How Middle East War Could Affect Domestic Car Purchases

The Detroit Three have little exposure – in terms of new car sales – to the Middle East, but as the war with Iran rages on, automakers and auto analysts are eyeing developments for another major collision.

On February 28, the United States and Israel bombarded Iran after President Donald Trump said Iran was developing nuclear weapons that threaten America’s allies and could “soon” reach the shores of the United States. Iran retaliated by attacking Israel and Middle Eastern countries that host US military bases.

“We’re absolutely following the results of this,” said Sam Fiorani, vice president of Global Vehicle Forecasting at AutoForecast Solutions. “The biggest disruptor, especially the Detroit Three, will likely be economic. Changes in oil prices and a wave of consumer confidence will be major market drivers for disruptions in parts or vehicles.”

Fiorani said the extended conflict would reduce demand in the region for Ford Motors vehicles made in China, which are the best sellers in that market. Also, General Motors and Stellantis will likely see a decline in demand for trucks made in North America. But production of new cars in North America probably won’t have much of an impact, he said.

Ford, GM and Stellantis told the Detroit Free Press, which is part of the USA TODAY Network, that they continue to closely monitor the war in case they take out workers from the Middle East, the problem grows and disrupts the purchase of goods or other causes cause an economic collapse that may affect the sale of new cars around the world.

What is it like to sell to Detroit automakers in the middle east?

American automakers don’t sell many cars to the Middle East in general, Fiorani said.

“The biggest car market in the region is Iran and American brands are not sold there legally,” Fiorani said.

Here’s how it breaks down: Including models produced outside of North America, American products make up a little more than 8% of the market in Iraq, about 9% in Saudi Arabia, less than 12% in the United Arab Emirates and more than 14% in Kuwait, Fiorani said, citing data AutoForecast Solutions obtains from various sources.

“Syria, Yemen and Egypt sell the fewest cars produced in North America,” Fiorani said.

By 2025, about 172,000 cars sold across the Middle East region were from the Detroit Three, including models not produced in North America, making up about 5% of the 3.4 million market, he said. Fiorani said Ford sold about 79,000 vehicles in the region, GM sold about 62,000 (out of 24,000 produced in Egypt) and Stellantis North America sold about 13,000. Tesla has sold more than 17,000.

“Approximately a third of the Chevrolets sold in Saudi Arabia and Kuwait were American-made trucks, while most of the Fords in the major markets were bought in China,” Fiorani said. “Car production in the Middle East is mainly for the local people. Countries like Egypt have high tariffs on cars from other countries that attract assembly into the country. Any exports from local factories, in particular, are exported to other countries in the Middle East.”

Opportunity for Chinese travel

If the war raises fuel prices and they stay high for any significant period that becomes a problem for all car manufacturers, but especially for the Detroit Three, said David Whiston, senior equity analyst at Morningstar.

“They’re probably 100% small trucks (for sale) in the US GM at least has electric vehicles like Equinox, IQ, Blazer, and pickups to offer, but that doesn’t make them immune to this,” Whiston told the Detroit Free Press.

Also, don’t think Middle East fuel prices will be unaffected by the war, said Sam Abuelsamid, Telemetry’s vice president of market research.

Despite cheap gas in Saudi Arabia, it is a small market and, although Iran has cheap fuel, that is because it is heavily subsidized by the government to keep prices low and maintain social stability, Abuelsamid said. He added that despite having large oil reserves and exporting to many countries, Iran has little refining capacity and imports almost all of the fuel it consumes.

That could make the Middle East ripe for the next attack by a Chinese car company, he said, because Chinese cars are electric and offer high technology at low prices.

“After the war, it is not clear who will be in charge and the recovery costs will be huge,” said Abuelsamid. “It is unlikely that they will be able to keep subsidized fuel prices low and we are more likely to see greater growth in Chinese imports than America” ​​in the post-war Middle East.

Jamie L. LaReau is a senior automotive writer covering Ford Motor Co. of the Detroit Free Press. Contact Jamie at [email protected]. Follow him on Twitter @jlareauan. To sign up for our automotive newsletter. Become a subscriber.

This article first appeared in the Detroit Free Press: Here’s how a war in the Middle East could affect major automakers

Reporting by Jamie L. LaReau, Detroit Free Press / Detroit Free Press

USA TODAY Network via Reuters Connect