SHANGHAI, (Reuters) – Chinese automaker Geely (0175.HK) warned on Friday its EV sales are likely to be impacted by a delay in deliveries due to the “situation” in the Red Sea, where Yemeni militants are attacking vessels, forcing shippers to take longer, more expensive routes.
Geely, China’s second largest automaker by sales, told Reuters that most of the shipping firms it uses to export its electric vehicles to Europe have plans to go around the Cape of Good Hope to avoid the Suez Canal, the shortest route from Asia to Europe, due to the hostilities.
If the Red Sea issue remains unresolved, shipping firms are expected to adjust freight rates and result in rising transport costs, the company added.
A source in the logistics industry serving automakers in China, the world’s biggest market for cars, said this rerouting would increase shipping costs five-fold, predicting a shortage of vessels by the second-half of January due to the longer time it takes for them to return to port.
Geely did not name the shipping companies and the industry source declined to be named as they were not authorised to speak to the media.
China exported a total of 1.63 million vehicles to Europe in the first 10 months of this year, up 147% from the same period a year ago, according to data from the the China Passenger Car Association (CPCA). It did not give a breakdown for EVs.
Geely’s warning bodes ill for other automakers in China as they seek to increase exports to Europe due to overcapacity and weak demand at home.
Several global shippers have already said they would avoid the Red Sea after the Iran-aligned Houthis, who control much of Yemen, started attacking ships passing through the Bab al-Mandab Strait at the southern end of the waterway in the past few weeks in what they say is a response to Israel’s war in Gaza.
Cui Dongshu, secretary general for the CPCA, said there was no immediate impact from the Houthi attacks on EV exports to Europe as automakers use a rail network, but the industry source said those trains were already running at full capacity.
The source said Tesla (TSLA.O), which exports China-made Model 3 vehicles to Europe, and SAIC Motor Corp have secured vessels in Shanghai, but other smaller companies were likely to struggle.
Asked about the potential shipping disruptions, Tesla said it has no relevant information to share. SAIC did not immediately reply to a request for comment.
Chrysler-parent Stellantis (STLAM.MI) said it was monitoring the situation in the Red Sea area and would “adopt the most feasible and appropriate way” to deal with it.
Chinese carmakers have enjoyed strong sales in Europe, a trend that has alarmed European regulators and prompted them to investigate the possibility of punitive tariffs to protect European Union automakers.
Reporting by Zhang Yan and Casey Hall in Shanghai, Qiaoyi Li in Beijing, Writing by Miyoung Kim; Editing by Miral Fahmy