EV Manufacturers Face Financing Squeeze Amid Falling Demand
Please note that we are not authorised to provide any investment advice. The content on this page is for information purposes only.
Electric vehicle (EV) manufacturers across the globe are experiencing tighter financing conditions and slowing sales, triggering renewed concerns about the sustainability of high-capex business models in a cooling macroeconomic climate.
After several years of rapid expansion, EV demand growth has begun to plateau in key markets such as the United States, China, and the European Union. This comes as interest rates remain elevated, reducing consumer affordability and curbing vehicle financing availability.
According to data from the International Automotive Finance Association (IAFA), global EV loan approvals dropped 9.4% in the second quarter compared to the same period last year. In the US, average interest rates for new EV loans are now at 7.1%, up from 5.6% a year ago.
Tesla, Rivian, and BYD have all reported slower-than-expected deliveries in Q2. Tesla’s CFO recently warned of “margin compression due to inventory buildup and softening retail financing pipelines.”
Analysts attribute the pullback to a combination of higher borrowing costs, persistent inflation in battery supply chains, and weakening consumer sentiment in developed markets. Fleet buyers, a major growth driver over the past two years, have also become more cautious.
“In the past, easy money allowed EV firms to fund aggressive production ramps and R&D,” said Marta Corvino, senior auto analyst at Fitch Mobility. “Now, they’re facing a more disciplined capital environment, and some are struggling to adapt.”
Smaller EV startups have been hit hardest. Lucid Motors and NIO have both announced plans to cut staff and delay new model rollouts. Meanwhile, investor appetite for EV-focused bonds and green auto ETFs has cooled significantly.
On the financing side, auto lenders are tightening underwriting standards, citing increased default rates among lower-income buyers and leasing customers.
Some governments are stepping in with support. Germany recently extended EV purchase subsidies through 2026, while China’s central bank has urged domestic lenders to maintain “reasonable credit flows” into the green vehicle sector.
Despite the downturn, long-term prospects for the EV industry remain positive. Global climate goals and tightening emission standards continue to underpin structural demand for electric mobility. However, industry players may face a period of financial consolidation.
Investors are now looking to upcoming earnings reports and delivery forecasts for Q3 as a key gauge of market stability.
