Used car exports stall as Middle East conflict sends shipping costs soaring

Korea's used car exports to the Middle East have been virtually paralyzed for two months as the Strait of Hormuz blockade sends shipping costs soaring, leaving thousands of vehicles stranded at the country's largest export hub and dealers reporting zero revenue.

"The Middle East was our biggest market, but we've been essentially shut down for two months because we can't afford the logistics costs," the head of a used car export company, surnamed Kim, said at the Incheon Songdo Used Car Export Complex. “Revenue is completely zero right now."

Monthly used passenger car exports to the Middle East fell 48.8 percent in value and 71.8 percent in volume in March from last year's monthly average to $65.6 million and 6,636 units, the Korea International Trade Association said Saturday. No cars were shipped to Qatar, Bahrain or Israel in March at all.

On April 27, rows of vehicles sat baking in the sun at the complex, the signs of prolonged exposure accumulating across their bodywork. Trailers occasionally pulled in to drop off more cars before leaving again.

Korea's annual used car exports total roughly 12.86 trillion won ($8.8 billion) across approximately 880,000 units, with around 70 percent flowing to the Middle East through Incheon Port. The industry estimates that around 1,600 businesses and about 20,000 vehicles are now stranded at the Incheon Songdo complex alone.

Kim Ju, an exporter who had come to Incheon to source vehicles for sale in Kyrgyzstan, described the shift on the ground.

"We export about 500 cars a month, earning around 200,000 won per car," Kim Ju said. "Middle East buyers used to come here a lot, but since the Iran war broke out, they're rarely seen."

The head of another used car export company, which mainly ships to the Middle East and Central Asia, said buyer traffic from the Middle East has collapsed. "Before the war, 10 to 20 Middle East buyers came here every day. Now it's down to just three or four," the exporter said.

"Only some regions — Kazakhstan and Kyrgyzstan — are still buying. We're essentially out of work."

The Middle East used car market had already softened following the 2023 war in Palestine, and export channels narrowed further over the past two years as Egypt, Syria and other countries tightened import restrictions. The current war has compounded the damage, industry sources said. If the trend continues, Middle East shipments could fall by more than 100,000 units this year alone.

Shipping companies have retroactively levied $7,250 per container in extra surcharges on cargo already in transit. With three cars per container on average, that adds more than 3.5 million won per car in extra costs — further diminishing the normal profit of only a few million won per car.

"Shipping to the Middle East is possible, but logistics costs have already risen five and a half times compared to before the war, making it financially unviable," the dealer said.

For unshipped vehicles, cash flow is tightening.

"We can't load cars we've already bought, so our working capital is tied up and we can't collect payment from overseas buyers because we can't deliver the vehicles," the head of another used car export company said. 

"We just want the government to at least offer short-term working capital loans to help us survive these soaring logistics costs."

Industry experts said government support for new market development is needed. 

"The industry is already trying to turn this crisis into an opportunity by strengthening ties with buyers in Latin America, Central America and the Commonwealth of Independent States and exploring untapped markets in Africa and Eastern Europe," Park Young-hwa, the head of the Korea Used Car Export Association, said. 

"But there are limits to what exporters can do on their own. We want the government to provide diplomatic support for used car export trade missions. Creating hub markets in regions like Africa — covering not just used cars but also parts and other products — would also be a path forward."

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.

BY KO SUK-HYUN [[email protected]]