Jakarta, CNBC Indonesia– The development of electric cars is threatened. A number of things could slow down demand for electric vehicles.
In fact, sales of electric vehicles are still growing rapidly. But demand has fallen short of expectations from automakers and other companies that have invested billions of dollars in electric vehicles.
“Demand for electric vehicles next year could be lower than expectations,” said Lee Chang-sil, chief financial officer at South Korean battery maker LG Energy Solution, citing global economic uncertainty.
High interest rates could thwart the ambitions of climate regulators and carmakers to speed up the transition. The persistent rise in interest rates has caused companies to cautiously change their plans for 2024.
Not to mention the announcement by General Motors and Honda to cancel plans for a US$5 billion collaboration to develop low-cost electric vehicles together. Even though the announcement was only made a year ago.
GM said it would focus near-term EV 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 a near-term slowdown in growth,” GM CEO Mary Barra told analysts.
Tesla CEO Elon Musk issued a warning last week. He explained why he was slowing down plans to build a factory in Mexico.
“I’m concerned about the high interest rates we’re facing,” he said on Tesla’s earnings conference call.
“Because I can’t stress this enough that most people who buy cars are about the monthly payments. If interest rates stay high or even higher, it will be harder for people to buy cars,” he stressed.
Other automakers have also voiced similar concerns. Germany’s Volkswagen cut its profit margin forecast for the year, blaming a negative impact on raw materials hedging at the end of Q3, some of which are used in EV batteries.
Like many industrial companies, automakers hedge against changes in commodity prices. With demand for electric vehicles slowing, prices for raw materials have weakened, including those widely used in batteries.
It is known that lithium prices have fallen 67% so far this year based on spot lithium carbonate prices assessed by Fastmarkets. Cobalt metal prices on the CME have fallen 20% this year and have fallen by more than half since May last year.
US automaker Ford also said it would temporarily reduce one of three shifts at a plant producing the F-150 Lightning electric pickup truck. In July the company also slowed its electric vehicle ramp-up, shifting investment to commercial vehicles and hybrids.
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