High interest rates are derailing the ambitions of climate regulators and automakers to accelerate the shift to electric vehicles (VE), as revealed on Wednesday by the dismantling of an alliance between G.M. and Sling and the warning of a battery manufacturer.
EV sales continue to grow strongly, but demand is not living up to the expectations of manufacturers and other companies that have invested billions of dollars in the sector. The possibility that rates will continue to rise has led companies to modify their plans and look askance at the year 2024.
Lee Chang-sil, chief financial officer of South Korean battery maker LG Energy Solution, said on Wednesday that “Demand for electric vehicles next year could be lower than expected” due to global economic uncertainty.
On the same day, Honda and General Motors announced the end of a $5 billion plan to jointly develop low-cost EVs, just a year after announcing it. The day before, GM said it would focus its short-term efforts on meeting demand, rather than hitting specific volume targets.
“We are taking immediate steps to improve the profitability of our electric vehicle portfolio and adapt to slowing growth in the near term,” GM Chief Executive Mary Barra told analysts.
Investors responded to the change in outlook. Over the past three months, the iShares Self-Driving EV and Tech exchange-traded fund has plunged more than 24%, far more than the 8.3% drop in the MSCI world equity index.
However, EV sales are growing. In the third quarter they exceeded 300,000 units in the United States for the first time, according to a report from Cox Automotive. In September they increased by 14.3% in the European Union and 22% in China, the largest world market in the sector.
Elon Musk, CEO of Tesla, raised the alarm last week when explaining why he was stopping plans to build a factory in Mexico.
“I am concerned about the high interest rate environment we find ourselves in”he said on Tesla’s earnings conference call. “I cannot help but highlight that for the vast majority of people, buying a car has to do with the monthly payment. If interest rates remain high (…) it is much more difficult for people to buy a car.”
Other automakers expressed the same caution.
Germany’s Volkswagen last week cut its profit margin forecast for the year, blaming the negative effects of raw material hedging at the end of the third quarter. Some of these materials are used in EV batteries.
Like many other industrial firms, automakers are protecting themselves against swings in raw material prices, and with demand for EVs slowing, raw material prices have fallen, including those used in batteries. .
Lithium prices have plummeted 67% so far this year, according to lithium carbonate spot prices assessed by Fastmarkets
American automaker Ford announced earlier this month that it would temporarily cut one of three work shifts at the plant that makes its F-150 Lightning electric pickup truck, and in July it slowed the pace of EV production, shifting investment to commercial cars and hybrids.
Shares in Japan’s Nidec on Tuesday recorded their biggest decline in a decade and a half, plunging more than 10% on investor concerns about the engine maker’s prospects in an increasingly difficult Chinese market for EVs.
Chinese company CATL, the world’s largest EV battery maker, said last week that its third-quarter profit rose 10.7%, its weakest quarter since early last year, due to slowing demand and tough competition. .
Source: Reuters
Source: Gestion
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