Electric Vehicles: Negative News Weighs On Sector

News surrounding the electric vehicle (EV) and lithium mining industries has been remarkably and uniformly negative over the last few weeks. Not surprising, the share prices of many key participants have underperformed the market over this period. 

Unfortunately, little constructive news seems likely to be announced for at least for some time, with one possible notable exception; deliveries of Tesla, Inc.’s (NASDAQ: TSLSA) long-awaited Cybertruck (with a stainless steel frame) could begin in late November, potentially boosting investor sentiment then.

There’s several pieces of recent anecdotal evidence of waning EV (and therefore lithium) demand. For instance, Tesla earlier this week reported 3Q 2023 earnings which fell short of analysts’ consensus estimates. Perhaps more importantly, CEO Elon Musk was quite pessimistic on the company’s earnings conference call regarding demand levels, the state of the global economy, and high interest rates which make purchasing cars — more specifically, affording high monthly car payments — difficult for the average consumer.

Poor Q3 earnings resulted in a 9% drop for Tesla. Source: TradingView

The day before, General Motors Company (NYSE: GM) announced that, due to flattening EV demand, it would delay the start of production by a year to late 2025 on its Chevrolet Silverado and GMC Sierra electric pickup trucks at a plant in Michigan. And on the same day, start-up EV manufacturer Lucid Group, Inc. (NASDAQ: LCID) announced disappointing 3Q 2023 production and delivery figures, further reflecting weakened demand in the sector.

READ: Lucid Produces Fewer Cars In Third Quarter While Deliveries Remain Flat

Ford Motor Company (NYSE: F) meanwhile announced last week that it was temporarily cutting one of three shifts at the Michigan plant building its electric F-150 Lightning pickup truck. In each of the cases involving GM and Ford it is interesting that the delays/cuts are occurring not for sedans, but for pickup trucks, which are generally extremely popular among U.S. consumers.

In September, the European Union launched an investigation into China’s support of its EV industry. Chinese EV makers have a much bigger presence in Europe than the U.S. primarily because the 10% import tariffs on the continent are far less than the 27.5% fee imposed by the U.S. government on Chinese car imports. Europe has the second biggest EV battery market in the world after China.

READ: Canada Faces Challenges in EV Adoption, Survey Finds

Lithium carbonate prices have been cut almost in half over the last three months to about US$23,200 per tonne, essentially reaching their lowest levels in two years. Prices touched about US$80,000 last fall but collapsed by around 70% over the next six months before bottoming in late April 2023. Stagnating demand has caused prices to return to these April 2023 levels.  

In Chinese yuan per tonne. 7.313 yuan = US$1.00. Source: Trading Economics.

Information for this story was found via Edgar and the sources and companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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