{"id":93371,"date":"2024-02-15T07:19:01","date_gmt":"2024-02-15T07:19:01","guid":{"rendered":"http:\/\/www.spglobal.com\/mobility\/en\/research-analysis\/briefcase-navigating-the-red-sea-crisis.html"},"modified":"2024-02-15T07:19:01","modified_gmt":"2024-02-15T07:19:01","slug":"briefcase-navigating-the-red-sea-crisis-an-automotive-industry-perspective","status":"publish","type":"post","link":"https:\/\/gamefootballmobileanimeiphone.com\/index.php\/2024\/02\/15\/briefcase-navigating-the-red-sea-crisis-an-automotive-industry-perspective\/","title":{"rendered":"BriefCASE: Navigating the Red Sea crisis, an automotive industry perspective"},"content":{"rendered":"\n\n\n
\n

Geopolitical tensions and Yemen-based Houthi militant
\nattacks in the Red Sea and Gulf of Aden are exposing the
\nvulnerability of global trade to regional conflicts, leading to
\ndetours, delivery delays and other repercussions for the auto
\nindustry.<\/em><\/h4>\n

The global shipping industry has faced major disruptions since
\nDecember 2023, due to attacks on Western cargo ships that the
\nHouthi have alleged to have affiliations to Israel. The Houthi have
\ninstigated these disruptions, ostensibly to pressure the Israeli
\ngovernment to end its war against Hamas in Gaza, prompting military
\nresponses from the US and allies. Strikes on radar systems, storage
\nfacilities and launch sites in the critical Red Sea conduit for
\nglobal maritime trade were initiated in the initial weeks of
\n2024.<\/p>\n

Impact on original equipment manufacturers<\/strong><\/p>\n

Tesla and Volvo Cars<\/strong><\/a> have reportedly announced
\nthe suspension of certain production operations in Europe owing to
\na lack of components. For others, including Stellantis and Suzuki<\/strong><\/a>, production lines have been paused or
\ndisrupted, and some are resorting to air freight to mitigate
\ndelays, while adding cost. Volkswagen<\/strong><\/a> says it is managing the situation
\nto minimize the impact on production. Tire manufacturer Michelin<\/strong><\/a> planned a production halt at four
\nSpanish factories on Jan. 20-21, owing to delays in raw material
\ndelivery. Despite having sufficient rubber stocks, Michelin
\nacknowledges the ongoing challenges in maintaining supplies of
\nsea-transported raw materials.<\/p>\n

Depending on the duration of the shipping disruption, mid- and
\nlong-term impacts for OEM and supplier bottom lines, and future
\nstrategic spending decisions, could manifest. In the current
\ninflationary climate and with vehicle demand already facing
\nheadwinds, the OEMs may prefer to absorb the increased shipping
\ncosts at a risk to margin, rather than industry volume. While there
\nmay be budgetary headroom in the short term, any prolongation in
\nthe crisis could impact future capital expenditure projects and
\ncould be detrimental to an automaker's outlook at any stage; but
\nright now, the industry is going through a particularly
\ncapital-intensive phase of its development: Electrification,
\nbatteries, autonomous vehicles and software-defined vehicles are
\nall competing for any spare automaker dollars. Any automakers
\nsignificantly exposed to the additional costs \u2014 particularly
\nEuropean OEMs currently active in battery and battery raw material
\nsourcing arrangements \u2014 could have plans impacted with
\nimplications for future competitive positioning.<\/p>\n

Supply chain vulnerabilities, shipping costs and
\ndelays<\/strong><\/p>\n

With a reliance on just-in-time inventory and sea-freighted
\nelectric vehicle batteries from Asia, the industry faces air, rail
\nand road as alternatives, though air may not be feasible for
\nbulkier and\/or heavier parts. According to S&amp;P Global Market
\nIntelligence data, rail accounted for 4.7% of the EU's auto parts
\nimports from Asia in 2023. It is also impacted by sanction-related
\nissues. Despite temporary rerouting options, longer routes increase
\nshipping costs for OEMs and reliant companies.<\/p>\n

Shipping costs can have a substantial inflationary impact. Ships
\noriginating from Asia and rerouted 3,500 nautical miles (6,500
\nkilometers) around South Africa instead of taking a shortcut
\nthrough the Suez Canal can also extend the journey by up to 20
\ndays. Shipping costs have therefore skyrocketed. Rates on the
\nShanghai-Europe route alone rose by 8.1% to $3,103 per 20-foot
\ncontainer on Jan. 12, compared to the previous week, according to
\nReuters. Similarly, the rate for containers heading to the
\nunaffected US West Coast surged by 43.2% to $3,974 per 40-foot
\ncontainer on a week-over-week basis.<\/p>\n

The ongoing crisis also has the potential to cause congestion
\nand delays at ports, due to unpredictable vessel timetables and
\nequipment shortages caused by an imbalance of containers. Drewry
\nSupply Chain Advisors estimates that more than 800 ships
\nrepresenting about 10 million twenty-foot equivalent units (TEUs),
\nor approximately one-third of the world's container ship capacity,
\nare affected by the Red Sea attacks and rerouting around the Cape
\nof Good Hope.<\/p>\n

Mainland China's role and industry
\nresponses<\/strong><\/p>\n

Car-carrier lines NYK, K-Line and MOL are also rerouting ships,
\nowing to the risk of Houthi attacks. Their decision contributes to
\nthe industry's capacity crunch, affecting the availability of pure
\ncar and truck carriers (PCTCs). According to The Loadstar, the lack
\nof PCTCs has prompted shippers to use containers for car shipments.
\nAlthough there was a rise in orders for new car carrier vessels in
\n2023, most are not expected to be delivered until 2025. Mainland
\nChina's increasing influence in car exports and lithium battery
\nproduction, along with its shift toward domestic electric car
\nproduction, adds to the global supply chain challenges. BYD's move
\nto secure its shipping capacity highlights mainland China's
\nstrategic response.<\/p>\n

Retail impact and broader concerns<\/strong><\/p>\n

The crisis has prompted Maersk to reroute ships, with its CEO
\nwarning of severe impacts on the global economy and potential
\ninflation. Assuming these maritime disruptions are short-lived, the
\nrecent increase in sea freight prices is expected to reverse. While
\nthe automotive sector will experience some short-term impacts, it
\nis not anticipated to significantly change baseline economic or
\ninflation forecasts. However, if challenges persist, with the Red
\nSea remaining closed and shipping costs staying high, the
\ninflationary effects will extend beyond new car buyers.<\/p>\n

Subscribe to BriefCASE: Our
\nweekly AutoTechInsight newsletter featuring innovative automotive
\ninsights and expert analysis<\/strong><\/a><\/p>\n

Identify opportunities and improve profitability
\nwith insight into vehicle components and systems. Learn
\nmore.<\/a><\/strong><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n

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Geopolitical tensions and Yemen-based Houthi militant
\nattacks in the Red Sea and Gulf of Aden are exposing the
\nvulnerability of global trade to regional conflicts, leading to
\ndetours, delivery delays and other repercussions for the auto
\nindustry.The 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