The Electric Vehicle Industry Has Entered a Period of ‘Winter' as The Market Is No Longer Experiencing a Boom
The global electric vehicle industry has entered a 'winter mode.' What pessimistic signals have been released? Major electric vehicle manufacturers have started a price war to curb the slowdown in global demand.
Carmakers step up EV discounts in bid to stem global demand slowdown
Carmakers in leading western markets have significantly increased the range and scale of discounts they offer on electric vehicles in a bid to counter weaker-than-expected appetite for battery models among mainstream buyers.
In the UK, the average discount in October was 11 per cent below the recommended retail price. In the US, discounts on EVs were at 10 per cent. A year ago, discounts were barely offered in Germany where companies are now cutting prices about 7 per cent to attract buyers.
Rising prices, negative publicity around charging and safety, political attacks on EVs as well as greater caution from mass market buyers have contributed to a sharp deceleration in sales growth.
It is the first global slowdown in EV demand since sales took off three years ago, raising concerns that car companies will be forced to sacrifice profitability by offering discounts in order to hit clean air or emissions targets across the world.
Tesla CEO Musk made pessimistic statements and holds a cautious attitude towards the demand for EV
Tesla CEO Elon Musk said on Q3 earnings conference call last month that he was concerned about the impact of high interest rates on car buyers, adding the electric vehicle maker was hesitating on its plans for a factory in Mexico as it gauges the economic outlook.
After the company missed Wall Street expectations on third-quarter gross margin, profit and revenue, Musk said he was cautious about going "full tilt" on the Mexico factory.
"If the macroeconomic conditions are stormy, even the best ship is still going to have tough times," he said in a shift in tone from a year ago, when he said Tesla was "recession resilient."
Tesla has managed to maintain demand with a series of price cuts, but Musk spent much of the call voicing concerns about further expansion, saying that he was afraid rising interest rates would make cars unaffordable.
General Motors, Honda, and other automakers have delayed production, partnerships, and construction plans
General Motors has announced that it will slow down the production of electric vehicles due to the UAW strike. Consequently, Honda has withdrawn from its partnership with General Motors in producing affordable electric vehicles.
The widely touted partnership between Honda and GM would have used GM's Ultium battery technology to make a series of electric vehicles beginning in 2027 that would have cost less than $30,000
Both companies announced that after extensive studies and analysis, they're ditching the $5 billion effort.
Alan Amici, president and CEO of the Ann Arbor-based Center for Automotive Research, says he isn't surprised by this latest development. "As far as General Motors' strategy here, it may be to focus more on the Chevy Bolt as their entry-level EV than to pour additional money into a joint venture with Honda for entry-level EVs," Amici said.
Battery maker LG Energy Solution warns of slowing EV demand
South Korean battery firm LG Energy Solution warned during the release of its financial report that due to global economic uncertainties affecting the outlook for electric vehicle sales, revenue growth will slow down in 2024.
It joins a growing number of automakers and suppliers expressing caution about demand for EVs, as they fear high interest rates lifting financing costs and sputtering growth in major economies such as China and Europe will impact car buyers.
LGES, which supplies Tesla, General Motors and other automakers, said revenue growth in 2024 would not be as high as the mid-30% rate forecast for this year.
A recovery in demand from European manufacturers is likely to be delayed as Chinese rivals launch cheaper EVs in the region, LGES Vice President Kim Gyunghoon said on the earnings call. LGES is lowering production at its Poland factory in response to minimise costs, Kim added.
Based on above conditions, EV startup faces a challenging journey to achieve lifetime positive free cash flow
Tesla serves as a prime example, illustrating that even a highly successful EV startup faces a challenging journey to achieve lifetime positive free cash flow. In this sample, all EV startups continue to remain deeply lifetime cash flow negative.
If EV startup is consistently spending more cash than it generates from its operations, it may struggle to secure additional funding or may be forced to take on high levels of debt. This can lead to a cycle of financial instability, ultimately putting pressure on the startups' long-term viability.
Moreover, if EV startups continue to be deeply lifetime cash flow negative, it could limit their ability to invest in research and development, expand production capacity, develop new products, or make strategic acquisitions.
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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151757323 : the market is still growing.
the problem is many of the cars legacy auto makers are offering are sheet and people ain't buying.
produce a decent cheap car like BYD does, or a mid level priced car like Tesla, and it's hard to keep up with demand
nerdbull1669 : I feel it is the other way round, because this is the transition period from current petrol-powered cars to EVs, there will be a period where demand will suddenly decline, as consumers have more choices now, and they would want to switch to something that will not tied them down. Instead of doing price war, why not produce more cost effective electric vehicles?
humorous Ibex_5972 : Ah nothing like that, the world is still running on gas.
KB trader : Yeah price cuts is the way forward now that the diehard green fans have taken the EV route.. price will be the next factor to tilt the side liners.