Automotive industry in fear: Demand for electric vehicles not keeping pace with investments

(Patria) - Despite billions invested, interest in electric vehicles has not met expectations.

Numerous manufacturers have therefore hit the brakes and slowed down investments. Although sales of battery-electric vehicles are constantly growing, the billions of dollars invested by almost all major manufacturers may not bring the expected return.

Some experts are concerned that the demand for electric vehicles is not aligned with the amount of investment by car manufacturers, Carscoops points out. In America, high interest rates worry everyone, industrial analysts, as well as Tesla CEO Elon Musk. "I am concerned about the high interest rate environment we are in," said Musk. "If interest rates remain high or go even higher, it will be much harder for people to buy a car."

Tesla has therefore announced that it is slowing down plans for its Mexican factory. Honda and General Motors have abandoned a $5 billion joint development aimed at creating affordable electric SUVs, which was announced by Honda Prologue.

Ford has reacted similarly, reducing the production pace of the F-150 Lightning model from three to two shifts. On the other side of the pond in Europe, Volkswagen has already halted production and put on hold the decision for a new gigafactory.
Japanese engine manufacturer NIDEC now expects a 15 billion yen ($100 million) full-year loss in its core e-axle business, instead of the profit it previously made. E-axle production combines motors, gears, and electronics for power control.

Lower interest and cheaper raw materials

China, which has experienced huge demand from Europe for its cheap electric vehicles, is not experiencing the same at home. Chinese battery manufacturer CATL announced that its third quarter was the weakest of the year, citing falling demand and increased competition.

According to a Reuters report, lithium prices have fallen by 67 percent, while cobalt prices have fallen by 20 percent in 2023, and have halved since May 2022.

Specific data shows that in the third quarter of 2023, electric vehicle deliveries in the US exceeded 300,000 for the first time in history. Electric vehicle sales also increased in the EU by 14.3 percent and by 22 percent in China. All of this is clearly not enough to justify the huge investments and meet expectations.