Tesla and Volvo Car, owned by Geely, are temporarily halting production in Europe due to component shortages resulting from attacks on shipping in the Red Sea, Reuters highlights.
The strikes, launched by the U.S. and Britain on Yemen, targeted the Iran-backed Houthi militia, disrupting a crucial shipping route.
Container shipping costs have risen significantly amid worries about ships bypassing the Suez Canal for extended durations. The substantial disruption in the supply chain, the most substantial since the COVID-19 pandemic, poses a threat to the global economic recovery, potentially leading to inflation due to increased freight and oil prices. The Suez Canal, responsible for approximately 12% of worldwide container traffic, plays a pivotal role in international trade.
As explained, supply chain disruptions may lead to shortages in April and May if the Red Sea situation persists. Other automakers could also experience shortages, with concerns about the impact on EV supplies.
While Tesla and Volvo shares fell, Stellantis reported minimal impact on manufacturing, and BMW, Volkswagen, and Renault stated unaffected production. However, EU carmakers heavily rely on Asia for EV components, and the region constitutes a significant portion of EU imports for EV batteries and lithium-ion shipments. Carmakers and analysts in Europe have expressed concerns about slower-than-expected EV sales, leading to price cuts to stimulate demand.
