China's auto export boom meets maritime reality check in Gulf crisis

Disruption in Middle Eastern shipping routes linked to the Strait of Hormuz is exposing the vulnerability of China's rapidly growing automotive export network, forcing OEMs and logistics providers to reassess their heavy reliance on maritime trade lanes just as overseas demand has become increasingly critical to the industry's growth.

With car carriers stuck in the Strait of Hormuz impacting Chinese imports to the Middle East, China's automotive sector has been one of the industries most affected by the US and Israel’s war with Iran, which has had a profound impact on the global automotive logistics industry.

Read more: US and Iran agree ceasefire but shipping disruption continues

Despite the US and Iran agreeing a temporary ceasefire, shippers like Maersk and Hapag-Lloyd have cautioned that normal operations are unlikely to resume in the Strait of Hormuz anytime soon.

The industry sustained a double blow: losing direct sales to countries like Iran and facing severe disruption to crucial transshipment routes through Dubai that serve markets across the Middle East and Africa.

According to official data from the China Passenger Car Association (CPCA), the UAE was the third-largest automotive export destination for Chinese automakers, with deliveries reaching almost 570,000 finished vehicles, representing a 70% increase compared with the previous year.

Technically, the UAE ranks only behind Mexico and Russia on the list of key export destinations for Chinese automakers, though only a small fraction of the vehicles delivered to the UAE actually remain in the country.

China shipped about 1.39 million vehicles to Gulf countries in 2025, roughly one-sixth of its total vehicle exports, so any disruption in that corridor is immediately felt by Chinese OEMs and their logistics providers, commented Nandini Roy Choudhury, senior analyst with thinktank Future Market Insights.

"At the same time, shipping through the Strait of Hormuz has fallen dramatically during the conflict, creating delays, vessel bunching and higher war-risk and fuel costs," Choudhury added.

Things are yet to stabilise, and despite the agreement of a two-week ceasefire between the US and Iran, shipping company Hapag-Lloyd has described resuming service in and out of the Persian Gulf as “impossible”, while US president Donald Trump has said the US Navy will begin a blockade of Iranian ports from April 13, following the deterioration of peace talks this past weekend.

Even if the disruption is temporary, it is painful for Chinese carmakers because the Middle East has been a key growth engine, just as the home market has become more difficult.

China's domestic car sales have been weak in recent months, which means exports matter even more than before. "In that context, any interruption to outbound finished vehicle logistics or inbound components flows to assembly and distribution hubs in the region has an outsized effect on inventory planning, dealer supply and cash conversion," Choudhury said.

China impacted on multiple fronts

The war affects China's automotive industry on many fronts. In particular, China's EV industry is expected to face supply chain disruptions if the war is prolonged, according to S&P Global Commodity Insights.

Read more: Car carriers stuck in Strait of Hormuz impacting Chinese imports to Middle East

Car carriers stuck in the Strait of Hormuz are impacting Chinese imports to the Middle East, with ship operators discharging vehicles into nearby ports.

"Ongoing conflict could sever access to Iranian celestite, which accounts for 60-70% of China's total imports," the S&P Global analysts warned.

This mineral, the analysts explained, is the primary feedstock for strontium salts, a critical material used for making permanent magnet motors for EVs.

"While producers might pivot to alternative imports or lower-grade local ores, these substitutes are insufficient to bridge the supply gap, likely resulting in delivery delays or production suspensions," the analysts added.

According to Gasgoo Automotive Research Institute, with the Strait of Hormuz shipping now fully obstructed, supply chains for permanent magnet materials and EV models – highly dependent on high-grade celestite – may face production cuts or delivery delays in the future.

Besides, the analysts warned that the conflict in the Middle East could have a tangible impact on Chinese automakers by disrupting the supply of automotive components and spare parts, and this factor could be even more painful than disruption to finished vehicle exports.

Lessons to be learned

The Middle East crisis does provide an opportunity for the Chinese automotive industry rethink its logistics strategies. For instance, Future Market Insight's Choudhury assumed that Chinese carmakers would treat this as another reminder that export growth built on a narrow set of maritime chokepoints is vulnerable.

Read more: Turning supply chain disruption into competitive advantage at GM, Schaeffler, and Toyota

At ALSC Europe 2026 in Bonn, leaders from General Motors, Schaeffler, Maersk, Toyota Motor Europe and Kinaxis discussed how companies pulling ahead are the ones that have restructured how logistics fits into the enterprise before the crisis arrives.

"I think the Chinese industry's response will be similar to what many global manufacturers learned after Covid, the Red Sea disruptions and the Ukraine war: efficiency-only supply chains are giving way to resilience-oriented networks," Choudhury emphasised. "The priority will be to avoid having too much volume tied to one sea lane, one transshipment hub, or one regional demand pocket".

The mitigation playbook for the short term is fairly clear. First, Choudhury said, the Chinese OEMs will try to diversify export markets so that Europe, Latin America, Southeast Asia and selected African markets can offset shocks in the Gulf. In addition, they are likely to increase regional warehousing, bonded inventory and CKD/SKD assembly options in or near the Middle East to reduce dependence on long uninterrupted vehicle-shipping cycles.

Also, Choudhury assumed that the Chinese companies will probably work more closely with shipping lines and logistics partners on multi-port strategies, contingency vessel allocation and higher safety stock for critical components.

A new breath for railway projects?

Against the backdrop of repeated shocks to maritime trade – from Covid-era port congestion to Red Sea insecurity and now renewed volatility linked to the Middle East – some analysts are again questioning whether rail could regain relevance as a corridor for finished vehicle flows between China and Europe.

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Some OEMs have already tried to use the existing railway corridor running through Central Asia and Russia, sometimes called a New Silk Road. The most prominent case was Volvo Cars, which exported China-built S90 sedans from Daqing to Europe via the China-Europe Railway Express, delivering vehicles to hubs such as Zeebrugge in Belgium in roughly two to three weeks, compared to nearly 40 days for delivery by sea.

Several other carmakers considered following Volvo Cars’ lead, but all the projects in this direction have been wrapped up after the beginning of the conflict in Ukraine.

According to Choudhury, interest in the alternative delivery routes can certainly rise as risk-hedging options, but infrastructural limitations, sanctions and high costs prevent them from emerging as game-changers in the foreseeable future.

The World Bank notes that in the China-Europe freight market, rail still accounts for less than 5%, with more than 95% moved by sea. Therefore, rail is nowhere near large enough to replace maritime flows at scale, Choudhury said.

"And for the Middle Corridor through Central Asia and the Caspian, the same structural problems remain: fragmented operations, bottlenecks, limited throughput and relatively high cost,” Choudhury added. “OECD work says delivery costs on the route can be more than twice the Northern Corridor and around $5,500 per TEU.”

As a result, Choudhury stated that for Chinese automakers and suppliers, rail is most likely to grow as a supplementary channel for urgent or high-margin cargo, while finished vehicles in large volumes will still depend primarily on maritime transport.