Escalating tension in the Red Sea is forcing car manufacturers operating in Europe to close their factories due to significant delays in sourcing materials from the East.
Volvo and Tesla are the first carmakers to announce that they will stop production in their factories in Europe as a result of the attacks on ships in the Red Sea, which created significant delays in component deliveries from Asia;
On her part, Stellar stated that Not affected as the group is currently relying on air transport to deal with the supply problems that have arisen.
“Stellantis has taken appropriate measures to compensate for the temporary rerouting of ships by using air freight solutions”, a company spokesman said Friday. The automotive industry has not faced “virtually no impact on production to date”the spokesperson added.
However, the situation for other manufacturers has worsened. Specifically, the Volvo factory in Ghent, Belgium will stop production for three days after ships had to take new routes to avoid escalating tension in one of the world’s busiest shipping lanes. This, as the Swedish manufacturer stated, it will have direct impact on timely delivery of gearboxes to the unit.
In this Volvo manufactures the XC40 and C40. In contrast, car deliveries and production targets for the company’s plant in Gothenburg, Sweden were not affected, a Volvo spokesman said.
Tesla, for its part, said that will suspend most car production at its plant near Berlin from January 29 to February 11. The American company did not make public the reason for the suspension of its production, but it is known that Tesla relies heavily on it in batteries supplied from China to build the Model Y sold in European markets at its Gruenheide plant.
We remind you that Asia represents the wider region 67% of component imports in the EU concerning batteries which are intended to be installed in electric cars, according to data from S&P Market Intelligence.
Escalating tension in the Red Sea
Attacks by Iran-backed Houthi fighters in solidarity with the Palestinians in their fight against Israel in the Gaza Strip have forced container ships to avoid the Suez Canal.
Large transport companies, such as Maersk and the Hapag-Lloyd, have stated that they are now avoiding that particular route, with their ships following the longest drive around Africa’s Cape of Good Hope. As expected, this has significantly affected ship itineraries, caused delays in cargo deliveries and significantly increased shipping costs.
According to authoritative analysts, the cost of extra fuel for a ship that used to travel from Asia to Northern Europe via the Suez Canal and now follows a round trip route that passes through the southern tip of Africa amounts to approx. 2 million dollars. Additionally, this re-routing adds 10 extra days to the journey.
“The longer this crisis continues, the more disruption it will cause to shipping freight around the world and costs will continue to rise.”said Peter Sand, chief analyst at Xeneta.