Electric Vehicles Hit A Speed Bump

Investors who bet on the rapid growth of electric vehicles in China are getting a shock.

Umicore , UMICY -0.83% a big player in the electric-vehicle supply chain, issued a profit warning Tuesday, sending its stock down 15%. The Chinese government cut subsidies for electric vehicles by more than expected last month, and Umicore is feeling the knock-on effect. The company pushed back targets for sales and plant investments by 12-18 months.

Listed in Belgium, Umicore came to be seen as a rare non-Asian play on the fast-growing electric-vehicle industry. It makes cathodes, one of the most valuable components of lithium-ion batteries, as well as tailpipe catalysts for conventional cars. Unlike Tesla, it is profitable and doesn’t require investors to bet on a specific model’s appeal.

But its potential to benefit from the electric-vehicle revolution is now looking impaired in the short term and uncertain in the longer term. Lower subsidies in an already weak Chinese car market aren’t the only problem. Umicore also seems to be struggling to maintain market share against scrappy rivals who are happy to use cheap cobalt from questionable sources, often involving child labor. It warned that ethical sourcing put it at a “significant competitive disadvantage.”

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