Updated February 22nd, 2024 at 23:51 IST

Downsizing, production cuts hit EV sector globally

German luxury carmaker Mercedes has toned down expectations on EV demand.

Reported by: Business Desk
BMW i16, the i8 successor, left unrevealed | Image:BMW
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Going green goes slow: The electric-vehicle industry across the world is witnessing  a sharp reduction in jobs, leading to a massive change in companies’ strategic plans, as well as production cuts pressed by the EV makers. The sudden subdued sentiment in the EV space, first triggered by high EV prices, suggesting pain in the near term could slow the transition away from gasoline-powered combustion engines.

The German luxury carmaker Mercedes, in its forecast, has toned down expectations on EV demand. Mercedes has said that it will update its gasoline-powered engine vehicle lineup well into the next decade.

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Muted Mercedes 

Mercedes has put brakes on its goal to go all-electric by 2030. Instead, it now says it will retain combustion engines in at least half of its vehicles until then. Previously, it had hedged by saying consumer demand would dictate how soon it went all-electric.

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"High interest rates, moderate oil prices, and range anxiety all have conspired against EV demand. The enthusiasm of early adopters of EVs wasn’t representative of the longer-term and broader demand for these vehicles," said Brian Jacobsen, chief economist at Annex Wealth Management, which does not own shares in any EV makers.

"We expected a reduction in demand and enthusiasm for the vehicles so we didn't find the valuations compelling," he added.

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EV start-ups  

The pivot by Mercedes comes a day after EV startups Rivian and Lucid forecast 2024 production well below analysts' expectations and Rivian cut its workforce by 10 per cent. That news caused shares of Rivian and Lucid to tumble on Thursday by 27.5 per cent and 19.5 per cent, respectively.

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The pain follows last year's price war that drained margins and pressured many companies' already money-losing EV operations. "There is a host of macro-level challenges," Rivian CEO RJ Scaringe said on Wednesday, adding that high interest rates and geopolitical risks were making consumers price-sensitive.

The situation was previously flagged by Ford, General Motors and market leader Tesla, where CEO Elon Musk's warning in January of the market leader's slowing pace of growth slashed $80 billion in market value in one day.

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Prices for used EVs collapsed by 16.4  per cent in January compared with a year ago, according to Manheim Used Vehicle Value index data. Even in China, the world's largest auto market where demand for EVs has been strong, new-energy vehicle sales fell 38 per cent in January, the first monthly drop since August 2023.

(With Reuters inputs) 

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Published February 22nd, 2024 at 23:51 IST