Tesla’s German Factory Shuts Down Amid Red Sea Crisis, Parts Shortage

U.S. electric vehicle manufacturer Tesla has decided to suspend operations at its German factory for two weeks due to a shortage of parts caused by the Red Sea situation. This is the first time a major company’s factory has been shut down due to an attack on a Red Sea ship by Yemen’s Houthi rebels. Concerns over supply chain disruptions, which peaked during the COVID-19 pandemic, are rising again.

According to Reuters and the Nihon Keizai Shimbun on the 11th (local time), Tesla announced plans to halt operations at its Gigafactory in Grünheide, Brandenburg, Germany, from the 29th of this month to the 11th of next month. This factory manufactures Model Y.

Tesla elaborated on the reasons behind this decision, noting that the transportation period has been considerably extended due to the Red Sea situation, leading to supply chain disruptions. The company further added that the rerouting of the Europe-Asia connection via the Cape of Good Hope in South Africa, necessitated by the armed conflict in the Red Sea, is impacting production at the Grünheide factory.

Experts predict the Red Sea situation could also hit other car manufacturers. European electric car factories depend on China for critical parts, and the Red Sea is a major route connecting China and Europe. Sam Fiorani, vice president of AutoForecast Solutions, warned, “Relying on so many key components from Asia, 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.”