The shift to electric vehicles isn’t going anywhere, but it’s not moving as fast as expected. More alarm bells sounded Wednesday on the slowdown, underscored by the scrapping of a GM-Honda partnership to jointly develop affordable EVs and a warning from a battery maker that the booming market could stall as soon as 2024.
Ambitious climate regulators and automakers are pushing to accelerate the shift from gasoline-powered cars, setting sales targets to see EVs make up 50% of passenger car and light truck sales in some countries by 2030. They also aim to boost renewable energy production to meet the electricity demands of EVs and are investing billions in batteries and other parts and charging infrastructure.
Those ambitions have helped drive sales of EVs to record levels this year. The global fleet of passenger EVs will grow from an estimated 6.6 million this year to 77 million in 2025 and 229 million by 2030 under BNEF’s Economic Transition Scenario, the fastest growth rate of any energy technology.
But that’s not enough to meet the emissions reduction targets set by governments and regulators worldwide. That gap must be closed by 2040 if the world wants to keep track of a net-zero level of road transport emissions by 2050, as in international climate agreements.
In the United States, for instance, the Environmental Protection Agency requires automakers to progressively lower total greenhouse gas emissions from their vehicles. Tesla is firmly in the lead. As production progresses, its Model 3 SUVs have sold more than 222,000 units in the third quarter. But it’s not a one-car race, with Volkswagen, Renault-Nissan, and China’s Geely all gaining ground.
High-interest rates are derailing the momentum, making it more difficult for consumers to afford new cars, particularly those with a lower fuel economy than conventional models. The average interest rate for a new car loan is about 6% right now, according to Kelley Blue Book. That’s well above the record low of 4.2% in late 2018. The rate rise also makes it more expensive for people to finance the upfront costs of EVs.
Those factors have contributed to expectations that EV demand next year will miss estimates, and companies are shifting their plans accordingly. GM’s CEO, Mary Barra, said during this week’s earnings call that the company will slow the launch of several EV models to focus on profitability and recover from the impact of United Auto Workers strikes. However, The company will continue revamping its existing Bolt model, which has seen a sales surge thanks to its affordability and driving range.
The slowdown is also derailing the growth of the EV industry, as it is taking a toll on the prices for raw materials used to build and charge batteries, such as lithium carbonate and cobalt metal. Lithium prices are down 67% this year compared to last, while cobalt prices have sunk nearly 40%.
