Volvo and Tesla have declared temporary production pauses at their European facilities, attributing the disruptions to the recent blockade of the Red Sea by Yemen. The Yemeni forces’ targeting of US and Israeli-backed ships has intensified, aiming to diminish US military supplies in an attempt to end the high-intensity Israeli bombing campaign that is currently reducing the Gaza Strip to rubble and slaughtering civilians. Many independent observers express concerns, describing Israel’s bombing of Gaza as genocide.
Yemen’s blockade of the Red Sea is impacting crucial component deliveries from Asia. In response to the disturbances in one of the busiest shipping lanes globally, Volvo’s Ghent, Belgium factory will cease production for three days. This decision follows the rerouting of ships to avoid violence, leading to delays in the delivery of essential gearboxes.
Similarly, Tesla will temporarily suspend the majority of car production at its factory near Berlin from January 29 to February 11 in light of the supply chain challenges arising from the Red Sea incidents. Meanwhile, Stellantis is addressing supply interruptions by relying on air freight to mitigate potential disruptions in their production processes.
While Tesla has not provided a specific reason for the suspension of its production, it does rely heavily on batteries sourced from China to assemble the Model Y for the European markets at its Gruenheide factory near Berlin.
This reliance on Asian suppliers for electric vehicle components is a common trend in the industry. Asia constituted 67 percent of the European Union’s imports of components for EV batteries in the 12 months leading up to September 30. Moreover, just over two-thirds of shipments for lithium-ion batteries originated from Asia.
The blockade of the Red Sea by the Yemeni military has compelled container vessels to divert away from the Suez Canal due to the intervention. Shipping companies face an additional 10 days in journey time and a cost increase of $2 million in fuel to reroute from China, around the Horn of Africa to European shipping ports.