Wrapup 1: Industry pain abounds as electric car demand hits slowdown

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30/01/2024 15:34

By Nick Carey and Joseph White
       Jan 30 (Reuters) - While automakers and suppliers are
betting big on future demand for electric vehicles, 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.
    "It's true, the pace of EV growth has slowed, which has
created some uncertainty. We will build to demand," General
Motors  GM.N  CEO Mary Barra said on an earnings call Tuesday.
    GM previously cut EV production targets due to the slowing
demand, but 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  F.N  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. 
    "There's no doubt that the limitations - EV charging and the
lack of battery resiliency at low temperatures - are causing
consumer anxiety," said Tim Piechowski, portfolio manager with
ACR Alpine Capital Research, which owns GM shares. 
    "The reality is that the adoption curve will be slower and
there will be pushback to regulators about fuel economy," he
added. "It'll just be a longer ramp than perhaps was initially
anticipated."
    That slower pace was underscored this month as companies
pull back on prior plans.
    On Monday, France's Renault  RENA.PA  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 euros.
    
    MUDDY WATERS FOR THE ECONOMY
    Suppliers are affected, too.
    China's CATL  300750.SZ  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  002594.SZ  on
Monday forecast its 2023 net profit rose at a far slower pace
than 2022, while last week Korean battery maker LG Energy
Solution  373220.KS  predicted slowing growth in the global EV
market this year.
    "Global EV momentum is stalling. The market is over-supplied
vs demand," Morgan Stanley analyst Adam Jonas said in a recent
research note.     
    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. 
    "Subsidies have run out and at the same time, we are in
muddy waters across the economy. Consumers' propensity to buy is
not particularly pronounced," VDA chief economist Manuel
Kallweit said. 
    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  A4N1y.F  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 engine (ICE)-powered vehicles.
    "We know the EV market is not going to grow linearly," GM
CFO Paul Jacobson said Tuesday. "We are prepared to flex between
ICE and EV production."

 (Reporting by Nick Carey in London and Joseph White in Detroit,
additional reporting by Victoria Waldersee in Berlin and Ilona
Wissenbach in Frankfurt, writing by Ben Klayman
Editing by Nick Zieminski and David Ljunggren)
 ((benjamin.klayman@thomsonreuters.com; 313-600-2277; Reuters
Messaging: benjamin.klayman.thomsonreuters.com@reuters.net))