Despite electric vehicle (EV) sales continuing to grow, there are mounting concerns about slowing demand for electric vehicles.

High-interest rates have thrown a wrench into the ambitious plans of climate regulators and automakers to accelerate the transition to electric vehicles. This concern was underscored on Wednesday by the abrupt termination of a GM-Honda partnership and a warning issued by a battery manufacturer.

Electric vehicle sales are still on the rise, but they are failing to keep up with the expectations of car manufacturers and other companies that have poured billions of dollars into the EV sector. The anticipation of persistently high-interest rates has led companies to rethink their strategies as they cautiously approach the year 2024.

Lee Chang-sil, the Chief Financial Officer at South Korean battery maker LG Energy Solution (373220.KS), expressed concerns on Wednesday, stating that EV demand for the upcoming year may fall short of expectations due to global economic uncertainties.

Lower cost EV

On the same day, Honda (7267.T) and General Motors (GM.N) announced the abandonment of their $5 billion joint venture aimed at developing lower-cost EVs, just one year after the initiative was revealed. GM also stated that it would focus its short-term EV efforts on meeting demand rather than pursuing specific volume targets.

GM CEO Mary Barra told analysts, “We’re taking immediate steps to enhance the profitability of our EV portfolio and adjust to slowing near-term growth.”

Investors have reacted to this shift in the outlook. Over the past three months, the iShares Self-Driving EV and Tech exchange-traded fund has witnessed a more than 24% decline, significantly greater than the 8.3% drop seen in the MSCI All-World Index (.MIWD00000PUS), a representation of global equities.

Despite the concerns, EV sales are still growing. In the third quarter, EV sales surpassed 300,000 units in the United States for the first time, according to a Cox Automotive report. In September, they rose by 14.3% in the European Union and 22% in China, the world’s largest EV market.

Elon Musk, CEO of Tesla (TSLA.O), raised concerns last week regarding the impact of the high-interest rate environment on car purchases. During Tesla’s earnings conference call, Musk stated, “I am worried about the high interest rate environment that we’re in. The vast majority of people buying a car consider the monthly payment. If interest rates remain high or increase further, it becomes that much harder for people to buy a car.”