Tesla To Halt Production At Berlin Plant Amidst Red Sea Disruption

Tesla has said it will halt most production at its plant near Berlin for two weeks due to parts deliveries delayed by attacks on ships in the Red Sea.

Most production will stop from 29 January to 11 February, the firm said, meaning about 5,000 to 7,000 cars would not be built.

“The armed conflicts in the Red Sea and the associated shifts in transport routes between Europe and Asia via the Cape of Good Hope are also having an impact on production in Grünheide,” Tesla said in a Friday statement.

“The considerably longer transportation times are creating a gap in supply chains.”

‘Fresh blow’

Analyst Susannah Streeter of Hargreaves Lansdown said the pause was a “fresh blow to Tesla’s production targets and comes amid fierce competition from Chinese manufacturers”.

She noted that Chinese auto giant Geely, which owns Volvo and Lotus, has also said there would be a delay to delivery of EV models in Europe.

Tesla’s shares have had their worst start to any year since it went public in 2010, losing more than $94 billion (£74bn) in value during the first two weeks of 2024 amidst a string of negative headlines about the firm.

At the beginning of January Tesla lost its place as the world’s biggest electric vehicle (EV) manufacturer to China’s BYD, while car rental firm Hertz has scaled back its EV fleet and said last week it would sell off 20,000 of the vehicles, some one-third of its EVs, due to higher-than-expected depreciation and damage and lower-than-expected demand.

Profit margins

Meanwhile Tesla recently introduced another price cut in China and has begun giving pay rises to staff in the US, eroding its profit margins, which had already fallen to 16.3 percent in the third quarter from 27.9 percent a year earlier.

Investors are also concerned about slowing growth for EVs, something of which Tesla warned in its October third-quarter earnings report.

The warning was soon afterward echoed by other major carmakers and suppliers, with many reducing their expansion plans.

Tesla’s share price drop has caused the personal fortune of chief executive Elon Musk to decline in value by $23bn so far this year, according to the Bloomberg Billionaires Index.