Expect Some Impact On Costs Due To Red Sea Crisis: Maruti Suzuki

Maruti Suzuki may see some increase in costs due to the rerouting of vessels amid the ongoing Red Sea crisis, according to a senior company official.

The auto major, which exported around 2.7 lakh cars last calendar year, however, noted that it does not expect the issue to have a very big impact on the company's overseas shipments.

"We are seeing some logistical challenges because of the Red Sea issue. And there may be some increase in costs because of risk or because of rerouting of vessels but it should not be significant," MSI Executive Officer (Corporate Affairs) Rahul Bharti said in an analyst call.

The lead time of dispatches might change, and there may be some uncertainty in vessels coming and picking up their consignments, among others, he noted.

That is a small issue, which is quite common in the export business, Bharti said.

Red Sea strait is crucial for 30% of global container traffic and 12% of global trade. About 80% of India's merchandise trade with Europe passes through this route.

The situation around the Bab-el-Mandeb Strait, a crucial shipping route for traders connecting the Red Sea and the Mediterranean Sea to the Indian Ocean, has escalated due to attacks by Yemen-based Houthi militants since December 2023.

Because of this, the shipping costs have jumped, and the consignments are taking more time to reach Europe and the U.S., as the ships are taking the Cape of Good Hope route, encircling Africa.

Maruti Suzuki has set an aim to export at least 7.5 lakh units by the end of this decade, Bharti said.

Africa is turning out to be a good market, and for several reasons, the Middle East region has picked up quite well recently, he noted.

The government is also signing some FTAs, where the company might get some relief in duty, Bharti said.

He noted that the automaker is also gearing up to commence production of battery electric vehicles this year.

The first model, a mid-sized SUV, would be exported to Japan and Europe while catering to the domestic market.

"In addition to serving the domestic market, this mid-SUV segment product will be exported to developed markets, such as Japan and Europe," Bharti said.

Elaborating on the model, he noted that the mid-sized SUV would be bigger in size than the Grand Vitara and come with a range of around 550 kilometres.

"We have taken care of customers' range anxiety extremely well. It will be a high-spec vehicle. We are hopeful that the customers will receive it well," Bharti said.