Yemen's Houthi terror group threatened on Saturday that it would not allow vessels from any country to cross toward Israel, stressing: "If the necessary food and medicine do not enter the Gaza Strip, the ships will become legitimate targets for our forces."
This threat can have many economic effects, since the vulnerability of ships sailing in the Red Sea and Persian Gulf to these threats will extend the sailing routes of cargo ships, which may increase the cost of a variety of products such as electrical appliances, electronics and even vehicles, whose import and export routes pass through maritime compounds under the range of Houthi missiles.
According to Chen Herzog, chief economist of BDO, a consulting firm, "The Houthi threat to sea freight to Israel could bring a heavy economic price to the cost of living and the supply chain. The volume of imports of goods to Israel is about NIS 400 billion a year, 70% of which comes by sea."
TVs imported from the East. Photo: Joshua Yosef
Herzog explains that the impact of the Houthi threat is expressed on three levels: The first is the increase in insurance costs for sea transportation to Israel, as a result of an increase in the risk premium. The second level is the effect of changing the itinerary of ships from the east to Israel, where, instead of passing through the Bab el-Mandeb Strait and the Red Sea, they will be forced to use a different sailing route that encompasses the African continent. This means extending the sailing time by 30 days (!) and increasing the price of sea freight.
The third level may be expressed in the fact that foreign shipping companies will completely refrain from reaching Israeli ports, in order to avoid risks, or due to the limitations of the insurance companies.
Remember that there is also a crisis in air freight
According to Herzog, "China is the largest source country for maritime imports to Israel, accounting for about 20% of the volume of imports to Israel. Significant imports from the East also exist from South Korea, which is ranked as the sixth largest source of imports to Israel." Herzog adds that the impact can be felt in terms of product availability. According to him, "Imports from the East are of final products, as well as raw materials, and therefore will lead to price increases in industry as well. It should be remembered that the crisis in sea transportation comes against the background of a situation in which since the outbreak of the war there has also been a crisis in air transport, due to the decline in flight activity to Israel. Therefore, the cost of living is now affected by a double crisis – both in sea and air freight.
"This is expected to affect everyone's pockets through an increase in the prices of cars, appliances and furniture, and it may also roll over to the prices of food and consumer goods as a result of the increase in the cost of transporting raw materials.
The economic damage is also to the Israeli industry, which manufactures for Eastern marketers, mainly the chemical industry."
ZIM cargo ship, photo: AP (archive)
Significant impact on vehicle prices A source in the field of vehicle
imports told Israel Hayom: "The insurance companies raised the prices of risk insurance policies, and the route of the cruise route was lengthened. The ships will arrive via the Strait of Gibraltar so this is a 30-day extension. As a result, the cost of transportation will increase. Prices can go up by hundreds of dollars per car, depending on which model it is."
Giora Plosniker - Senior Vice President of Marsh - the Israeli branch of the world's largest insurance broker: "Many car shipments arrive from the East to Eilat. If the alternative is to Ashdod, it will be necessary to change the transport route so that it will encompass Africa - and then it will be a transportation increase that will certainly be chained to the price of the vehicle as well.
New cars. Photo: Joshua Yosef
"In addition, if shipments from the East that are planned to pass through the Suez Canal are cancelled and instead encompass Africa, the impact will be on the prices of additional products. Beyond that, if there is still a desire to ship to Eilat, the price of marine insurance will also rise, and here an additional effect is created on the final price to the consumer."
A source in the automotive industry emphasizes the expected change: "In 1.1, a substantial part of electric vehicles are expected to increase in price due to the tax increase on this complex. Many car companies wanted to get ahead of schedule and reach a situation where they would have vehicles in stock before January 1, so that they could clear the vehicles from customs and sell more cheaply thanks to the old tax system. Importers who planned ahead of time that the shipments would arrive before the tax came in and they did arrive - there is no influence on them. The supply of vehicles, which are currently delayed because of Houthi influence and the rotation that the ships are making now, are affected first of all because it is a higher tax, by about 1-10%. The consequences of this matter are harm to competition, because these vehicles will not be able to compete in the market. The restriction is mainly on ships coming from Southeast Asia, China and Japan."
Significant damage to vehicles imported from China
Plusnaker stresses that there are vehicles that will not be disturbed by the Houthi threat, such as European vehicles. "But," he notes, "in recent times, 1 out of every 7 vehicles sold in the State of Israel was a vehicle from China. Almost all of them are electric vehicles – and this is a big hit. Add to this the rise in the euro and dollar since the beginning of the war, and the extension of the track and insurance – all of which will surely lead to higher prices. This makes the car no longer competitive, because its prices are not competitive.
"I think that in general, any tax increase that is planned will reduce the volume of electric vehicles purchased. In addition to the fact that the electric vehicle will also be more expensive, it has many existing and known disadvantages, such as charging limitations, innovation and the fact that you do not know how to handle it.
"So far, at least, the price has been cheaper. Once taxes go up and the price isn't cheap, why should people buy an electric car? It's contrary to what's happening in the world. They want to promote electric vehicles for reasons of air pollution. The increase in taxation is very significant. If you look at car prices, which are already high, and add taxation to that, it has significance. It's an injustice. It doesn't make sense that this Houthi story would hurt competition in the electric vehicle sector. The state had to solve this and postpone the taxation for two months, until the ships arrived. We keep talking about how important competition is, and we have to make sure that there is healthy competition."
Mi Ron Levy, vice president of vehicles of the Levy Yitzhak Group, thinks that the impact on car prices following Houthi attacks will exist if inventories in Israel are depleted. "At the moment there are large enough inventories, but as soon as they dwindle, and if, God forbid, the terrorist threat continues, of course there will be an impact on the automotive sector. As soon as there is demand and there are no vehicles, I assume prices will go up."
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