Electric car manufacturer Tesla will temporarily halt most production at its factory near Berlin for two weeks due to shipping delays in the Red Sea. These delays, caused by attacks from Iranian-backed Houthi militants, have impacted the supply chain, leading to disruptions in parts deliveries. The suspension, scheduled from January 29 to February 11, could result in approximately 5,000 to 7,000 cars not being built.
The conflicts in the Red Sea have forced companies to take longer routes, circumventing the disrupted shipping route to the Mediterranean by traveling around the southern tip of Africa. Tesla, the second-largest seller of electric cars globally, stated that the considerably longer transportation times are creating gaps in supply chains.
This pause in production comes at a challenging time for Tesla, as it faces increased competition from Chinese manufacturers. Last month, Chinese company BYD overtook Tesla as the world’s top-selling electric carmaker. Analysts note that the Berlin production pause poses a fresh challenge to Tesla’s production targets.
The Red Sea route, a crucial pathway to the Suez Canal, accounts for about 12% of global maritime traffic. Recent tensions, marked by air and missile strikes by the US and UK in Houthi-controlled areas of Yemen, have escalated the situation. The military response targeted Iranian-backed Houthi militant locations to prevent attacks on ships navigating the Red Sea.
The disruption in the Red Sea has broader implications for global trade, with a 1.3% drop in December. The German economic institute reported a 60% decrease in the number of containers traveling daily through the Red Sea, from 500,000 in November to 200,000 last month.
Oil prices rose by 2% following the US and UK strikes, reaching almost $79 a barrel for Brent crude. Concerns about the potential impact of a broader conflict in the Middle East on oil supplies contribute to these price increases.
Shipping companies, including Maersk, responsible for moving 20% of global trade annually, have diverted their ships around the southern tip of Africa due to the Red Sea disruptions. Maersk’s CEO, Vincent Clerc, warned that the situation could persist for months, describing Houthi attacks as “brutal and dramatic.” He also expressed concerns about potential inflation across the global economy.
Retailers, including Marks & Spencer, anticipate challenges in availability and potential inflation if container ships continue to divert around Africa. Marks & Spencer specifically mentioned that the availability of some items, mainly clothing, may be affected in February and March, and alcohol deliveries could also face disruptions.
