Hyundai Motor Co is rerouting ships around Africa to avoid the Strait of Hormuz, slowing the automaker’s global supply lines as the war in Iran adds pressure to an already strained movement of goods.
“We have deviated our ships to the Cape of Good Hope,” chief executive officer José Muñoz said on Wednesday in an interview, referring to the southern tip of South Africa. “This is a lot of additional lead time.”
The shift is part of a broader plan to rework its operations to insulate the company from supply-chain shocks, tariffs and geopolitical tension, he said.
Read:
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Longer term, Hyundai is seeking to source more components locally in Europe rather than ship them from South Korea, a path that relies on passing through the Strait of Hormuz.
Hyundai has been keeping more inventory on hand to buffer against supply shocks since the global pandemic upended supply chains, Muñoz said.
Meetings to make supply-chain decisions – once an annual occurrence – are now happening on roughly a weekly basis, he said.
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“We try to put together supply and demand, take decisions and maximise as much as we possibly can the production capacity that we have, so that we don’t lose production,” Muñoz said.
“But it’s tough. It’s never been as tough as it is now.”
Investors globally anticipate extended disruptions to traffic through the strait, even after news of a ceasefire agreement between the US and Iran that sent oil prices tumbling more than 17% on Wednesday.
Hyundai has largely been able to maintain production due to its built-in flexibility, Muñoz said.
Listen/read: Iran ceasefire offers short-term relief, long-term risks remain elevated
The company is navigating a volatile car market in the US, as affordability challenges, rising gas prices and the loss of electric-vehicle incentives pressure sales. Still, Hyundai saw a significant jump in first-quarter sales of electric vehicles (EVs) from a year ago.
The CEO said EV demand will persist even if not at the levels once expected.
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Hyundai’s new assembly plant near Savannah, Georgia, was originally intended to make only pure EVs – the Ioniq 5 and 9 models – but will begin making hybrids in 2026 and range-extended electric models in 2027.
The Savannah plant will also start making modified EVs for Alphabet Inc’s Waymo driverless-car business this year. Production will start with a few thousand, eventually climbing to “tens of thousands” of robotaxis at the plant, Muñoz said.
Read: Alphabet’s Waymo to expand its Robotaxi fleet with Hyundai EVs [Oct 2024]
Longer term, Hyundai wants to increase capacity in the US by about 300 000 units to 1.2 million by 2030 and localise 80% of its supply chain domestically to further insulate the business from tariffs and supply shocks.
“Globalisation is over,” said Muñoz . “It’s completely over.”
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