By Utkarsh Shetti (Reuters) -General Motors said on Tuesday it would take a $1.6 billion charge in the third quarter as it reshapes its electric vehicle strategy following the scrapping of a key federal incentive that is likely to dampen demand. GM’s disclosure is one of the clearest indications yet that U.S. automakers are scrambling […]
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GM to take $1.6 billion charge as tax credit blow muddies EV plans
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By Utkarsh Shetti
(Reuters) -General Motors said on Tuesday it would take a $1.6 billion charge in the third quarter as it reshapes its electric vehicle strategy following the scrapping of a key federal incentive that is likely to dampen demand.
GM’s disclosure is one of the clearest indications yet that U.S. automakers are scrambling to adapt their production plans in response to slowing EV demand.
The EV market also faces fresh strain after the Trump administration scrapped a $7,500 federal tax credit for electric vehicles, a key industry support, with auto executives warning of a sharp near-term drop in battery-car sales before an eventual rebound.
EV ADOPTION RATE TO SLOW
In a filing, GM said it expects “the adoption rate of EVs to slow” following recent policy changes, including the termination of certain consumer tax incentives and reduced emissions-rule stringency.
“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,” GM told Reuters in a statement.
Automakers are also working to cushion the impact of President Donald Trump’s tariffs, which forced GM to take a $1.1 billion hit in the previous quarter.
The company has estimated a bottom-line impact of $4 billion to $5 billion this year from trade headwinds and said it could take steps to offset at least 30% of the blow.
Shares of the Detroit, Michigan-based automaker were down 2.5% in premarket trading. The stock is up about 4.5% so far this year.
“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.”
Both GM and crosstown rival Ford had launched a program that would have allowed dealers to offer a $7,500 tax credit on EV leases after the federal subsidy expired, before walking back on those plans.
The automaker warned of possible further charges as it reassesses capacity and manufacturing footprint.
The changes will, however, not affect GM’s current portfolio of its Chevrolet, GMC and Cadillac EVs that are in production.
Charges include a $1.2 billion non-cash impairment tied to EV capacity adjustments and $400 million for contract-cancellation fees and commercial settlements.
GM said the charges will be recorded as adjustments to non-GAAP results for the third quarter, scheduled for early next week.
(Reporting by Utkarsh Shetti and Shivansh Tiwary in Bengaluru; Editing by Tasim Zahid)