Wrapup 1: EV sector grapples with layoffs, production cuts and altered plans

Volvo Car AB

22/02/2024 16:45

By Akash Sriram
       Feb 22 (Reuters) - A global slowdown in electric-vehicle
demand is rippling through the industry, costing jobs and
leading to changes in strategic plans, layoffs and production
cuts, suggesting pain in the near term could slow the transition
away from gasoline-powered combustion engines.
    On Thursday, German luxury carmaker Mercedes  MBGn.DE  toned
down expectations on EV demand and said it will update its
gasoline-powered engine vehicle lineup well into the next
decade. 
    Mercedes delayed its goal to go all-electric by 2030.
Instead, it now says it will retain combustion engines in at
least half of its vehicles until then. Previously, it had hedged
by saying consumer demand would dictate how soon it went
all-electric.
    "High interest rates, moderate oil prices, and range anxiety
all have conspired against EV demand. The enthusiasm of early
adopters of EVs wasn’t representative of the longer-term and
broader demand for these vehicles," said Brian Jacobsen, chief
economist at Annex Wealth Management, which does not own shares
in any EV makers.
    "We expected a reduction in demand and enthusiasm for the
vehicles so we didn't find the valuations compelling," he added.
    
    The pivot by Mercedes comes a day after EV startups Rivian
 RIVN.O  and Lucid  LCID.O  forecast 2024 production well below
analysts' expectations and Rivian cut its workforce by 10%. That
news caused shares of Rivian and Lucid to tumble on Thursday by
27.5% and 19.5%, respectively.  
    The pain follows last year's price war that drained margins
and pressured many companies' already money-losing EV
operations. 
    "There is a host of macro-level challenges," Rivian CEO RJ
Scaringe told Reuters on Wednesday, adding that high interest
rates and geopolitical risks were making consumers
price-sensitive.    
    The situation was previously flagged by Ford  F.N , General
Motors  GM.N  and market leader Tesla  TSLA.O , where CEO Elon
Musk's warning in January of the market leader's slowing pace of
growth slashed $80 billion in market value in one day.
    Prices for used EVs collapsed by 16.4% in January compared
with a year ago, according to Manheim Used Vehicle Value index
data. Even in China, the world's largest auto market where
demand for EVs has been strong, new-energy vehicle sales fell
38% in January, the first monthly drop since August 2023.
    
    That drumbeat of bad news even has the administration of
U.S. President Joe Biden set to propose a softening of limits on
tailpipe emissions designed to get more Americans into EVs,
sources said. 
    Earlier this month, Volvo Cars  VOLCARb.ST  decided to halt
investments in Polestar  PSNY.O  after the money-losing luxury
EV offshoot brand missed a 2023 delivery target.
    Some industry observers argue that the long-term picture of
a transition to EVs remains in place despite any short-term road
bumps.
   "A slowdown in the growth rate from 45% to something more
sustainable is not the disaster the press has been pushing. And
interest rates affect all car sales, not just EVs," said Vitaly
Golomb, a Rivian investor and investment banker who focuses on
mobility.
    "The effect is more pronounced on more expensive vehicles of
course and EVs still average higher price," he added. "Perhaps
(automakers) need to emphasize the stark difference in total
cost of ownership."

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Electric vehicle sales growth to slow in 2024    https://reut.rs/3UPKo5d
Used EV prices drop following a year of EV makers slashing
prices    https://reut.rs/49FLzIH
Mercedes-Benz delays electrification goal, beefs up combustion
engine line-up     urn:newsml:reuters.com:*:nL5N3F71DY
US offers $710 million in loans for EV technology projects   
 urn:newsml:reuters.com:*:nL2N3F71Z4
Rivian, Lucid's 2024 production targets disappoint as EV demand
wanes      urn:newsml:reuters.com:*:nL2N3F706L
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Akash Sriram in Bengaluru Writing by Ben Klayman
Editing by Matthew Lewis)
 ((benjamin.klayman@thomsonreuters.com; 313-600-2277; Reuters
Messaging: benjamin.klayman.thomsonreuters.com@reuters.net))