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Amid faltering demand for electric vehicles, automakers are scrambling to slow down investments in vehicle electrification one after another.

Some project that EV and battery companies may be heading toward a harsh winter.

US automaker General Motors recently scrapped its US$5 billion plan to co-develop new EVs with Japan’s Honda. GM also postponed plans to begin operating a battery plant and an electric truck plant in Tennessee and Michigan, respectively, for which it partnered with LG Energy Solution.

Meanwhile, Ford announced that it is reducing its investments in EVs by US$12 billion, due to which production will be delayed at its second battery plant run by BlueOval SK, Ford’s joint venture with SK On.

A source who works for an automobile importer explained that “the brakes are being applied to EV production.”

Earlier, in September, US market research company Gartner estimated that around 11 million EVs would be sold this year across the world. Considering that EV sales increased from 4.7 million to 9 million from 2021 to 2022, sales growth appears to be slowing down.

Meanwhile, market analyses diverged. First, some point out that demand for EVs is growing more gradually due to high interest rates, as most automobile purchases are paid for in installments. According to this view, demand for EVs may slow down even more and companies specializing in EVs and batteries may face more difficulties if high interest rates continue.

The yield for 10-year government bonds recorded 4.8% in the US in October.

An automotive industry insider said, “South Korea also saw interest rates skyrocket to 11% at the time of the Legoland situation last year. We believe risks in procurement interests still exist, and we are closely observing demand for EVs.”

On the other hand, others analyze that there’s no need for concern just because growth for the EV market has dulled a little, as GM and Ford — which both specialize in internal combustion locomotives — are simply adjusting their aggressive investment plans, having put them out so as not to seem behind the EV curve but having now determined they are excessive.

An analyst who spoke on the condition of anonymity definitely argued that “there’s no need to doubt the EV market’s growth potential.”

Another industry official said, “This should be seen as part of a process to prepare for the next step while taking a breather. Due to government regulations and the [US] Inflation Reduction Act, tax credits can be received through investments in the US, so mainly EV companies with lots of investments are taking short-term measures, but the market is continuing to grow.”

Hyundai Motor Group and Kia, which recorded 20 trillion won in cumulative operating profits during the third quarter of this year alone, also decided not to change EV production goals and investment plans. “While EV sales next year may not meet expectations, we don’t have plans to reduce production and development investments for EVs. Regardless of temporary obstacles, the market will grow,” said Seo Gang-hyun, Hyundai Motor Group’s chief financial officer and vice president.

Domestic battery and material companies may take a hit due to global EV companies’ production slowdowns. Liontown Resources, an Australian lithium miner, has already taken action, halting domestic lithium mine acquisitions, as EV sales are projected to slow, and the price of lithium is dropping due to oversupply as a result of many new lithium mines opening since 2020.

An official with a domestic battery company noted, “If the price of lithium drops, battery companies may see higher returns in the short run, but because of the price sliding system, the impact won’t be significant unless the downtrend in prices doesn’t continue in the long run.” They added, “What’s scarier for battery companies is slowing growth for EV demand.”

By Choi Woo-ri, staff reporter

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