Shipping Costs $400,000/Day, New Energy Sales Up 360,000 Units? CRRC's Gains and Losses in the "Middle East Battlefield"

In 2025, China’s auto exports for the first time surpassed 7 million units, with the Middle East contributing approximately 1.39 million, accounting for nearly 20%.

While domestic price wars are raging fiercely, the vast blue ocean of the Middle Eastern market is undoubtedly China’s car companies’ “profit cow” and “growth engine.”

However, the sudden escalation of the Middle East geopolitical conflict at the end of February 2026 hit like an unexpected brake. The Strait of Hormuz—the throat of global energy and trade—immediately came to a halt.

The “oil route” to Persia was cut off. For the global auto industry, which was thriving along this route, this was not just a logistics delay but a severe stress test on corporate strategic resilience, supply chain security, and the rules of global survival.

As the conflict ignited across the strait, roll-on/roll-off ships loaded with cars were forced to drift at sea, and the global auto industry faced a major test. Meanwhile, under the shadow of war, China’s car companies’ globalization stories are experiencing the harshest “coming-of-age” test. How will China’s auto industry “stop the bleeding” and turn around?

Analyzing the “Pressure Index” of Automakers Under Middle East Turmoil

On this hot land of the Middle East, the joys and sorrows of Chinese car companies are not the same. When risks arrive, the differences in business structure determine each company’s pressure index.

GAC Motor CEO Zhou Xiaoying pointed out that assessing the impact of the Middle East situation on relevant entities can be comprehensively judged through a set of core logical factors, simplified as: Impact ≅ (Middle East export share/scale) × (dependence on Gulf ports/transshipment hubs) × (presence of local “after-sales/spare parts” systems) × (financial settlement and insurance exposure).

This logic can clearly quantify the potential impact faced by different entities.

Meanwhile, Zhou Xiaoying identified three main types of direct losses that have already occurred or are most likely to occur:

1. Delivery delays or cancellations en route, affected by the effective halt of passage through the strait. Shipping companies have suspended or significantly adjusted relevant routes, completely disrupting the arrival schedule at dealerships. Several logistics and shipping agencies have issued warnings, and commercial passage through the strait is now effectively halted, with related bookings suspended.

2. Sharp increases in freight and insurance costs. The VLCC freight rates on the Middle East–China route have soared to around $400,000 per day, directly elevating the entire transportation cost system. This is often accompanied by increased or canceled war risk insurance, further intensifying operational cost pressures.

3. After-sales parts risks. The damage to brand reputation from delays in vehicle delivery is far less severe than from supply disruptions of key parts (such as accident repair parts, commonly used vulnerable parts, electronic components). Once supply is cut off, it can severely damage brand image and be difficult to recover.

According to GAC Research, major Chinese automakers exporting to the Middle East include Chery, BYD (002594), SAIC, Changan, Geely, and others.

Data from GAC Research shows that from January to November 2025, Chery exported 263,679 units, ranking first among Chinese passenger car exporters to the Middle East.

From this industry shift, Chery’s impact level is particularly indicative.

Chery is the Chinese automaker with the largest Middle East business scale, highly concentrated in Iran.

“Chery’s business in the Middle East is the largest among Chinese automakers, with a high concentration in Iran,” said analyst Chen Weiwei from GAC Research. Chery mainly conducts business in Iran by providing local partners with knock-down (KD) parts for assembly. After the outbreak of war, the foreign exchange quotas previously approved by the Iranian central bank for auto supply chain procurement may be significantly tightened to prioritize support for the war effort, leading to a reduction in business scale.

He added: “The blockade of the Strait of Hormuz will also hinder Chery’s KD parts exports and vehicle exports to the UAE, which cannot reach their destination in the short term.”

Exports to Saudi Arabia are only partially affected. Changan, SAIC, and Geely’s Middle East operations are more distributed in Saudi Arabia, which can bypass the Strait via the Red Sea through Jeddah port (accounting for about two-thirds of Saudi auto imports). Although land transportation costs will increase locally, this can somewhat offset the impact of the Strait blockade.

Map of the Strait of Hormuz; Source: Baidu Baike

SAIC MG’s difficulties mainly stem from logistics dependence and inventory imbalance. As a leading Chinese brand in the UAE and other Gulf markets, MG’s market performance heavily relies on regional logistics orderliness, with a tightly integrated “port-to-store” chain and strong dependence on key transshipment hubs like Dubai Jebel Ali Port.

Jebel Ali Port is a deep-water port in Dubai, UAE, and the largest and busiest port in the Middle East. As a key hub of the Western Land-Sea new corridor, Beibu Gulf Port (000582) actively promotes trade routes to the Middle East.

Zhou Xiaoying emphasized: “Once the transshipment hub is blocked, delivery delays and inventory imbalances will become more apparent more quickly.”

For Great Wall Motors (601633), their SUVs and pickups, being larger and heavier, are more sensitive to shipping costs and insurance fees. When freight and insurance costs surge, the per-vehicle landed cost increases, directly eroding their cost advantage. More importantly, users of such off-road models demand high after-sales guarantees; supply disruptions of key parts will severely damage brand reputation.

Compared to the “pain points” of the previous companies, BYD faces a different kind of loss: timing and strategic rhythm dislocation.

According to Zhou Xiaoying, in a public interview in November 2025, senior executives of BYD mentioned they are discussing or promoting the establishment of a distribution/delivery center in Saudi Arabia targeting the GCC, calling it a “huge investment,” expected to be implemented in 2026, with plans to expand to 10 outlets in Saudi Arabia.

For BYD, short-term “absolute sales” may not be the biggest concern, but the conflict could disrupt dealer confidence in opening new stores and delay the introduction of new models.

“Breaking the strategic window will affect their overall globalization plan, especially in the Middle East,” Zhou Xiaoying said.

Oil Prices Surpass $100, Freight Rates Surge, Strontium Carbonate Doubles: Rewriting the Cost Formula for Car Exporting

If corporate losses are the visible tip of the iceberg, then the upstream industry chain’s transmission effects are the submerged icebergs capable of grounding the giant ships.

Methanol: 55% Dependency and the “Framework Material” Crisis

Iran is the world’s second-largest methanol producer, with an annual capacity of 17.16 million tons, accounting for 9.2% of global capacity. Since the country’s methanol facilities are highly concentrated along the Persian Gulf coast and exports rely heavily on maritime shipping, any escalation of conflict could severely impact supply.

China is precisely Iran’s largest buyer of methanol. In 2025, China imported over 7.92 million tons from Iran, accounting for more than 55% of total imports.

Methanol is not only a fuel but also a fundamental raw material for synthesizing polymers and chemical products. From interior dashboard parts, foam materials in seats, to engineering plastics, adhesives, and coatings on vehicle bodies, the entire production chain is deeply linked to the stable supply of methanol.

Tianfeng Securities’ chemical team pointed out that Iran, as a key methanol producer in the Middle East, has geopolitical uncertainties that could directly affect China’s methanol import market and downstream auto industry.

Celestite: 85% Reserves and the “Lifeline” for Electric Vehicles

Compared to methanol, celestite (strontium sulfate) may be less familiar to the general public, but it is crucial for new energy vehicles. Celestite is the main source of strontium, which is essential for manufacturing high-performance permanent magnet ferrites widely used in electric motors, sensors, and braking systems.

Iran holds about 85% of the world’s high-grade celestite reserves and dominates the supply of high-quality celestite globally. About 60-70% of China’s celestite imports come from Iran.

This means that any disruption in Iran’s celestite supply could threaten the raw material supply chain for domestic strontium salts and downstream electric motor production.

Worse, inventory levels are concerning. Some analysts believe that due to shipping disruptions, domestic celestite reserves can only support about three months.

In fact, the explosion at Iran’s Abadan Port in June 2025, which led to port shutdowns, already worsened global celestite supply. The price of strontium carbonate soared from around 8,000 yuan/ton in September 2024 to 16,000 yuan/ton in June 2025, a 100% increase.

With the Strait of Hormuz shipping blockade, the supply chain for high-grade celestite-dependent permanent magnet materials and electric vehicle models may face production cuts or delivery delays in the future.

Oil: 1.5 Million Barrels/Day Imports and Cost Transmission

Iran is China’s third-largest oil supplier, after Russia and Saudi Arabia. Industry estimates suggest that in 2025, China imported about 1.5 million barrels of crude oil daily from Iran, totaling approximately 550 million barrels (75 million tons) for the year.

The blockade of the Strait of Hormuz further restricts Iran’s oil exports. Once conflict escalates, international oil prices react swiftly; Brent crude once surged nearly 13%, reaching about $82 per barrel. Bernstein raised its 2026 Brent crude price forecast to $80 per barrel.

Analysts expect that if the situation in Iran continues to escalate and affects energy facilities in Gulf Arab countries, international oil prices could break through $150 per barrel.

This would be a heavy blow to fuel vehicles.

Huatai Securities, using historical oil price patterns, estimated that at $80 and $100 per barrel, the retail price of 92-octane gasoline would be about 7.1 and 7.6 yuan/liter, respectively.

Revisiting the fluctuations from 2013 to 2018, they found that a 1 yuan/liter change in gasoline price impacts passenger car sales by about 75,000 to 85,000 units. Based on this, they project that if oil prices stabilize at $80 and $100 per barrel from March to September 2026, the marginal increase in oil prices could reduce China’s annual fuel vehicle sales by 170,000 to 680,000 units.

However, the other side of the coin presents opportunities for new energy vehicles.

Huatai Securities estimates that when oil prices rise to $100 per barrel, it effectively reduces the relative cost of new energy vehicles by 1.7% to 3.7%, boosting sales by 1.7% to 4.5%, translating to an additional 100,000 to 360,000 vehicle demand shifting to the new energy market.

Logistics Hubs “Shutdown”

Once the blockade was announced, major international shipping companies quickly adjusted for risk.

MSC, the world’s largest shipping line, suspended bookings for Middle East routes worldwide; CMA CGM halted all Suez Canal transits, rerouting ships around the Cape of Good Hope; Hapag-Lloyd announced suspensions of all ships passing through the Strait of Hormuz.

Peter Sand, chief analyst at Xenata, pointed out that the closure of the Strait of Hormuz has shattered hopes of a large-scale return of container shipping to the Red Sea in 2026. Rerouting via Africa’s Cape of Good Hope becomes the only option for Asia-Europe and trans-American routes, adding 10 to 14 days to voyage times.

Many shipping companies have explicitly refused to accept auto transport orders related to the Middle East, and dealers are hesitant to place orders, plunging export chains into full passivity.

At this moment, Chinese automakers deeply realize that the so-called cost advantage of new energy vehicles is not only based on technological innovation but also relies on a fragile logistics line crossing the Strait of Hormuz.

From “Market Gained by Chance” to “Baptism in Hard Battles”; from “Price Wars” to “System Battles”

Crises are not only tests of corporate resilience but also catalysts for industry evolution.

Faced with this potentially prolonged “Gray Rhinoceros,” China’s auto companies’ overseas strategies are being reshaped.

Pessimists see sales losses; optimists see a reshaping of the landscape.

In terms of competitive landscape, Japanese cars remain dominant in the Middle East (Toyota’s market share about 17%), but they are also affected. Toyota has announced a reduction of 40,000 units of production for the Middle East market in Japan, with high-margin models like the Land Cruiser facing delivery pressures. When supply shrinks, “delivery gaps” will inevitably emerge.

Image Source: Toyota Motor

Cui Dongshu, secretary-general of the China Passenger Car Association, believes this incident presents a “crisis with opportunities.” “China’s shipping capacity and industrial resilience are among the world’s leading, and no other country has such strong cost resilience as ours.”

Having experienced chip shortages, the Red Sea crisis, and now the Hormuz blockade, a clear consensus is emerging: the era of extreme efficiency in global supply chains is over, giving way to an era of regional resilience.

But this does not mean “regionalization” is safer than “globalization.”

Zhou Xiaoying pointed out that regionalization merely replaces transoceanic risks with regional concentration risks. True safety comes from “triple redundancy”: route redundancy (multiple ports/multiple channels), supplier redundancy (dual sourcing/across regions), and inventory redundancy (critical parts safety stock).

She believes that in specific overseas layouts, Chinese automakers’ future strategies will follow a dual logic: “capacity follows barriers, supply chains follow safety.”

This core logic, when applied to specific overseas deployments, shows a clear regional differentiation:

• South America (e.g., Brazil): strong demand but strict tariffs and localization requirements, suitable for “local production for market” strategies.
• Southeast Asia: deep roots of Japanese automakers; Chinese automakers can seek breakthroughs through “new energy/intelligentization + local partners + financial solutions.”
• Europe: high compliance barriers but large brand premiums, suitable for “high certainty investment + compliance system output.”

Meanwhile, the order of overseas deployment for automakers is shifting from simply “where growth is fast” to a more scientific layout based on “market returns/policy barriers/geopolitical risks/logistics value” quadrants.

Conclusion

Standing in spring 2026, the smoke of the Strait of Hormuz may eventually clear, but the reflections it leaves for China’s auto industry are far from over.

This is not just a logistics crisis but a coming-of-age ceremony about survival.

It forces Chinese automakers to face a reality: the road of globalization has never been smooth. When black swans turn into gray rhinoceroses, what truly protects you is not low prices but resilient systems and supply chains capable of weathering storms and still operating amid war.

For China’s rapidly advancing auto industry, only by learning to temper in the flames can it truly sail into the deep sea.