As commodity prices soar due to the Middle East war, the U.S. auto industry is taking a direct hit. In particular, concerns are growing about worsening profitability at automakers as prices for aluminum, a key material, rise sharply.
According to the Financial Times (FT), the so-called Big Three—General Motors (GM), Ford, and Stellantis—said in their recent first-quarter earnings releases that this year's raw material expense increases could add as much as $5 billion (about 7.38 trillion won) in extra burden. That is because tensions have escalated around the Strait of Hormuz amid the fallout from the Middle East conflict, disrupting global shipping and supply chains and pushing up prices of key materials such as aluminum, plastics, and paint in tandem.
In fact, aluminum prices on the London Metal Exchange (LME) have risen as much as 16% since the war. FT said that if the rise in aluminum prices persists, it could add $500 to $1,500 in expense per vehicle. Aluminum is a core material used throughout automobiles, including the body, engine, and doors.
The burden on automakers is already showing up in the numbers. GM expects operating profit to fall by as much as $2 billion (about 3 trillion won) this year due to raw material inflation. GM Chief Executive Officer Mary Barra said, "Costs have risen because of the war, and it's uncertain how long the situation will last," adding, "We are absorbing the shock by reducing other expenditure." Ford also expects increases in supply chain expense to reach as much as $2 billion. Stellantis likewise flagged a future expense burden of about €1 billion. For the industry as a whole, the raw material shock is estimated at $5 billion, a level comparable to the losses from the U.S. government's high tariffs (about $6 billion).
The problem is the potential for a prolonged crisis. So far, fixed-price contracts with suppliers have helped absorb some of the short-term shock, but if the conflict drags on, the increase in raw material prices is expected to be fully reflected in production expense. Suppliers are also increasingly likely to seek price renegotiations.
In addition to aluminum, rising oil prices and a shortage of naphtha, a plastic feedstock, are cited as burdens. That is because upward price pressure is mounting across auto parts such as plastics, tires, and interior materials. On top of that, as semiconductor companies focus on producing high-performance chips for artificial intelligence (AI) instead of automotive chips, memory (DRAM) prices are rising as well, compounding expense pressures.
Industry watchers say it will likely end up leading to higher consumer prices. Experts said, "If the war is prolonged, price hikes are inevitable," and analyzed that "if companies raise prices at the same time, market share will be maintained, but the burden on consumers will grow even heavier."