Anxiety is brewing in the automobile industry due to the Red Sea crisis. Car-makers are contemplating re-routing ships, which will invariably lead to more costs. Eventually, the industry is looking at increasing the prices of products.

Luxury car-makers, mostly European, import critical components and semi-knocked-down kits to assemble the cars here. Some of them are getting fully-built units, too, through the Red Sea route.

“The government has done well by increasing surveillance and managing extreme situation like a ship hijack, which was intercepted. But certainly we are over cautious and people [companies] are continuing. But if the route is changed, then it will increase the cost and transit time,” Vinod Aggarwal, President, Society of Indian Automobile Manufacturers (SIAM), told businessline.

Transit time

He said the increase in transit time means more cost. “In the long term, we are hoping that the crisis would be resolved. But there could be a situation when there would be an exploration of alternate routes and longer through Africa,” Aggarwal added.

According to Balbir Singh Dhillon, Head of Audi India, the Red Sea situation put a challenge to production for two to six weeks because containers had to be rerouted.

“So, we will have less cars to sell this quarter, but I hope that we recover this subsequently and no more problems come. But prediction is a bit of a challenge now. It is difficult to predict for the whole year. We can predict only a quarter at the most...we are in a very new world, something or the other is happening around,” he said.

He said that most of the industry is facing similar situation right now, but it is more specially for the luxury vehicles space, because there is a lot of dependency for everybody in the supply chain overall.

Santosh Iyer, Managing Director and Chief Executive Officer, Mercedes-Benz India, said the crisis has not acquired major proportion as of now.

“In the last quarter, we had our supply chain challenges, which is still continuing [not related to Red Sea]. As far as Red Sea is concerned, we have had some delays in shipments of completely built units by 10-15 days, but it is still not affecting business for us majorly. For the moment, however, we don’t see any major issue related to Red Sea,” he added.

While luxury car-makers are facing import issues, there are companies facing challenges for exports from India.

Renault India, which exports its products and parts to Brazil, Romania and France, is among the companies affected. India is one of the international logistic networks for Renault globally.

“Our containers are in the ships, which are still stuck in the Red Sea. But they are safe and are manageable at this point in time,” said Venkatram Mamillapalle, Country Chief Executive Officer and Managing Director, Renault India.