The electric vehicle revolution could be slowing down, and investors are spooked.
Two lesser-known chip makers and one battery maker have noted a slowdown in electric vehicle and overall auto sales.
It is a trend that is likely to carry into 2024.
Ford Motor (NYSE:F) Group is already assessing its EV strategy ahead of the new year.
Sales for EVs have decelerated, leading to a glut in inventory of formerly sought-after models such as the Mustang Mach-E and F-150 Lightning.
In response, the automaker has initiated price reductions and is extending discounts to attract potential buyers.
The overall scenario for all involved isn’t necessarily bleak, but it does require a rethink of resources.
Bad news for auto industry chip makers
Chip makers for the auto industry had a bad day on Wall St on Monday. Earnings reports from On Semiconductor Corp. and Lattice Semiconductor (NASDAQ:LSCC) Inc. disappointed with their forecasts.
Inflation and high-interest rates are having a major impact.
“We think it will carry through into the first part of next year, with most cycles running six to nine months,” Benchmark analyst David Williams said.
“The reduced consumer buying power and overall macro backdrop will likely keep buyers on the sidelines for the next couple of quarters.”
On Semi expects to ship $200 million less this year of its silicon carbide chips, which are used in EVs.
It is suffering from a shortfall of a major European customer.
It’s not all bad news for the company whose 2023 revenue sits at $800 million, four times higher than in 2022.
“EVs are going to grow,” On Semi chief executive Hassane El-Khoury said. “They’re going to grow for us in the fourth quarter as well. It’s just not going to grow in the fourth quarter at the rate that we expected … I think EVs are a long-term growth opportunity — even with the backdrop of a lot of the headlines that we’re seeing, customer designs have not slowed down.”
Lattice Semiconductor (NASDAQ:LSCC), which sells chips that are used in advanced driver-assistance systems in cars, saw its shares tumble 13% after its quarterly report.
“In the last kind of four to six weeks of Q3, we started to see demand soften from our industrial and automotive customers,” Lattice CEO Jim Anderson told analysts.
“I would say that it was really localised to the Asia geography, and we expect that softness we started to see at the end of Q3 extend into the current quarter.”
Meanwhile, Tesla Inc (NASDAQ:TSLA)’s battery partner, Panasonic Holdings is slashing production by 60% due to Tesla’s slowing sales.
Ford to halt EV facility development
Having spent billions of dollars on EVs, Ford is now reassessing its EV strategy.
Ford has suspended plans for a facility intended to produce batteries for upcoming electric vehicle models. This development, however, will not impact the automaker's Blue Oval City facility in Tennessee or its future EV line-up.
Ford's latest financial disclosures reveal a US$1.3 billion loss in the past quarter and cumulative losses of US$3.1 billion this year, with expectations to lose a total of US$4 billion in 2023.
To address declining demand, Ford introduced the F-150 Lightning Flash, a moderately priced version of its electric truck, asserting that customer preferences will guide its EV production.
The financial strain is not exclusive to Ford; General Motors (NYSE:GM) has also postponed production of its new electric trucks and SUVs. Moreover, Tesla CEO Elon Musk expressed concerns about interest rates during his latest earnings call.
Despite the challenges faced by automakers, the reduction in EV prices could benefit consumers. Various incentives, such as discounts and upcoming changes in point-of-sale tax credits, could potentially revive the lagging EV market and reverse automakers' declining fortunes.