Monday, February 26, 2024

The Red Sea awakens the souls of the auto industry’s supply crisis

Rising tensions in the Red Sea have raised the specter of a supply crisis unleashed by the pandemic that has crippled global trade. Yemen’s Houthi militia attacks against maritime traffic have forced major shipping companies to cancel their transit through an enclave as strategic as the Suez Canal, where about 12% of circulating sales go to the whole world. This change of direction to travel south of the African continent as an alternative route extended the duration of their journeys by about 10 days, resulting in delays in goods and increased costs of containers, which can triple their price due to higher fuel consumption.

As the conflict worsened and the navigation of commercial ships decreased (by 30% so far in January), delays and the increase in the price of goods began to take their toll on the industrial fabric. Although the main focus is on the textile sector, others, such as the automotive sector, have already begun to suffer the ravages of the geopolitical conflict in the form of stoppages of production in important industrial factories.

At the moment, the intensity of the supply problems is not comparable to the last introduction that damaged world trade, but sources in the sector expect that the extent of the problems will go ‘to a crescendo’ as the conflict drags on over time. However, the same sources appealed to the strength of the Spanish automotive industry, which showed its strength in the face of the latest supply crises.

Supply problems

In Spain, companies such as Michelin were forced to make production stops at their four factories located in Lasarte, Vitoria, Aranda de Duero, and Valladolid due to problems with the supply of rubber, a key material in the manufacture of tires, obtained from the aforementioned conflict. . The French multinational interrupted part of its production on January 13 and 14, and the situation will repeat itself this weekend. In the case of the Vitoria plant, union sources estimate that 674 workers will be affected by the strikes and show that the company has not announced new deactivations in production shifts at this time.

Beyond the borders of Spain, the headache has reached Elon Musk. His electric vehicle company, Tesla, will freeze most of its production at its German Grünheide plant, near Berlin, from January 29 to February 11. In a statement, the company justified its decision on “disruptions in the supply chain” caused by “extremely long transportation times,” but did not mention the components not arriving on time. Stopping it becomes even more important if we consider that this factory produces the Tesla Model Y, also known as the best-selling electric car in Spain, with 6,833 registrations registered in 2023.

Tesla isn’t the only one that can lock it down. Swedish Volvo stopped assembling cars for three days due to a lack of supply of its gearboxes at the Belgian Ghent plant, home of the XC40 and C40. The company is cautious and does not expect supply problems at its headquarters in Gothenburg, Sweden, but stressed the importance of resolving the situation immediately to avoid further supply chain failures.

Faced with this situation, conglomerates like Stellantis made an ‘escape plan’. The group, which includes brands such as Fiat, Opel, Citroen, and Peugeot, among others, turned to cargo planes to move their goods and avoid the sea route. “In order to combat the extension of shipping times for some transferred vessels, Stellantis has adopted the use of a limited number of cargoes on cargo planes,” the company explained in a recent statement.

World Nation News Desk
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