Tesla under pressure: this is what the Red Sea attacks mean

In the Red Sea, Houthi rebels from Yemen are attacking ships with alleged Israeli connections, turning one of the world’s most important trade routes into the Middle East conflict. This is particularly worrying for the automotive industry, which relies on semiconductors from Asia.

“The Red Sea route affected by the attacks is of great importance for global trade; The tense security situation is putting pressure on the supply and logistics chains of global trade in goods,” said a spokeswoman for the Association of the Automotive Industry. T-Online.

What do BMW and the VW Group say?

The situation in the Red Sea requires adjustments to cargo ship transport routes, leading to longer delivery times and higher costs. However, the association is not yet aware of any effects on vehicle production at affiliated companies, she continues.

BMW says: “The situation in the Red Sea has no impact on the BMW Group’s production, as supply to our factories is guaranteed.” The company is in close contact with its logistics partners and currently does not expect any disruptions or delays.

When asked, a Volkswagen spokesperson explained: “As things currently stand, the Volkswagen Passenger Car brand does not expect any significant production restrictions at its factories.” Almost all major shipping companies had already changed their routes in December, meaning cargo would arrive with only a small delay. But not all companies get off so lightly.

Tesla stops production

The electric car manufacturer Tesla had previously announced that production at the German production site in Grünheide near Berlin would be suspended for two weeks. As transport routes shift, a gap has emerged in supply chains, the company said on Thursday (reports t-online). The missing components are “overseas components”. Tesla did not announce any details about this on Friday.

Production will fully resume from February 12. The company does not want to say exactly how the mandatory break for staff is arranged. “The employees are being paid,” Tesla said when asked on Friday.

Tesla has been producing electric cars in Grünheide since March 2022. Approximately 11,500 employees work there. Tesla wants to double production in Grünheide from the target 500,000 cars per year to one million per year by expanding the factory. According to its own information, the company currently builds more than 250,000 vehicles annually.

How could it come to this?

Major trade route interrupted

The Suez Canal connects the Mediterranean Sea to the Red Sea, providing the shortest sea route between Asia and Europe. About ten percent of world trade passes through this route. Since the outbreak of the Gaza war between Israel and the Islamist terror organization Hamas, there have been 27 attacks on international merchant ships in the Red Sea.

Large shipping companies are therefore increasingly avoiding the important trade route. According to American information, more than 2,000 ships have made a detour. However, the alternative route around the South African Cape of Good Hope is much longer – and therefore more expensive.

This means that even if few companies have seen a direct impact on production, the Houthi rebels’ attacks could have an impact on the global economy.

Significantly fewer containers

“The number of containers transported there fell by more than half and is currently almost 70 percent below the actual expected volume,” the Kiel Institute for the World Economy (IfW) reported on Thursday. According to the IfW, the transport volume via the Red Sea is currently only around 200,000 containers per day, after around 500,000 containers in November.

The diversion around the Cape of Good Hope would extend transportation time by seven to 20 days. Due to the longer travel time, prices for container transport – known in the jargon as freight rates – have risen significantly. “Transporting a standard 40-foot container between China and Northern Europe currently costs over $4,000; in November it was around $1,500,” the IfW says. “However, the current price is still far from the drastic fluctuations during the corona pandemic, when transporting a container on this route cost up to $14,000.”

However, the IfW experts do not initially expect price increases for consumers, because freight costs for the goods shipped are often in the thousands. However, the attacks in the Red Sea could have consequences for the economy as a whole if they continue. Oil transports are also carried out in this way.

Sources