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Carmakers are telling their suppliers to switch focus from electric models to hybrid vehicles as they contend with “a marked slowdown” in battery car demand, according to the head of parts maker Dowlais.
The company, formerly the automotive division of GKN, specialises in making side-shafts that fit into both electric and engine-powered cars, giving it around six months of visibility of supply across all types of vehicles.
There are “big swings” away from electric vehicle orders to hybrid models, said Dowlais’s chief executive Liam Butterworth on Thursday, forecasting that carmakers would be forced to cut EV prices later in the year.
“There is a lot of restocking going on on [internal combustion engine] platforms, as carmakers are pivoting away from EVs” in western markets, he told the Financial Times.
“We have a pretty good line of sight for this year’s schedules,” he added, with “big swings from one platform to another within carmakers as they reallocate volumes” away from electric.
The shift comes as sales growth of EVs has slowed, and in some cases fallen, across the world as mass market motorists remain unwilling to pay higher prices for electric cars, and harbour concerns about driving ranges and charging.
The pace of the slowdown has caught several carmakers by surprise, with groups including General Motors and VW pulling back from expanding EV capacity in recent months, and diverting resources into engine models, especially hybrids.
Carmakers are heavily discounting EVs across the US, Germany and the UK in order to sustain their sales, data from the industry has shown.
China remained a strong market for EVs, due to local rules and incentives, Butterworth said, but the US had been “very underwhelming, and we don’t see much momentum”.
He added: “We see the big three [Ford, GM, Stellantis] backing off on big EV investments and going into hybrids.”
In Europe, the market remains pegged to incentives, with “Germany dropping off in December [after cancelling incentives], where we saw a complete drop-off on some schedules of EV platforms within the space of two to three weeks”.
Butterworth added: “Overall incentives by country are having a huge effect in terms of consumers being willing to buy.”
He expected “more pricing and commercial incentives this year” as carmakers have to force sales to hit carbon targets or EV quotas in markets such as the UK.
His comments come as Dowlais, which demerged from GKN owner Melrose last April, reported a widening pre-tax loss from £62mn in 2022 to £522mn last year, after writing £430mn down from its metal powders unit.
Shares were down almost 5 per cent by Thursday afternoon to 85.5p after the company said that it expected flat revenues this coming year, due to weaker orders.
Butterworth said business had “got the right cost structure in place, the right portfolio of products and technology” and was being “cautious” about which new vehicles to supply.
The stock has dropped by a third since the demerger, which Butterworth said was partly due to legacy shareholders in Melrose selling their stakes in the new business.