Aftermarket Shockwaves From The Strait Of Hormuz
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Aftermarket Shockwaves From The Strait Of Hormuz

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Welcome And What Indicators Tracks

Mike Chung 

Welcome to Auto Care ON AIR, a candid podcast for a curious industry. I'm Mike Chung, Senior Director of Market Intelligence at the Auto Care Association, and this is Indicators, where we identify and explore data that will help you monitor and forecast industry performance. This includes global economic data, industry indicators, and new data sources. Hello and welcome to another edition of Indicators. I'm Mike Chung, and I'm very happy to have Stephan Keese. He is the managing partner for North America at Roland Berger. Stephan, welcome to our program. Mike, thanks for having me. Great to be here. Absolutely. And there's been a lot of um news lately, and we're going to talk a little bit about the conflict in Iran and how that's affecting the automotive aftermarket and arguably a lot of other industries in the United States. So maybe we start off with just that term Iran conflict. Some of the things that come to mind are energy prices. Tell me a little bit, Stefan, about things that come to mind from your perspective related to the supply chain and other operational considerations that executives should be paying attention to.

Stephan Keese 

Absolutely. Happy to. So we're going to stay away completely from the politics, from the origins of the conflict at the moment, and focus on the implications, what is currently happening with the closure of the Strait of Hormuz. It's important to consider that the region that is blocked off by the strait at the moment produces about 20% of the global production of crude oil. But the strait itself actually transports about 30% of global seaborne trade of crude oil. So it's a very important chokehole for crude oil in general. And in addition, there's a ton of refining capacity in Saudi Arabia, in the Emirates, in Iran itself. And the refining capacity produces, of course, all the different energy sources, whether it's gasoline, whether it's diesel, whether it's kerosene. But it also produces a ton of different byproducts that are typically created when you produce one of the energy raw materials, ranging from fertilizer inputs like ammonia and sulfur to a whole bunch of different petrochemical products, most importantly naphtha, polyethylene, polypropylene, and even some critical materials that are being used, for example, in the semiconductor industry, such as helium. Iran is also a major source for a raw material called celestide. Celestide is typically refined into strontium, and strontium, again, is a very critical production in electronics manufacturing, in magnets, in sensors, switches, thermal components, diodes, and again, even in some form of chip manufacturing itself. And lastly, the region is also one of the major outputs or major producers of primary aluminum and uh produces about 80% of India's demand or imports of aluminum into the country. So it's not just about the raw uh it's not just about uh crude oil, it's really about all the different byproducts and um different commodities that are derived from oil that are now being choked off uh in the straight of homes and are impacting global supply. Because we're talking tier two, tier three, tier four supplies, raw materials really, it takes a while until everything trickles down, but it will ultimately impact the uh aftermarket uh components and of course all the other industries that are dependent on those raw materials.

Mike Chung 

That's fascinating because if I go back in time to say the 1970s, 1980s, um all of the materials you mentioned up front are, like you said, base materials, petrochemical, the building blocks for so much of the chemical and engineering industries. And then, as you mentioned, some of the more advanced materials or applications towards more advanced technologies, we're talking a very widespread of industries that are being affected by this very critical, like you said, chokehold of a gateway for so many chemicals across so many industries.

Stephan Keese 

That's absolutely true. And I think the world is much more connected today than it was back in the 1970s. Um back in the 70s, we had the global energy crisis. Um but today, with so much import, so many parts coming from Asia, coming from India, coming from Southeast Asia, coming from China, uh, especially also in the aftermarket, um, you feel a much more direct impact, not just on the raw material, on the on the crude oil, and um, but also on the on the downstream parts that are produced um in other parts of uh of the world. So if the crisis continues, I think we are up for a much tougher ride than we might have been in the 1970s. We may be a little bit more energy independent than we were uh back then, but we are basic, yeah, we are definitely heavily dependent on Asia, on South Asia and East Asia as it comes to component and parts uh sourcing.

Mike Chung 

Now, there's two things I want to kind of follow up with. One is how does this current situation compare to something like, say, when COVID broke out in the night in 2020, uh the Russia-Ukraine conflict, the Red Sea shipping lane um uh crisis. In terms of complexity, in terms of duration, can you comment on those aspects of this current conflict in Iran?

Shipping Detours And Container Shortages

Stephan Keese 

I would say it's different. It may, you may put it in one line with all the other crises, but each crisis had its own different sets of challenges. The Russia-Ukraine crisis was predominantly a European energy uh cost problem, um, because Europe at that time was so dependent on Russian gas. By now, Europe has refocused either on other sources of energy or on gas from the Middle East, where they are impacted again, or on gas from um from North America. COVID, I think, was a general demand and supply shock at the same time. Closure of the of the Strait of Um of the Suez Canal was luckily a relatively short-lived but very impactful um um stoppage of uh east-west uh trade routes. Now we have a little bit of all of the above. We have skyrocketing oil prices, we are up about 45% on crude oil, 80% on LNG. Um we have a demand shortage. There's many parts of the world who are already who are facing significant shortages of gasoline, of kerosene. Um, there are Southeast Asian airports who are not accepting incremental flights anymore because they don't have any incremental kerosene to spare. There's countries ranging from uh Australia to um Southeast Asia and probably soon Europe, which are um reporting gasoline shortages. Um and you have significantly disrupted shipping lanes because many freight companies don't want to use the Suez Canal uh anymore. It's different from the Strait of Hormuz, but you still have uh the Houthis in Yemen who are threatening attack uh with attacks, and it's well within the range of any Iranian missiles. So they go around the Cape Horn, and that easily adds about 20 days to the overall journey, and therefore increases uh shipping costs significantly and of course slows down um the shipping rates. As a curious side note, which not many people are talking about yet, but we are seeing a significant container shortage coming up in Europe and in uh in the US because containers are stuck now in Asia and in the Middle East, because no one can bring them, uh can bring them back to um uh to the to the point of origin.

Mike Chung 

Yeah, you certainly don't want to send back an empty vessel because that's just lost revenue opportunity. And I think one thing you mentioned was tier two, tier three, tier four, and this again gets due to the breadth of the issue. I remember Suez Canal, or not Suez Canal, pardon me, the Red Sea. I I remember specific cases, say, Volkswagen and steering wire harnesses coming from, say, Poland. And that just that is just one of many examples. But I think as you described the range of chemicals and input materials to so many different suppliers, it's just a much larger swath of products that are going to be held up in production. Is that fair to say, Stefan?

Stephan Keese 

Absolutely. And it's gonna take it's gonna take months, in some cases years, until the situation normalizes. Just think of the attacks on Iranian, Kuwaiti, um, and other um uh Middle Eastern um refining uh facilities uh as well as LNG facilities. It can easily take up to three years and cost hundreds of millions of dollars to repair some of the damage that has been done over the uh last couple of years. So even if the strait would open up tomorrow, not all of the refining capacity can come back right away because of all the infrastructure structure damage that has already been uh been caused.

Mike Chung 

You did mention earlier maybe one to six months of a trickle-down effect, and that did not necessarily include like what you just highlighted from an infrastructure perspective. Are there other things that are worth noting, whether from a more short-term perspective or the medium to more long term that you just highlighted, Stefan?

Stephan Keese 

It typically takes some time uh for the energy price hikes to translate into actual raw material price hikes. We've seen actually in this crisis a faster translation of some of the um the cost. If I look at where some of the resin costs for polyethylene, polypropylene have already developed, they have already gone up quite a bit, but they don't reflect the full extent of the um of the oil price hike as of yet. They eventually will. So it takes up to three months until the oil price changes are fully reflected in the chemical prices, and then it takes another, let's say, months or two months until the producers of the final product that source these resin, source these uh chemical input factors until they have depleted their inventory and until they are actually fully faced with their with higher cost materials. Um and then you add in another, let's say, months in transit time until you actually get a part from uh from Asia here in the in the US. That means we are probably about six months out until the market will feel the full impact of um of um um of the currently increased um uh crude oil prices.

Mike Chung 

That's fascinating. And I think I I just read, I think it was in Friday's Wall Street Journal, that we're already seeing fuel charges. 3.5% at Amazon, UPS, and FedEx are all are already adding fuel surcharges. And that's just kind of one of several hits, it sounds like, because, like you said, depending on the product and the input, there could be more impacts on prices ultimately going to consumers, I would think, in the next three to six months. Is that fair to say, Stefan?

Stephan Keese 

Absolutely. I think we will see increased cost that we will see increased um product cost from the higher raw material cost. We will see shortages. Um I'm afraid that we may be running into another ship um shortage that's on top of the current SD RAM uh shortage, uh DRAM shortage that we already have in the market. Um and then you have increased uh freight cost. Um and then on top of this, you layer um you layer a potential decline in consumer demand um because of the inflation, because of consumer uncertainty. Let's face it, Q1 for the automotive aftermarket uh industry was already weak, weaker than expected and weaker than than hoped. And if the current um current trend continues, we will see an even weaker Q2 and even weaker Q3. Um couple that with increased um uh product cost, and you will you may have you may have a problem on top of um of a of a problem of higher higher um sourcing cost and decline uh demand.

Mike Chung 

So it sounds like it's a snowballing effect here, and you covered a lot. You covered materials, packaging, freight, supplier surcharges, and so forth. Um and we just talked about the fuel surcharges. Are there other kinds of costs that you see increasing that uh we should be concerned about or just be watching for, whether as a consumer or as a supplier?

Stephan Keese 

I mean, you mentioned packaging. Packaging is an important uh factor. There's a lot of uh most of the packaging is um is directly or indirect, directly oil derived. Um, and it's not even clear yet on how quickly and how strongly packaging will continue to um to um trickle down uh into the supply chain. Um I think there we've talked about shortages. Um there is um the aside from the from the longer shipment times and uh that it takes to get products from Asia to Europe to North America, you also cannot really shorten uh shortcut any of those through air freight because there isn't enough air freight capacity anymore. Middle Eastern Airlines were some of the biggest or are some of the biggest uh air freight companies in the world, and they are operating at significantly reduced capacity. And all the remaining European and Southeast Asian airlines are currently forced into a very narrow corridor of about 200 miles between the north of Iran and the southern border of Russia, uh flying over Azerbaijan and Georgia. And that limits the capacity of um of air traffic in general that can go from uh from Europe into um into South Asia and East Asia. So you have again, you have these these um these incremental add-on effects that will continue to add to cost and add to um to availability.

Mike Chung 

And just thinking about the air transit for as a freight lane or as a means of freight, um, you mentioned reduced airspace from a safety perspective or legality perspective. Um you mentioned kerosene, higher fuel prices. Are there other um considerations? Because I can just only see those prices of shipping by air going up.

Stephan Keese 

Prices by shipping by air and sea will go up, insurance rates are going up for sea freight. Um I mean uh wherever you look at the moment, prices uh at the end are only going in one direction, which is up.

Pricing Without Killing Demand

Mike Chung 

Sure. So that kind of begs the question: if I'm a a pricing executive at an aftermarket supplier, say in the United States, how are you advising companies to look at their pricing cadence or uh I guess thinking about changing prices? As you said, things are going up. What what is your advice on that in in that regard?

Stephan Keese 

This year in the short term, it will be it will be a very delicate balancing act. You have to pass on some of the price increases to the consumer because the price increases will be um the prices will uh rise faster than what companies can um can internalize. However, if you rise prices too quickly and too strongly, you will impact demand. Um so trying to maybe even anticipate some of the price increases that are coming, trying to price carefully and gradually, and make an end seeing what price increases are you maybe internalizing in the short term in order to preserve midterm demand for the brand and deter and customers from switching over to other lower cost alternative brands. I think all of that needs to be uh taken into consideration.

Mike Chung 

Certainly. And it'll be interesting because gasoline prices have gone up fairly substantially over the last several weeks. So it'll be interesting to see if we see a reduction in driving and then therefore a reduction in service demand and consequent parts demand for maintenance. So I feel like there's a couple of different things going on for the consumer for their own demand of their um service on their vehicles, whether or not they delay it. And then as that kind of folds into the producer's um logic in raising prices, it'll be uh quite a lot to watch, it sounds like Stefan.

Stephan Keese 

I 100% agree. Um there's already a lot of discussion about reduced flight demand because the airlines will have to pass on kerosene prices to the end consumer. Sure. So there's a lot of discussion at the moment on how much um how much air travel will be seen summer. Um and if fuel prices stay elevated, which they are likely likely to uh to do, I do think we will see an impact in in miles travel. Um and that of course will impact um maintenance demand. And on top, you you layer that on top of the already reduced spending willingness of the uh average consumer to maintain, repair, replace uh, or upgrade, um then you run into a potential demand crisis in uh Q2, Q, Q3. And that's again tying this back to pricing. That's where it's so important to price very, very carefully. I think people will have to price, but if you overprice, you will impact demand more than you gain.

Mike Chung 

Sure. Um I want to bring it over to kind of supply chain management and sort of the the broader geographical implications here for suppliers. So um thinking about dependencies on, say, Asia for sourcing, um, are you seeing companies really kind of think about and rearrange their sourcing options for materials?

Stephan Keese 

I think we've seen we've seen a trend for a number of years now. It started after COVID, uh with all the new geopolitical um trade uh alignments that companies are more and more looking to. Uh source region by region or region for region, really. So trying to localize in North America, predominantly in Mexico, as much as they can. There's still a whole bunch of categories which are generally cheaper to source from Asia than they are sourcing them from North America, even factoring in the incremental logistics and supply chain cost. Simply because in some categories there's a significant cost advantage from labor, from raw materials, from subsidized materials like aluminum and others. So that we still see quite a bit of sourcing directly from Asia. The companies that are currently already worried and already feeling the impacts typically have exposure sourcing exposure from India. India is at the moment the most impacted country. Since China imports a lot of its oil from the Middle East, a lot of its gas from the Middle East, a lot of um petrochemical byproducts from the Middle East. I do expect that there we will also see increased impact on Southeast Asia as well as uh East Asia, including China, and parts being sourced from there. So, midterm, I think uh companies will continue to double down on the trend to reshore where it's possible. And otherwise, it's important to either secure multiple locations or try to uh get your supply chain as robust as you can in order to minimize uh disruptions uh from uh from this or potential future crisis.

Mike Chung 

Sure. And as you kind of alluded to, certainly companies have been rethinking their supply chains and planning since COVID, tariffs, and other things that have been emerging as issues. Um are there other questions that executives should be asking their suppliers for given the current situation?

Stephan Keese 

Look, at the end, it all comes down to the category management. Which categories do you ultimately produce where? Which um categories uh do you source from where? How can you get the quality right and the price right from which uh sources of uh of uh origin? And I think what we've learned over the last six years is that the global supply chain crisis seem to um layer on top of each other or seem to follow each other. It isn't just a one singular event, it's a series of different events that have different um different um sources, but all leading back to the same fundamental problem is that the world has become overly connected and global supply chains have become stretched to the absolute limit, so that any disruption, whether it's uh it's an act of war, whether it's an act of terror, whether it's an it's uh it's a global health uh problem, it's an it's an accident, like in the um in the Suez Canal, each individual act um uh uh complicates global supply chains and uh and global global supply even more.

Hidden Dependencies And Global Pricing

Mike Chung 

Oh, thanks for that uh that insight. And just thinking about are there any quote unquote hidden dependencies that you haven't already addressed? Um perhaps it's a supplier that has materials coming from the Middle East or processes that are heavily reliant on the Middle East that perhaps um may be kind of news to a supplier or to our audience.

Stephan Keese 

The countries that source the most directly from the Middle East are China, are India, are Japan, South Korea, and most of the Southeast Asian uh countries, including um including Australia. You have a relatively limited amount of direct sourcing um from the Middle East in the Americas or in Europe, um, with the exception of a couple of categories, like for example, urea, um, critical for uh um for emission systems, um key ingredient to add blue, for example, um that uh come significantly that where we have significant production in uh in the Middle East um itself. So I think from a supply quantity perspective, we will see the most important and most immediate impacts on uh the Asian countries. From a price perspective, all of these commodities are traded at global um world market prices, and there's no um way to disconnect or discouple prices in the US for commodities from world market prices. Um so we will see the price impact regardless of the origin of um of the product, even when it's being produced in countries where the raw material are sufficiently available.

Mike Chung 

Oh, thanks for that commentary. And you touched on sort of the aspect of transit time, where perhaps going around the Cape the Cape Horn may add 20 days to deliver. Um can you comment on how longer transit time, perhaps some um lower reliability in the logistics um flow, how those are changing service levels, fill rates, and other impacts. You had mentioned higher insurance rates is one of them. But can can you uh comment on those aspects?

Stephan Keese 

Certainly. I mean, most companies maybe don't source just in time, but they have they try to keep inventories as low as reasonable, um, simply to preserve working capital. And that's been a key philosophy for aftermarket companies for a long uh long time. If you now suddenly have to add about 20 days in transportation because the ships can't go through the Suez Canal uh but have to go the other way over the Pacific or have to go through around the uh around Cape Horn, um your inventories run extremely low. Um you can't really uh offset this through air freight uh in the short uh cost at uh in the short term at any reasonable cost. There isn't enough capacity in place, and that can put you into um into a significant predicament uh even if your source can still produce in sufficient uh quantities. And again, as I said earlier, for example, in India we already see reduced outputs in some um uh suppliers um simply because they can't get enough enough aluminum, they can't get enough uh petrochemical uh uh commodities. And uh therefore, even if they could ship, they don't have the uh the parts. And that's sooner or later going to impact um impact service levels for certain categories, for certain uh brands.

Mike Chung 

And I think you mentioned something earlier about this as the an opportunity and almost a necessity for companies, for suppliers to build a more robust supply chain. And I see that coupling in this conversation as well, where if there's a delay in filling your inventory, if you're not able to in order to ensure the quality of the product that you're creating, and again, as you mentioned, by category, it can vary. Being able to be nimble and just look at ways to enhance your already existing infrastructure and kind of sourcers to ensure that you can have enough suppliers to make the products that you need to make and diversify as you had highlighted. Am I capturing that correctly, Stefan?

Stephan Keese 

I I I would say yes. Um I mean, think back to the 2010s. We had a relatively stable supply of products uh with very little disruption around the world. Um and companies were optimizing their own inventory levels, their own supply routes to a standard deviation on what it usually, how usually uh the freight would uh would arrive. And you knew that worst comes to worst, you can always air freight an extra shipment. And then came COVID, and after COVID, the global supply chain started to start. And now we've gone from black swan event to black swan event, so all these one-time events that the output never happened, they're all happening one after the other. So you can't just ignore the fact that you have to plan, take flex one events into your supply chain um uh planning today, and you have to have um extra inventory on hand, or live with the fact that you're not gonna have the right uh service levels uh for certain categories on certain brands. Um, and that's of course something that you don't want to do because then you have to start prioritizing your customers and um and channels and uh and think about where do I work, where do I drop, where do I um where do I make sure that I maintain my service level and my delivery as um as high as I I can. I think larger companies with multiple brands, especially across the same categories, are probably in a better shape to try to balance. I think smaller categories that are heavily dependent on Asian and East Asian um uh sourcing that don't have the ability to easily uh offset different brands or different uh different um categories, they're probably gonna be much more uh much more impacted. And um so this is not just a single disruption activity. I think this is going to threaten certain business models and operating models and corporate strategies uh and of course profitability significantly.

Executive Playbook And Scenarios

Mike Chung 

It sounds like such a complex uh balancing act in terms of making trade-offs, like you said, if you have to prioritize customers, if you have to manage across different categories and brands, um, it's gonna look different uh at a variety of companies, it sounds like every company will have to will have to draw its own conclusions from it.

Stephan Keese 

Um and the answer also cannot just be let's bring everything back to the US. You cannot be cost competitive with manufacturing in the US for a lot of categories. There sometimes aren't raw materials, so you still have the same raw material uh dependence. Um uh so we will see more regionalization, more trying to de-risk supply chains by bringing uh manufacturing closer, but it's not going to work for every single category. Um it can't it can't be uh be profitable or cost effective for every category.

Mike Chung 

Sure. So I guess like when you're advising executives at companies, what are the top couple of things you might advise them to do in situations like this?

Indicators To Watch In Real Time

Stephan Keese 

Well, number one, understand really the impact of uh of the crisis, uh both on demand as well as on supply, as well as on prices. Um, a lot of people at the moment are focused on crude oil and ultimately on the gas station um at the price levels we see there. But the real challenges on the supply chains, I think, are a lot deeper than that. So really understand which raw materials uh are going to impact you in which way, in which uh time frame. And then I think you have to to uh to uh go through the strategic thinking on what are the implications for my current budget, for my current business business year. Am I going to how is it going to um impact my sales? Potentially thinking in scenarios. None of us know how long this uh conflict is going to continue. None of us know when the strait will reopen. None of us truly know how quickly supply could return to normal and how quickly oil prices would drop again. So it's going to have some uh form of impact. Is it going to be significant? Is it going to be medium or is it going to be light? I think it depends on your categories and depends on your um on your individual strategy. So thinking in scenarios here, uh I think is very important. And then thinking through what does it mean for my portfolio, what does it mean for my um for my supply chain strategy, what does it mean for my commodities, for my supplier management, for my pricing. Uh what prices can I pass on? What prices should I pass on a little bit faster? Where do I maybe internalize certain price hikes? I think it becomes a very individual corporate uh decision-making process.

Mike Chung 

That makes perfect sense. And over the next several months, are there indicators in the economy or in the industry that you recommend or you would expect executives to be watching to kind of gauge stability or further chaos, if you will?

M&A Timing In A Volatile Market

Stephan Keese 

Look, I mean, the the price situation on the raw material side is uh of course needs to be needs to be watched very, very closely. Um, this will give you a good indication on how prices will probably impact your your different uh products and um and categories. On the demand side, both milestriven as well as the point of sales information in your different channels, uh, I think needs to be uh monitored very, very uh closely to understand how does demand continue to develop. Um and uh and the third topic is also what are your competitors doing on the pricing side? Um you don't want to be the first one uh to price, but you also don't want to be the last one to uh to uh to price. Um so how much flexibility do you actually have um from uh from your from the market?

Mike Chung 

Uh really enjoyed this conversation with you, Stefan. I I think as we uh get towards wrapping up, are there any other thoughts that you have in mind that you'd like to share with your audience or anything you'd like to kind of double tap that we've already uh spoken about?

Guest Story And Lightning Round

Stephan Keese 

I think we covered a lot of uh ground here today, so appreciate the conversation. Maybe one more thought that I had was uh we will also see an impact on the MA markets. The um aftermarket has been uh very much front and center of automotive uh MA activities. We see quite a few investors and owners currently rethinking current or potential acquisitions or sales processes in the light of this uncertainty. So that's one more item on your strategic watch list to take into consideration. When is there a good point uh good uh moment to maybe uh take a reduced market demand to go and buy? And when is there enough stability and forecastability in the market to potentially um go and sell something?

Mike Chung 

Well, thank you again for those insights. And Stefan, if you have a couple more minutes, I'd like to just have some more kind of light-hearted, fun conversational questions with you. Are you uh game for that? Yeah, always, of course. And it's uh wonderful. So we talked in the beginning about um it sounds like you're from Germany. Uh uh, did you live in Germany for a part of your life? And if you're in the United States, what part of the United States are you in now?

Stephan Keese 

Yeah, I grew up in uh I grew up in Germany. Um, I did my MBA actually in the US at Georgetown University, but then went back to Germany and started my professional career at Rollerberger uh 25 years ago, but then left Germany in 2009 and actually went to Brazil. Uh lived in Sao Paulo for six years, led our automotive practice in Latin America until uh the Latin American crisis in Brazil uh uh prompted me to uh to move on. And instead of going back to Germany, my wife and I decided uh to settle in the US. So we now live in Chicago and um enjoy enjoy every moment of it.

Mike Chung 

Wow, what a journey that must have been to go from country to country, continent to continent. So I'll do a couple of kind of lightning round questions. So thinking about the United States for a vacation, Hawaii or Alaska?

Stephan Keese 

Oh, very, very different places. I absolutely love Hawaii. Um great place, uh spent a couple of weeks there two or three years ago. Um and I think from for my wife, she she's always much more game for a nice hotel at the beach. Um, my son, I know, would absolutely love Alaska, go hiking, go um go bear watching and uh enjoy the nature. So I'm up for both, actually.

Mike Chung 

Wonderful. So now I'm just gonna do a series of quick hit lightning round questions. So here we go. Chocolate or vanilla? Uh chocolate. Beer or wine.

Stephan Keese 

Oh, that's a tough one. Depends on the time of the day, both, I would say.

Mike Chung 

Sounds like all of the above, then uh tennis or pickleball?

Stephan Keese 

Uh tennis. Always been an avid tennis player. Oh, wonderful.

Mike Chung 

Um, convertible or SUV?

Stephan Keese 

Uh when I was in my 30s, 100% convertible. These days, 100% SUV.

Mike Chung 

It's funny how they can change, right? And uh so now that you've been living in America for some time, would you rather go to the World Series or the Super Bowl? Oh, the Super Bowl. I'm a football guy. Okay, and then stick shift or self-driving?

Final Takeaways And Subscribe

Stephan Keese 

Uh, same thing. Uh used to love a stick. Um, it's a lot of fun to drift um and really really do some serious driving. But uh these days, self-driving.

Mike Chung 

Wonderful. And our last one, K-pop or Taylor Swift? Oh, Jesus.

Stephan Keese 

Um I have to admit, I I lived probably I spent nearly a year of my life in Korea, and I have absolutely loved the country, love the kitchen, love the people. So K-pop.

Mike Chung 

Wonderful. So uh Stefan, it's so great to meet you. And uh thank you so much for having uh being a guest on our program. And to all of our listeners and viewers, thank you for joining us for this edition. We hope you learned something and that you can apply it to your own business. Thank you and have a great day. Thanks for tuning in to another episode of Auto Care on Air. Make sure to subscribe to our podcast so that you never miss an episode. Don't forget to leave us a rating and review. It helps others discover our show. AutoCare on Air is proud to be a production of the Auto Care Association, dedicated to advancing the autocare industry and supporting professionals like you. To learn more about the association and its initiatives, visit autocare.org.

Description

A single waterway on the other side of the world can quietly rewrite your cost sheet in the automotive aftermarket. Mike Chung sits down with Stephan Keese, Managing Partner for North America at Roland Berger, to unpack what the Iran conflict and the Strait of Hormuz disruption mean beyond headlines and gas station prices. We keep it practical and operational: what gets constrained, how it moves through the supply chain, and when you actually feel it. 

We dig into why this chokepoint matters for far more than crude oil, including refining outputs and petrochemical byproducts that underpin plastics like polyethylene and polypropylene, plus other industrial inputs that can affect electronics and materials availability. Stefan compares this moment to COVID-19, the Russia-Ukraine energy shock, and recent shipping lane disruptions, then explains why this crisis can stack multiple problems at once: higher energy prices, disrupted ocean routes, rising insurance, reduced air freight capacity, and even looming container shortages as equipment gets stuck out of position. 

Timing is the real trap, so we walk through the lag from oil spikes to resin pricing to finished parts and why the full impact can land months later. From there we get into the hard leadership calls: pricing cadence without killing demand, inventory strategy when transit times stretch, and sourcing choices as companies push toward near shoring and regionalization while still relying on Asia for cost and scale. We also touch on what to watch next, including key indicators like commodity prices, miles driven, point-of-sale signals, and competitor pricing moves, plus how uncertainty can change M&A timing across the aftermarket. 

This episode was recorded on April 6, 2026.