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European Production Pauses for Tesla and Volvo Amid the Crisis in Red Sea Shipping

Last week, Tesla and Volvo declared that they were stopping part of their manufacturing in Europe due to a lack of parts brought on by shipping being diverted away from the Suez Canal and Red Sea due to the threat of attack from Houthi insurgents in Yemen who are backed by Iran.

Due to a shortage of parts on ships that were diverted from the Red Sea and Suez Canal and instead traveled around the southern tip of Africa, or the Cape of Good Hope, Tesla informed Reuters on Thursday that it will be stopping most car manufacturing at its Gigafactory near Berlin from January 29 to February 11.

“The armed conflicts in the Red Sea and the associated shifts in transport routes between Europe and Asia via the Cape of Good Hope are having an impact on production in Gruenheide,” a statement from Tesla stated. “The considerably longer transportation times are creating a gap in supply chains.”

Tesla assembles its electric vehicles that are sold in Europe in the Berlin-Brandenburg Gigafactory, which is situated close to Gruenheide. The components that are experiencing delays and are impacting the factory’s operations were not disclosed by the corporation.

Due to a delayed gearbox delivery, Volvo, which is mostly owned by the Chinese company Geely, said that it will stop production at its Ghent, Belgium, plant for three days next week.

Along with maritime behemoths like Maersk and Hapag-Lloyd, some tanker operators have ceased operating in the Red Sea due to the Houthi attacks on shipping and have instead rerouted their cargo around Africa. Maersk stated in early January that it anticipates the re-routing, which adds roughly 10 days and carries an extra $1 million in fuel costs, to continue for some time.

The Houthi rebels, who are supported by Iran, have demonstrated against Israel’s war on Hamas in Gaza. Many of the targeted ships have no connection to Israel, despite the Houthis’ declaration that they would solely attack Israeli warships or ships bound for Israeli ports.

along a joint statement released last week, 14 nations—including the United States—said that “the Houthis will bear the consequences should they continue to threaten lives, the global economy, or the free flow of commerce in the region’s critical waterways.”

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