More alarm bells sound on slowing demand for electric vehicles

FALLING RAW MATERIAL PRICES

Oct 25 (Reuters) – High interest rates are derailing the ambitions of climate regulators and automakers to accelerate the shift to electric vehicles, underscored Wednesday by the scrapping of a GM-Honda partnership and a warning from a battery maker.

Electric vehicle sales are still growing strongly, but that demand is not keeping up with the expectations of carmakers and other companies that have invested billions of dollars in the EV space. Expectations for persistently higher interest rates has led companies to alter plans as they eye 2024 warily.

SDG 7: Affordable and Clean Energy

1. EV demand next year could be lower than expectations,” Lee Chang-sil, chief financial officer at South Korean battery maker LG Energy Solution (373220.KS) said on Wednesday, due to global economic uncertainty.
2. Honda (7267.T) and General Motors (GM.N) announced they were ending a $5 billion plan to develop lower-cost EVs together just a year after announcing the effort. GM on Tuesday said it would focus near-term EV efforts on meeting demand rather than hitting specific volume targets.

SDG 9: Industry, Innovation, and Infrastructure

• “We’re taking immediate steps to enhance the profitability of our EV portfolio and adjust to slowing near-term growth,” GM CEO Mary Barra told analysts.
• Investors have responded to the changed outlook. Over the last three months, the iShares Self-Driving EV and Tech exchange-traded fund has plunged more than 24%, far more than the 8.3% fall for the MSCI All-World Index (.MIWD00000PUS), a proxy for global equities.

SDG 13: Climate Action

EV sales are growing, however. They topped 300,000 units in the United States for the first time in the third quarter, according to a Cox Automotive report. They rose 14.3% in September in the European Union and 22% in China, the world’s largest EV market.

FALLING RAW MATERIAL PRICES

Tesla (TSLA.O) CEO Elon Musk raised the alarm last week in explaining why he was slowing plans for a Mexico factory.

“I am worried about the high interest rate environment that we’re in,” he said on Tesla’s earnings conference call. “As I just can’t emphasize this enough that the vast majority of people buying a car is about the monthly payment. If interest rates remain high or if they go even higher, it’s that much harder for people to buy the car.”

SDG 12: Responsible Consumption and Production

• Germany’s Volkswagen (VOWG_p.DE) last week cut its profit margin outlook for the year, blaming negative effects for raw material hedges at the end of the third quarter. Some of those materials are used in EV batteries.
• Like many other industrial firms, carmakers hedge against commodity price swings, and with EV demand slowing, raw material prices have softened, including those used heavily in batteries.

SDG 7: Affordable and Clean Energy

• Lithium prices have tumbled 67% so far this year based on spot lithium carbonate prices assessed by Fastmarkets. Prices of cobalt metal on the CME have slid 20% this year and more than halved since May last year.
• U.S. automaker Ford (F.N) earlier this month said it would temporarily cut one of three shifts at the plant that builds its electric F-150 Lightning pickup truck, and in July slowed its EV ramp-up, shifting investment to commercial vehicles and hybrids.

SDG 9: Industry, Innovation, and Infrastructure

• Shares of Japan’s Nidec (6594.T) logged their biggest decline in a decade and a half on Tuesday, tumbling more than 10% on investor concerns over the motor manufacturer’s prospects in an increasingly tough Chinese market for EVs.
• China’s CATL (300750.SZ), the world’s largest battery maker for EVs, said last week that third-quarter profit rose 10.7%, its weakest quarter since the start of last year due to slowing demand and stiff competition.

Author Information

Ben Klayman

Thomson Reuters

Is the Detroit Bureau Chief and North American Transportation Editor, responsible for a team of about 10 reporters covering everything from autos to aerospace to airlines to outer space. Contact:

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SDGs, Targets, and Indicators

SDGs Addressed:

1. SDG 7: Affordable and Clean Energy
2. SDG 9: Industry, Innovation, and Infrastructure
3. SDG 11: Sustainable Cities and Communities
4. SDG 12: Responsible Consumption and Production
5. SDG 13: Climate Action

Targets Identified:

• Target 7.2: Increase substantially the share of renewable energy in the global energy mix
• Target 9.4: Upgrade infrastructure and retrofit industries to make them sustainable
• Target 11.2: Provide access to safe, affordable, accessible, and sustainable transport systems for all
• Target 12.2: Achieve sustainable management and efficient use of natural resources
• Target 13.2: Integrate climate change measures into national policies, strategies, and planning

Indicators:

• Indicator for Target 7.2: Proportion of total final energy consumption from renewable sources
• Indicator for Target 9.4: CO2 emissions per unit of value added in manufacturing industries
• Indicator for Target 11.2: Proportion of population that has convenient access to public transport
• Indicator for Target 12.2: Domestic material consumption per capita
• Indicator for Target 13.2: Number of countries that have integrated climate change measures into national policies, strategies, and planning

Explanation:

The issues highlighted in the article are connected to several Sustainable Development Goals (SDGs). The first SDG addressed is SDG 7: Affordable and Clean Energy, which aims to ensure access to affordable, reliable, sustainable, and modern energy for all. The article discusses the impact of high interest rates on the shift to electric vehicles, which is a key component of clean energy transition.

The second SDG addressed is SDG 9: Industry, Innovation, and Infrastructure. This goal focuses on building resilient infrastructure, promoting inclusive and sustainable industrialization, and fostering innovation. The article highlights how high interest rates are affecting the plans of automakers and battery manufacturers in the electric vehicle industry.

SDG 11: Sustainable Cities and Communities is also relevant to the issues discussed in the article. This goal aims to make cities and human settlements inclusive, safe, resilient, and sustainable. The article mentions the impact of high interest rates on the plans of automakers to meet the demand for electric vehicles, which can affect the development of sustainable transportation systems in cities.

SDG 12: Responsible Consumption and Production is another relevant goal. It focuses on ensuring sustainable consumption and production patterns. The article mentions how slowing demand for electric vehicles is affecting automakers’ plans and investments, indicating a need for more sustainable consumption and production practices in the industry.

Lastly, SDG 13: Climate Action is addressed in the article. This goal aims to take urgent action to combat climate change and its impacts. The article discusses how high interest rates are derailing the ambitions of climate regulators and automakers to accelerate the shift to electric vehicles, which is a key strategy for reducing greenhouse gas emissions and mitigating climate change.

Table: SDGs, Targets, and Indicators

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Source: reuters.com

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