The Impact of Red Sea Threat On European Automobile Production 

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  • Delays in shipping schedules across the Red Sea pose a threat to European car production.
  • The use of excess air cargo capacity is being explored.
  • The IMF forecasts modest global trade growth of just under 1% in 2024.

China, South Korea, and Japan play a pivotal role in manufacturing automotive components. Approximately 70% of European automotive components come from Asia, emphasizing the region’s significance, reports Digitimes.

Shipping Risks and European Car Production

Delays in shipping schedules across the Red Sea pose a threat to European car production.

Tesla and Volvo faced production halts due to disruptions, linked to extended transportation times and supply chain issues.

European Strategies to Mitigate Risks

European manufacturers are considering options like bolstering inventory and diversifying suppliers in the Americas.

Strategic use of excess air cargo capacity is being explored to fortify supply chain resilience.

Comparison with Chip Shortage Dynamics

The Red Sea crisis differs from the chip shortage, focusing on prolonged maritime transit times and increased costs.

Unlike the chip shortage, there are no reported sinkings of cargo ships, and production operations continue to meet customer demands.

Global Trade Growth Forecast and Shipping Projections

The IMF forecasts modest global trade growth of just under 1% in 2024.

Projections for 2024 indicate the addition of 478 new container ships, marking a 40% surge in capacity compared to 2023.

Challenge of Excess Shipping Capacity

Excess capacity is expected to persist in 2024, driven by the introduction of new ships and slow decommissioning of older vessels.

Despite a 3-4% growth in demand for container transportation, excess capacity remains a significant challenge according to BIMCO.

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Source: Digitime

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