Slowing EV Sales Are Upending Banker Climate Strategies

Electric vehicles have swiftly gone from a rare bright spot in the fight against climate change to a cause for concern.

A slowdown in EV adoption has potentially huge implications for the energy transition. It also has ramifications for the many financial institutions that have pledged to decarbonize the loans and investments they make.

For lenders such as Bank of America Corp., HSBC Holdings Plc and JPMorgan Chase & Co. that have committed to reduce emissions associated with their financing activities in high-carbon sectors, the auto industry seemed to have a relatively clear path. Unlike certain hard-to-abate industries where getting to net zero relies on scaling up nascent technologies, a widely held assumption was that government incentives and consumer demand for EVs could be counted upon for a smooth transition.

By extension, banks could just sit back and wait to hit their targets without much effort. But now, recent statements from many of the world’s biggest auto manufacturers have given bankers cause to question that strategy.

Ford Motor Co., for example, is retrenching. The automaker is delaying new electric vehicles and cutting prices, having called EVs “the main drag on the whole company right now.” Ford has predicted EV losses this year of as much as $5.5 billion.