General Motors said on Tuesday it will record a $1.6 billion charge in the third quarter as the company recalibrates its electric vehicle (EV) strategy in response to the elimination of a key federal incentive expected to weaken demand.
The move underscores how U.S. automakers are adjusting production plans amid softening EV sales, following the Trump administration’s decision to end the $7,500 federal tax credit that had supported the industry. Executives have warned that the change could trigger a sharp short-term drop in EV sales before a gradual recovery.
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In a filing, General Motors said it expects “the adoption rate of EVs to slow” after recent policy shifts, including the removal of consumer tax incentives and relaxed emissions rules. “The charge is a special item driven by our expectation that EV volumes will be lower than planned because of market conditions and the changed regulatory and policy environment,” the company said in a statement to Reuters.
Shares of General Motors rose 2.1% in morning trading following the announcement. The automaker also continues to grapple with the impact of tariffs imposed by President Donald Trump, which led to a $1.1 billion hit in the previous quarter. The company estimates total trade-related headwinds of $4 billion to $5 billion this year but said it aims to offset about 30% of that impact through cost-saving measures.
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The $1.6 billion charge includes a $1.2 billion non-cash impairment related to EV capacity adjustments and $400 million for contract-cancellation fees and commercial settlements. The company noted that the changes would not affect its current lineup of Chevrolet, GMC, and Cadillac electric vehicles, though it may take additional charges as it reassesses its capacity and manufacturing footprint.
“The charge doesn’t come as a surprise given recent market developments and the fact GM had made probably the most aggressive EV push of any traditional automaker,” said Garrett Nelson, a senior equity analyst at CFRA Research. “We think the automakers who chose to invest more heavily in hybrid vehicle development such as Toyota and Honda are poised to benefit in the U.S. auto market.”
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General Motors, along with Ford Motor, had earlier explored a program allowing dealers to offer a $7,500 credit on EV leases after the federal subsidy expired but later dropped the plan. Ford declined to comment on its EV strategy, while Stellantis did not immediately respond to a Reuters request for comment.
General Motors said the charges will be recorded as adjustments to its non-GAAP results for the third quarter, which are scheduled for release early next week.
Source: Reuters
