Makers and suppliers of electric cars are dealing with diminishing cash and weak sales. Hurdles are ripping through the automotive supply chain, crunching demand for batteries and materials such as lithium that power them, reports The Wall Street Journal (Dec. 1, 2024). “It’s a whole ecosystem that is collapsing. It’s just a disaster out there with consumer demand going down,” said the CEO of a clean-energy investment bank.
Several high-profile companies, including electric SUV maker Fisker, bus manufacturer Arrival, and Swedish-based battery maker Northvolt recently filed for bankruptcy. At least a dozen other startups, specializing in EVs or batteries, are also at risk.
Many of these young companies have been hammered by cooling demand for EVs, rising costs and supply-chain obstacles that have hindered their ability to put out new products quickly. And established Western automakers such as Ford and GM, which have pledged billions of dollars to expand their EV lineups, are now delaying or pulling back some future investment as sales haven’t materialized.
Northvolt was among the industry’s most stunning implosions. The startup, which sought to make batteries with a lower carbon footprint, had raised $15 billion from backers including VW and Goldman Sachs. But the weakening EV market resulted in BMW cancelling a major order.
Li-Cycle Holdings, a firm that has promised to turn recycled batteries into useful materials, had an approved $475 million government loan to help build out a plant in Rochester, N.Y. But it now only has enough cash on hand to sustain operations through March, 2025 and has paused construction on the factory.
Electric truck maker Canoo is also burning through cash and has laid off a quarter of its workforce in Oklahoma. It had received a $113 million incentive package from the state to create 1,300 jobs at its vehicle and battery plants and had promised to quickly hit $1.4 billion in revenue this year. “It feels like being punched in the face every morning trying to develop vehicles that have all their components for so long been outsourced to China,” said Canoo’s CEO.
Classroom discussion questions:
- What issues are EV component suppliers facing, and how can they deal with them?
- What are the implications for operations managers?