Published: 24 January 2024 at 11:46
VIEWPOINT: Parts are taking longer to deliver as ships avoid attacks
By Tom Stacey, Anglia Ruskin University
Automotive giants Tesla and Volvo have announced pauses to the production of their electric vehicles (EVs) in Europe. Electric vehicles are seeing record sales and demand worldwide, but a lack of parts means that factories cannot sustain their production.
The reasons for this are complex. Parts are taking longer to deliver as attacks by Houthi rebels force ships to avoid the Red Sea. And there are also issues around the monopoly that Chinese factories hold on many EV components, including crucial lithium batteries.
These factors have made it harder (and more expensive) to move parts across the globe to support EV production in Europe.
Modern global supply chains are tightly orchestrated. Moving goods to factories (and away from them to customers) is heavily demand driven. Forecasting this demand has become a huge industry, valued at over US$27 billion (£21.3 billion).
But even with all this intelligence, political tensions, pandemics and even stuck ships can turn this industry on its head overnight. This is particularly the case where the supply side is constrained, as it is with EV batteries from China.
In 2021, a container ship called the Ever Given ran aground in the Suez Canal, blocking this vital shipping route from the far east to Europe for the best part of a week. The blockage prevented goods from passing through the canal, so had the knock-on effect of raising container shipping prices.
Even though the Suez canal has been open for two years, the recent attacks on commercial ships in the Red Sea have caused shipping companies to divert their ships to less direct routes – adding significant costs and time.
What does this mean for consumers and the planet? And are there ways for EV manufacturers to circumvent these risks?
If manufacturers cannot produce due to shortages, then factories that make a single product such as Tesla’s gigafactory near Berlin (which produces the best-selling Model Y SUV) have one option – to idle the lines. Hourly-paid workers are sent home and where possible, salaried staff will continue in other roles such as safety checking and testing.
Tesla and Volvo have other factories and other product lines that can keep running. But even finished vehicles travelling from plants in China for sale in Europe are affected by the need to avoid the Red Sea. Vehicle manufacturer, Geely, who also produce Volvo vehicles in China, has warned of delays to European consumers expecting their new cars in early 2024.
Delays are not the only issue associated with shipping parts and vehicles around Africa to avoid the Red Sea. The 3,000 extra miles travelled by ships means they burn more fuel – a lot more fuel.
Peter Sand, a shipping analyst at ocean and air freight analytics platform, Xeneta, has estimated conservatively that each ship taking this route produces 2,700 extra tons of CO₂. If the international shipping industry were a country, it would already be among the world’s top carbon-emitting nations. And greenhouse gas emissions from ships are projected to increase by up to 50% by 2050.
EVs are undoubtedly better for the environment than their combustion engine counterparts. However, when supply is constrained, buyers often have little choice but to delay making the switch. Sales figures from 2023 show that private buyers still did not purchase as many EVs in the historically buoyant month of September as they did in the year before due to uncertainty in the market.
Fleet demand remains strong. But the market can only grow as fast as manufacturers can make cars. And pausing production is not going to help the transition.