Rising geopolitical tensions in the Middle East are affecting global automotive trade, leading several vehicle manufacturers in India to delay exports to overseas markets.

A group of Indian automakers has postponed shipments to the Middle East and North Africa, according to individuals familiar with the matter, as regional tensions disrupt sea routes and increase freight costs.

With the war involving the United States and Israel against Iran entering its sixth day, companies including Tata Motors, Maruti Suzuki India, Hyundai Motor India and the local unit of Volkswagen AG are deferring dispatches of cars and commercial vehicles, the individuals said.

They requested anonymity because the information is not public. The objective is to avoid emergency shipping surcharges of up to US$ 2,000 per container and war-risk insurance premiums, while container availability becomes strained.

The Strait of Hormuz - a narrow waterway at the mouth of the Persian Gulf and a route for global trade - has effectively become impassable after Iran warned earlier this week that any vessel attempting to pass through the waterway could face an attack. Rerouting vessels around South Africa would increase shipping costs for automakers, prompting them to delay cargo bound for the region.

According to the individuals, automakers can typically delay overseas shipments for two to three weeks before storage constraints and working-capital pressures begin to emerge. Any prolonged disruption could also affect sales, as the region is an export market for Indian vehicle manufacturers.

Two-wheeler manufacturer Bajaj Auto has halted shipments to Gulf countries, which account for about 3% of its exports, according to one of the individuals. Shipments to parts of Africa have also been affected due to limited container availability and difficulties in berthing ships.

Representatives for Hyundai Motor India, Maruti Suzuki India, Tata Motors and Bajaj Auto did not immediately respond to emailed requests for comment. A spokesperson for the Volkswagen Group stated that the company is assessing the situation and its possible impact, but did not confirm whether exports had been affected.

The Middle East and North Africa (MENA) region represents between 8% and 40% of total export volumes for major original equipment manufacturers, indicating a potential impact if shipments are delayed or cancelled, according to Jay Kale, executive vice president at Elara Capital India.

Maruti Suzuki India stated during a media call on March 1st that the Middle East accounted for approximately 12.5% of its exports in the year ended March 31st. For Hyundai Motor India, the MENA region accounts for around 40% of overseas shipments, Kale said.

One concern is the potential increase in costs and pressure on margins, particularly given the lack of clarity on how long the conflict may continue.

Freight expenses, which typically account for 1% to 3% of revenue for most automakers, are also expected to rise because of vessel rerouting and higher insurance premiums, according to Kale. Tyre manufacturers are particularly affected by higher crude oil prices due to their reliance on petrochemical-based inputs.

These developments have affected Indian equity markets this week, amid expectations that prolonged disruptions could reduce export volumes and profitability. The NSE Nifty Auto Index has declined by about 3.9% since the conflict began over the weekend.