Middle East turmoil threatens Hyundai Motor, KGM

Hyundai Motor Group and KGM are feared to bear the brunt of the escalating geopolitical tensions in the Middle East, as mounting external uncertainty is expected to raise logistics costs and dampen market demand there for the export-reliant carmakers.

The joint U.S.-Israel attack on Iran has rapidly driven up global oil prices, which in turn is increasing shipping costs for carmakers.

Hyundai Motor, Kia and KGM are three representative domestic carmakers that generate a significant portion of their earnings from exports, making them highly vulnerable to such external shocks.

KGM particularly remains vigilant over the growing uncertainty in the Middle East, as its exports to the territory accounted for roughly 25 percent of its total last year. The company formerly named SsangYong Motor is accelerating efforts to normalize its earnings by focusing on exports to the Middle East, after undergoing corporate restructuring.

Rising freight rates are also expected to push up overall operating costs for the carmakers at a time when they have to tackle other risk factors. For instance, Hyundai Motor and Kia are struggling to recover their profitability following the U.S. imposition of auto tariffs last year.

Industry officials said that if the Iran crisis spreads to neighboring Middle Eastern countries, the impact could extend beyond the operational costs and into their sales performance, dampening demand in key regional markets there.

“If the U.S.-Iran conflict is prolonged, this will disrupt the carmakers’ logistics system in the Middle East, which does no good for enhancing their profitability,” an industry official said.

KGM’s largest export destination is Turkey, which shares a border of some 560 kilometers with Iran. The carmaker exported more than 13,300 vehicles to Turkey last year, accounting for some 19 percent of its total exports during the same period.

Hyundai Motor Group is constructing its Middle East manufacturing facility in Saudi Arabia. Hyundai Motor Manufacturing Middle East (HMMME) serves as a key strategic production base for the carmaker to supply its vehicles to the region, and is scheduled to begin operations in the fourth quarter of 2026.

The carmaker said it is heightening vigilance over the conflict in the Middle East.

The stock prices of the three carmakers fell sharply on Tuesday, as investors grew wary amid the conflict in the Middle East. Shares of Hyundai Motor and Kia closed with falls of 11.72 percent and 11.29 percent, respectively, on the benchmark KOSPI. KGM also closed down 5.81 percent during the same period.