Federal tax credit cut triggers EV strategy overhaul
General Motors (GM) announced it will take a $1.6 billion charge in the third quarter as it adjusts its electric vehicle (EV) strategy in response to weakening demand and new regulatory setbacks. The shift follows the Trump administration’s decision to eliminate the $7,500 federal tax credit for EVs — a move auto executives say will cause a sharp decline in sales.
In a filing released Tuesday, GM warned that the EV adoption rate is expected to slow due to the changed policy landscape, including relaxed emissions regulations. The company told Reuters the charge was driven by expectations that EV volumes “will be lower than planned.”
GM’s disclosure signals a broader recalibration in the U.S. auto sector, where manufacturers are rapidly adjusting production plans amid a cooling EV market and rising trade headwinds.
Details of the $1.6 billion third-quarter charge
Of the total $1.6 billion charge, $1.2 billion is a non-cash impairment related to EV capacity changes, while $400 million stems from contract cancellations and commercial settlements. These adjustments will be reported as special items in GM’s upcoming third-quarter earnings, which are due early next week.
While GM emphasized that the charge does not affect its current EV lineup — including models from Chevrolet, GMC, and Cadillac — it acknowledged that further charges may arise as it continues reassessing its manufacturing footprint and output targets.
Shares of GM rose 2.1% in morning trading following the announcement.
Trump tariffs and hybrid competition compound pressure
The company is already managing the impact of new tariffs introduced by the Trump administration, which contributed to a $1.1 billion hit in the previous quarter. GM estimates that these trade measures will cost between $4 billion and $5 billion in 2025 but believes it can mitigate roughly 30% of the damage.
Analysts say GM’s aggressive EV pivot made it more vulnerable to regulatory reversals. Garrett Nelson, a senior equity analyst at CFRA Research, noted that GM was “probably the most aggressive” of the legacy automakers in its EV expansion. He believes competitors focused more on hybrid vehicles, such as Toyota and Honda, may now gain a competitive edge in the U.S. market.
Morningstar’s David Whiston suggested other automakers may soon report similar impairments. Ford declined to comment on its EV strategy, while Stellantis did not respond to media inquiries.
Dealership tax credit plan quietly reversed
GM and Ford had previously rolled out a workaround that allowed dealerships to continue offering the $7,500 tax credit on EV leases after the federal incentive expired. However, both companies later withdrew the program as regulatory uncertainty deepened.
The rapid changes highlight how deeply automakers depend on policy stability to execute long-term electrification strategies. GM’s latest announcement underscores the fragility of EV demand in the U.S. when faced with abrupt shifts in fiscal and trade policy.
