Red Sea Conflict Hits Tesla Production in Germany

Tesla suspends vehicle production at its Berlin factory owing to parts supply restrictions following rebel attacks on shipping in the Red Sea.

The news was revealed in an overnight tweet from the gigafactory’s social media X account that production of the Model Y crossover will be halted for about two weeks while uncertainty over vehicle parts supply remains.

Its message read: “#GigaBerlinBrandenburg has to largely halt production for around two weeks due to attacks by Yemen's Huthi rebels in the Red Sea. Due to a lack of components, we are therefore forced to suspend vehicle production at GigaBerlin for the period between January 29 and February 11, with the exception of a few subsections. Production will resume in full on February 12, explained Tesla.”

The U.S. battery-electric vehicle maker is the first company to disclose an interruption to output because of military action by the Iranian-backed rebel group. Meanwhile, other companies, including Chinese automaker giant Geely, which owns Volvo and Polestar, have warned of delays in deliveries.

In a statement, Tesla adds: “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 also having an impact on production in Gruenheide. The considerably longer transportation times are creating a gap in supply chains.”

Denmark's logistics company Maersk says it expects the rerouting to last for the foreseeable future. The longer route for shipping is said to add about 10 days in a journey from Asia to Northern Europe and about $1 million in extra fuel.

Speaking to Reuters, Sam Fiorani, vice president at AutoForecast Solutions which tracks automotive supply chains and production, says: “Relying on so many key components from Asia, and specifically China, has been a potential weak spot in any automaker’s supply chain. Tesla relies heavily on China for battery components, which need to be transported to Europe through the Red Sea, putting production constantly at risk. It can’t be believed that they’re alone, only the first to reflect the issue.”

The disruption hits the European BEV sector at a time when in recent months sales have not been growing as fast as expected, sparking a price war between some automakers trying to boost demand in the teeth of a continent-wide cost of living crisis.