According to Reuters, on January 11, Tesla declared that it would suspend most car production at its German Berlin factory from January 29 to February 11, citing a change in transportation routes due to attacks on Red Sea ships leading to shortages of components. This production halt indicates that the Red Sea crisis has impacted the largest economy in Europe.
Tesla is the first company to disclose production interruptions due to the Red Sea crisis. In a statement, Tesla mentioned, "The tense situation in the Red Sea and the resulting changes in transportation routes have also affected the production at its Berlin factory." The altered transportation routes have led to extended delivery times, causing gaps in the supply chain.
Analysts anticipate that other automakers might also be affected by the tense situation in the Red Sea.
Sam Fiorani, Vice President of AutoForecast Solutions, stated, "Reliance on critical components from Asia, especially those from China, has always been a potential weak link in any automaker's supply chain. Tesla heavily relies on battery components from China, and these components need to be shipped across the Red Sea to Europe, posing a risk to production."
He added, "I don't think Tesla is the only company affected; they are just the first to reflect this issue."
This production stoppage adds pressure to Tesla amid ongoing labor disputes, including a dispute with the Swedish union IF Metall, leading to sympathy strikes by several unions in the Nordic region.
Workers at Norway's aluminum firm Norsk Hydro and its subsidiary Hydro Extrusions, which produces components for Tesla vehicles, stopped working on November 24, 2023, in sympathy with IF Metall. These workers are members of IF Metall. Tesla did not respond to requests for comments on whether the strike at Hydro Extrusions affected its production.
Tesla, in its statement on January 11, mentioned that the Berlin factory would resume full production on February 12. Tesla did not provide details on which components are in shortage or how production would be restored at that time.
The tense situation in the Red Sea has compelled major shipping companies globally to avoid the Suez Canal, the fastest sea route from Asia to Europe, constituting approximately 12% of global shipping.
Shipping giants like Maersk and Hapag-Lloyd have rerouted ships around the Cape of Good Hope in South Africa, resulting in longer journeys and higher costs. Maersk stated on January 12 that it expects this route adjustment to continue in the foreseeable future. After the route adjustment, the journey from Asia to Northern Europe is estimated to increase by about 10 days, incurring an additional cost of around $1 million.
In the entire electric vehicle industry, European automakers and analysts have warned in recent months that the growth in sales is not as fast as expected. Some companies have lowered prices to boost demand affected by economic uncertainties.
