Tesla stops production in Berlin due to Red Sea turbulence

  • Written by Jonathan Joseph and Faisal Islam
  • BBC News

Image source, Getty Images

Tesla decided to suspend manufacturing at its only European factory for electric cars, after attacks in the Red Sea disrupted supplies.

The company said longer delivery times have created a gap in its supply chains as shippers avoid the route.

The UK government fears that if the disruption to the movement of goods spreads, another energy shock could occur.

The electric car maker is believed to be the first company to reveal a problem with its supply chains after shipping companies were attacked by Houthi rebels.

“The armed conflicts in the Red Sea and associated shifts in transport routes between Europe and Asia via the Cape of Good Hope also have an impact on production in Gruenheide,” Tesla said in a statement to Reuters.

It said its Berlin factory would close on January 29 and reopen on February 11 “except in some sectors” due to a shortage of components.

The Houthi rebels in Yemen have intensified their attacks on commercial ships since the war between Israel and Hamas began in October. The United States said that 27 attacks had occurred in the Red Sea since mid-November.

The group, backed by Iran, is using drones and missiles against foreign-owned ships transporting goods through the Bab al-Mandeb Strait — a 20-mile-wide canal that divides Eritrea and Djibouti on the African side and Yemen on the African side. The Arabian Peninsula.

The Houthi group declared its support for Hamas and said it was targeting ships traveling to Israel, although it is not clear whether all the ships attacked were actually headed to Israel.

Many companies now send ships around the Cape of Good Hope instead, a route that adds at least 10 days of travel.

Currently, about a quarter of the world's shipping containers are being rerouted.

According to the White HouseAbout 15% of global seaborne trade passes through the Red Sea. This includes 8% of the world's grains, 12% of the world's seaborne oil, and 8% of the world's liquefied natural gas.

The head of shipping giant Maersk told the BBC that “major disruption” in global trade was already being felt “even to the end consumer.”

Ahead of the military strikes on Thursday, Maersk CEO Vincent Clerc called for “stronger mobilization” to repel the attacks, which he said would lead to higher prices for customers.

Earlier this week, Tesco boss Ken Murphy warned that the disruption “could inflate the cost of some items but we don’t know that at the moment”.

Subsequently, IKEA and Danone said they expected a delay in receiving goods as well.

Oil prices also rose on Thursday after Iran seized a tanker off the coast of Oman. The oil tanker was heading to Türkiye when gunmen ordered it to sail to an Iranian port.

The BBC has learned that the Treasury Department has developed scenarios that include a rise in crude oil prices of more than $10 per barrel and a 25% increase in natural gas prices.

The government is concerned that continued attacks on shipping in the Red Sea could shrink the UK economy further if the disruption continues to affect tanker traffic more widely.

Iran-backed Houthi rebels in Yemen said the attacks were in sympathy with the suffering of Palestinians in Gaza, and the group's leader, Abdul Malik al-Houthi, said on Thursday that they “will not back down.”

As a result of the attacks, Maersk and many of the world's other major shipping lines have avoided a major route for global trade as they prioritize the safety of their crews.

“We have ships that are being fired upon. We have colleagues whose lives are at risk when this happens, and we simply cannot justify sailing through these danger zones the way the situation is now,” Clerk said.

He said the longer route around Africa sucks capacity from the global shipping system in the short term, adding anything from seven days to two weeks to a ship's journey, as well as costing an extra $1 million (£783,000) in fuel alone.

Freight transport rates by sea reached record levels during the pandemic, but they, along with shipping company profits, have fallen dramatically over the past 18 months or so.

“So it has a real impact on people all over the world in their daily lives.”

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