Tesla and Volvo pause production as Red Sea attacks delay supply

Tesla and Volvo have suspended production at some of their European factories, due to supply issues arising from the ongoing attacks in the Red Sea.

Ships using the world’s busiest maritime trade route are being targeted by the Houthi militia in response to the ongoing war between Gaza and Israel, international media reports.  

The Houthis, who are backed by Iran and allies of Gaza's Hamas militant group, control a large part of Yemen, which vessels must pass to use the vital and incredibly busy Suez Canal.

As a result, transport firms have halted deliveries through the trade route, either rerouting vessels thousands of miles around Africa or stopping them completely, and both options result in severe delays to time-sensitive production schedules. 

Many car makers rely on the Suez Canal to receive supplies from Asian parts manufacturers, especially components for electric cars. For example, the European-market Tesla Model Y is fitted with batteries from China.

The last-resort decisions from Tesla and Volvo show that effects of the Houthi attacks – which started in November but have only recently hit the headlines – are now being felt by the car industry for the first time.

The significance of these supply issues are being compared to those experienced during the Covid pandemic.

"The armed conflicts in the Red Sea and the associated shifts in transport routes between Europe and Asia via the Cape of Good Hope [South Africa] are having an impact on production in Gruenheide," said Tesla in a statement. 

The brand confirmed it would suspend “most” car production at its factory in Germany between 29 January and 11 February.

Volvo said it would halt output for three days at its factory in Ghent, Belgium, where it builds the Volvo XC40 and Volvo C40, due to a shortage of gearboxes.

Stellantis, which has more than 20 plants across Europe, said it was using air freight to mitigate issues arising from the shipping delays. Despite this, it has seen "almost no impact on manufacturing to date”, a spokesperson told Automotive News Europe.

Elsewhere, BMW and Renault confirmed their production was unaffected and Volkswagen told Reuters that it didn't expect "significant" production issues.

"Volkswagen is in close co-ordination with the shipping companies and is monitoring the situation closely in order to assess the impact on production and market supply and, as far as possible, avoid it," said a spokesperson.