Tesla, Volvo pause production in Europe amid Red Sea shipping crisis

Tesla and Volvo announced last week that they were suspending some of their production in Europe due to a shortage of components caused by shipping being re-routed away from the Red Sea and Suez Canal because of the threat of attack from Iran-backed Houthi militants in Yemen.

Tesla told Reuters on Thursday it will suspend most car production at its Gigafactory near Berlin from Jan. 29 to Feb. 11 because of a lack of components that were on ships re-routed away from the Red Sea and Suez Canal to around the Cape of Good Hope at the southern tip of Africa.

“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 Tesla statement said. “The considerably longer transportation times are creating a gap in supply chains.”

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The Berlin-Brandenburg Gigafactory, located near Gruenheide, is where Tesla assembles electric vehicles it sells in Europe. The company did not specify which components have been delayed that are affecting the factory’s operations.

Volvo, which is majority-owned by China-based firm Geely, said it will pause output at its plant in Ghent, Belgium, for three days next week because of a delayed delivery of gearboxes.

Some tanker operators have also stopped traversing the Red Sea amid the Houthi attacks on shipping and re-routed shipping around Africa, as have shipping giants like Maersk and Hapag-Lloyd. Maersk said in early January it expects the re-routing, which adds about 10 days and an additional $1 million in fuel expenses, to last for the foreseeable future.

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A Houthi military helicopter flies over the Galaxy Leader cargo ship in the Red Sea in this photo released November 20, 2023. (Houthi Military Media/Handout via REUTERS//File Photo / Reuters Photos)

The Iran-backed Houthi militants have conducted in protest of Israel’s war against Hamas in Gaza. Though the Houthis have said they would only target Israeli vessels or ships destined for ports in Israel, many of the targeted ships have had no links to Israel.

A group of 14 countries including the U.S. issued a joint statement last week saying, “The Houthis will bear the responsibility for the consequences should they continue to threaten lives, the global economy, or the free flow of commerce in the region’s critical waterways.”

An aircraft takes off to join the U.S.-led coalition to conduct air strikes against military targets in Yemen, aimed at the Iran-backed Houthi militia that has been targeting international shipping in the Red Sea, from an undisclosed location in this (US Central Command via X/Reuters / Reuters Photos)

The U.S. Navy and the British Royal Navy have shot down drones and missiles fired by the Houthis toward vessels in the Red Sea. They’re serving as a part of an international mission called Operation Prosperity Guardian which is intended to protect shipping in the region from Houthi attacks and acts of piracy.

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Last week, the U.S. and U.K. were joined by several other countries in launching airstrikes against Houthi targets in Yemen aimed at countering the threat.

FOX Business’ Bradford Betz and Reuters contributed to this report.