hormuz, Middle Eastern distributors and dealers will run low on inventory. Or missing delivery deadlines for demanding luxury vehicle customers, who pay a premium for their vehicles and are unaccustomed to waiting.
Despite decades of severe trade embargos, Iran still has a remarkably large domestic car market and robust manufacturing industry. In 2025, it ranked as the 14th-largest global new-car market, with 1.3m units, nearly three times the size of South Africa’ s market. Most vehicles sold in Iran are made locally and use antiquated engines, components and tooling.
A trickle of Chinese imports has brought the latest technology to Iran. It’ s unclear how bombing damage has impacted Iranian automotive factories or suppliers, but disruptions seem inevitable. The other Persian Gulf state with an automotive industry, albeit a very small one, is Saudi Arabia. As the main equity holder in California’ s most advanced car company, Lucid Motors, Saudi Arabia has a Lucid manufacturing facility in King Abdullah Economic City( KAEC), 100km north of Jeddah.
Lucid is not the only foreign car company in the King Salman Automotive Cluster, which the Saudi government created to attract global automotive industry investment. Hyundai has committed to a highly automated manufacturing hub for the King Salman Automotive Cluster, and Pirelli has expressed interest in producing tyres there. The risk analysis around all these investments, and the logistics of moving technical specialists in and out of the country, will all be recalibrated by the current conflict.
WORDS IN ACTION 25 MARCH 2026