The Impact of the Red Sea Crisis on Auto Shipping

Global supply chains are facing another major test right now. Ongoing disruptions in the Red Sea are causing significant delays for auto manufacturers and car buyers alike. If you are waiting for a new car delivery or wondering why certain dealership lots are looking empty, this international shipping crisis is likely the primary cause.

The Root of the Shipping Disruption

To understand why your new car is delayed, you have to look at global trade routes. Since late 2023, attacks on commercial vessels in the Bab-el-Mandeb strait have forced major shipping companies to abandon the Red Sea and the Suez Canal. This specific waterway normally handles roughly 12 percent of all global trade.

Instead of taking the direct route through the Suez Canal, ocean carriers like Maersk, MSC, and Hapag-Lloyd are rerouting their massive cargo ships around the Cape of Good Hope at the southern tip of Africa. This detour adds approximately 3,500 nautical miles to the journey between Asia and Europe. For the automotive industry, this means shipping times have increased by 10 to 14 days in a single direction.

How the Delay Hurts Car Manufacturing

Modern automakers rely heavily on a strategy called “just-in-time” manufacturing. Instead of storing thousands of parts in massive warehouses, factories time their supply deliveries to arrive exactly when they are needed on the assembly line. This system saves money, but it makes auto plants incredibly vulnerable to shipping delays.

When container ships are delayed by two weeks, car factories simply run out of parts. Several major automakers have already been forced to hit the brakes on production:

• Tesla: The electric vehicle giant had to suspend the majority of its car production at its Gigafactory in Berlin, Germany, from January 29 to February 11, 2024. The factory ran out of battery components that were stuck on ships taking the long route around Africa.
• Volvo: Volvo Cars announced temporary production halts at its factory in Ghent, Belgium. A delayed shipment of gearboxes from Asia forced the automaker to pause its assembly lines.
• Suzuki: The Japanese automaker halted production at its manufacturing plant in Esztergom, Hungary, for a week. They cited delays in receiving critical Japanese-made engines and other components.
• Michelin: The global tire manufacturer had to pause production at several of its factories in Spain, citing a lack of raw materials arriving from Asia.

These factory shutdowns create a massive backlog. Even when the parts finally arrive, automakers have to work overtime to catch up on missed production targets.

The Squeeze on Vehicle Transport Ships

The crisis does not just affect the parts needed to build cars. It also impacts fully assembled vehicles traveling from factories in Asia to buyers in Europe and the Americas.

Finished cars are transported on specialized vessels called Roll-on/Roll-off (RoRo) ships. These floating parking garages allow cars to be driven directly onto the boat and driven off at the destination port. The auto shipping industry is currently facing a severe shortage of RoRo vessels.

Because ships are taking the longer route around Africa, they spend more time at sea and complete fewer trips per year. This reduces the total global capacity for moving cars. Charter rates for RoRo ships have skyrocketed to record highs, sometimes exceeding $100,000 per day. Automakers exporting vehicles from China, Japan, and South Korea, such as BYD, MG, and Toyota, are struggling to find enough shipping space to meet international consumer demand.

What This Means for Car Buyers

If you are shopping for a new vehicle, the Red Sea crisis will likely impact your experience in a few specific ways.

First, expect longer waiting periods for custom orders or specific trims. If you order a vehicle that is manufactured in Europe or Asia, dealers are currently adding at least two to three weeks to their standard delivery estimates.

Second, this supply chain disruption could impact pricing. Shipping costs have surged due to the crisis. For example, the cost to send a standard 40-foot shipping container from Shanghai to Northern Europe jumped from around $1,500 in October 2023 to over $4,000 in early 2024. Furthermore, shipping companies are burning extra fuel to travel the longer distance around Africa.

Automakers generally absorb minor fluctuations in freight costs, but sustained shipping expenses often trickle down to the consumer. You might see fewer factory incentives, smaller dealer discounts, or slight increases in the manufacturer’s suggested retail price (MSRP) for models heavily reliant on Asian components.

While domestic production in the United States is less directly affected than European manufacturing, the global nature of auto parts means no market is entirely immune. A car built in Michigan still requires microchips from Taiwan and electronic sensors from China.

Attempts to Bypass the Problem

Automakers are looking for creative ways to bypass the Red Sea delays, but their options are highly limited.

Air freight is a popular alternative for small, lightweight electronics. If a factory is short on microchips, an automaker can fly them in to keep the assembly line moving. However, air freight is incredibly expensive and impossible to use for heavy items like electric vehicle battery packs, engine blocks, or fully assembled cars.

Some companies are using the trans-Eurasian railway network to move parts from China to Europe. While trains are faster than ships, rail capacity is small compared to ocean freight. A massive container ship can carry over 20,000 containers at once, while a freight train can only carry about 100. Right now, the auto industry has no choice but to wait out the delays on the water.

Frequently Asked Questions

Which car brands are most affected by the Red Sea shipping crisis? Brands that rely heavily on Asian parts for European manufacturing are feeling the most pain. Tesla, Volvo, and Suzuki have all experienced confirmed factory shutdowns. Asian export brands like BYD, MG, and Geely are also facing major hurdles in getting their finished cars to international markets.

How much longer will it take to get a new car delivered? The detour around the Cape of Good Hope adds roughly 10 to 14 days of transit time. However, because this delay causes port congestion and a shortage of available ships, buyers should expect their vehicle deliveries to be delayed by anywhere from three to five weeks compared to normal schedules.

Will the shipping crisis make new cars more expensive? It is highly possible. Container freight rates have spiked, and RoRo shipping vessels are charging record charter rates. If these elevated shipping costs remain steady for several months, automakers will likely reduce their sales incentives or raise sticker prices to protect their profit margins.