• Tesla pauses Berlin production due to Red Sea delays.
• Volvo Car halts Ghent plant for part delays.
• Global supply chain concerns grow with Red Sea disruptions.

Automakers Tesla and Geely-owned Volvo Car have announced temporary suspensions of production in Europe due to a shortage of components, marking the first visible impact of the Red Sea shipping disruptions on manufacturers in the region.

The United States and Britain initiated strikes on Yemen on Thursday, targeting the Iran-backed Houthi militia, whose actions have been disrupting international shipping in the Red Sea. This has prompted concerns about vessels having to avoid the Suez Canal, a crucial route between Asia and Europe.

Tesla revealed that it will suspend most car production at its Berlin factory from January 29 to February 11 due to a lack of components caused by shipping delays. The company cited the re-routing of ships around the southern tip of Africa as a result of armed conflicts in the Red Sea, leading to considerably longer transportation times and creating a gap in its supply chains.

Similarly, Volvo Car, majority-owned by China’s Geely, announced a three-day pause in production at its Ghent plant in Belgium due to delayed deliveries of gearboxes.

The Red Sea shipping crisis has led to major supply chain disruptions, risking the global economic recovery. Container shipping rates have surged, and concerns are growing that the Suez Canal, which accounts for about 12 percent of global container traffic, may face longer closures.

Shipping giants like Maersk and Hapag-Lloyd have rerouted their vessels around Africa, adding both time and cost to the journey. The impact is not limited to the automotive sector; companies like Geely, IKEA, Next, Target, and Tractor Supply are also experiencing potential delays in deliveries.

While Tesla and Volvo Car are the first to announce production halts, other companies, including major automakers, could face similar challenges in the coming weeks. The conflict in the Red Sea, coupled with logistical issues such as low water levels in the Panama Canal, poses a threat to global trade and supply chains.

The fallout from the Red Sea disruptions may result in shortages of various products, affecting retailers and manufacturers alike. With the potential for prolonged disruptions, the global supply chain faces challenges that could impact shelves as early as April and May, leading to concerns about inflation and a setback to the post-COVID-19 economic recovery.

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