Industry pain abounds as electric car demand hit by global slowdown

WHILE automakers and suppliers are betting big on future demand for electric vehicles (EVs), a near-term global slowdown is causing pain, including bankruptcies, scrapped initial public offerings and production cuts.

Investment in capacity and technology development has outrun actual EV demand, boosting pressure on companies to cut costs.

General Motors (GM) previously cut EV production targets due to the slowing demand, but GM Chief Executive Officer (CEO) Mary Barra told analysts GM was “encouraged” by industry forecasts that EV sales in the United States are forecast to rise at least 10% this year from about 7% in 2023.

Ford also previously cut EV production due to a growth rate that is rising more slowly than previously expected.

Tesla CEO Elon Musk underscored the near-term struggles, warning last week of a sharp slowdown in sales growth this year. With margins falling amid price cuts, shareholders erased $80 billion from Tesla’s stock valuation the following day.

That slower pace was underscored this month as companies pull back on prior plans.

On Monday, France’s Renault ditched plans to list its EV business Ampere because of sluggish stock market conditions. The company had said the IPO could be worth up to €10 billion. Suppliers are affected, too. China’s CATL on Tuesday forecast 2023 profit growth sharply lower than the previous year as it grappled with slowing demand and stiff competition.

CATL, the world’s largest EV battery maker, faces challenges from smaller rivals and slowing demand in China, the largest EV market.

China’s second-ranked EV battery maker BYD on Monday forecast its 2023 net profit rose at a far slower pace than 2022, while last week Korean battery maker LG Energy Solution predicted slowing growth in the global EV market this year.

Albemarle, the world’s largest producer of key EV battery material lithium, said this month it was cutting jobs and capital spending in response to slipping prices. A report put the job cuts at 4% of its workforce.

Meanwhile, German EV sales, including plug-in hybrid models, fell 16% last year and are forecast to drop another 9% in 2024, including a 14% decline for pure battery EVs, according to German auto association VDA.

Still, German production of EVs is forecast to increase by 19% this year to 1.45 million, with much of the output destined for export, VDA said.

EV demand in Europe has weakened and the region’s carmakers face competition from Chinese rivals. Those feeling the pain hardest in the sector seem to be the EV startups.

Britain’s Arrival on Monday said it received a delisting and stock trading suspension notice from the Nasdaq. Lordstown Motors, Proterra, and Sweden’s Volta Trucks have gone bankrupt as a tough economy weighs on demand and hinders access to capital.

Polestar last week said it planned to cut about 15% of its workforce, or 450 people, due to the challenging market.

The long-term is where automakers are placing their bets with EVs, even as they still benefit from strong demand for internal-combustion enginepowered vehicles. —