Market Headwinds Force Owners To Hit The Brakes On EV Projects
By Sebatian Obando of ConstructionDive
Once a bustling site poised to power the electric vehicle revolution, a $2.6 billion battery factory under construction in Lansing, Michigan, now sits at a near standstill, its future frozen as economic headwinds stall its progress.
EV battery maker Ultium Cells, a joint venture between General Motors and LG Energy Solution, placed construction of its facility on hold in July amid sluggish market conditions, namely high interest rates and concerns around EV demand, according to the company. It intends to resume construction once it has a clearer understanding of this outlook, an official from LG Energy Solution told The Korea Herald.
Uncertainty around interest rates is causing many on-hold projects to pile up like water behind a dam, according to Richard Branch, chief economist for Dodge Construction Network. These high rates are especially problematic for projects done in phases, like multibillion-dollar EV plants, where owners need to seek funding to complete each new phase of construction, said David Suchar, a partner at Maslon, a Minneapolis-based law firm.
“Many, if not most, construction megaprojects are undergoing some form of delay these days,” said Suchar, who regularly represents clients in construction. “At the center of the delays are a combination of increased construction material costs and borrowing costs due to high interest rates.”
For example, LG Energy Solution temporarily paused a portion of its $5.5 billion battery manufacturing complex in Queen Creek, Arizona, earlier this summer due to market conditions, according to a company statement shared with Construction Dive. Around the same time in New Hill, North Carolina, Vietnamese EV maker VinFast also delayed the first $2 billion phase of its manufacturing plant until 2028, citing market volatility.
“If you have supply chain issues on one part of the project, that can lead to delays in the project schedule,” said Suchar. “For projects planned in phases over several years with numerous trades involved, you can have a cascading effect.”
In addition, consumer demand for these types of cars has been less than expected. Growth rates around EV sales have decelerated this year, according to data from the International Energy Agency. Carmakers across the board, such as Ford and GM, are slashing production plans amid this demand slowdown.
Tyler Durden
Tue, 08/13/2024 – 14:20