VW steers clear of Red Sea disruption by rerouting parts supply

BERLIN: Volkswagen AG is avoiding production woes faced by Tesla Inc. and Volvo Car AB by redirecting ships quickly after the Red Sea crisis erupted last month, ensuring a steady supply of parts despite the escalating hostilities.

The German carmaker began rerouting shipments of car parts around South Africa instead of through the Suez Canal last month, according to a spokesperson.

The move added two weeks to delivery times, the company said, which the Europe’s biggest carmaker incorporated into the production schedules.

Delays to vehicle parts that normally flow through the Suez Canal have forced Volvo Cars’ Belgian plant to shut down production for a few days.

At Tesla’s German factory, output will be halted for two weeks, Reuters has reported. Suzuki Motor Corp.’s only European plant in Hungary will stop for a week.

The US and UK last week launched airstrikes on Houthi rebel targets in Yemen in a bid to stop the Iran-backed group’s attacks on ships in the Red Sea, with Houthi leaders vowing to fight back.

Europe’s automotive industry ships about 70% of all components coming from Asia through the Red Sea, according to Felix Mogge, an automotive advisor at Roland Berger.

Parts are focused in electronic components, and the worsening situation in the region should have triggered companies to make arrangements starting last month, Mogge said.

VW in 2022 established a supply chain task force to identify and avoid risks after the chip crisis forced the company to shutter factories during the pandemic.
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