General Motors to take a $1.6bn hit as US tax incentives for EVs slashed
General Motors had led the way among US car makers with plans to move to EVs (Alamy/PA)
General Motors will record a negative impact of $1.6bn (€1.4bn) in its next quarter after tax incentives for electric vehicles (EVs) were slashed by the US and rules governing emissions are relaxed.
Shares fell less than 2% before the opening bell on Tuesday.
The EV tax credit ended last month. The clean vehicle tax credit was worth $7,500 (€6,480) for new EVs and up to $4,000 (€3,456) for used ones.
Meanwhile, the US Environmental Protection Agency has been working on easing rules aimed at cleaning up exhaust emissions as the Trump administration moves to undo incentives for car makers to go electric.
President Donald Trump has also challenged federal EV charging infrastructure money and blocked California’s ban of new gas-powered vehicle sales.
It adds up to less pressure on car makers to continue evolving their production away from gas-burning vehicles.
General Motors, which had led the way among US car makers with plans to convert production to an electric fleet of vehicles, said in a regulatory filing on Tuesday that it will have to book charges that include non-cash impairment and other charges of $1.2bn (€1bn) because of EV capacity adjustments.
There is also $400m (€346m)in charges mostly related to contract cancellation fees and commercial settlements associated with EV-related investments.
GM warned that it may take additional hits as it adjusts production, with non-cash charges potentially impacting on operations and cash flow in the future.
The company said that its EV capacity realignment does not impact on its retail portfolio of Chevrolet, GMC and Cadillac EVs currently in production, and that it expects those models to remain available to consumers.
EVs were considered to be the future of the US vehicle industry. GM had announced in 2020 that it was going to invest $27bn (€23.3bn) in electric and autonomous vehicles in the next five years, a 35% increase over plans made before the pandemic.
In 2021, GM said that it planned to have more than half of its North American and China factories be capable of making electric vehicles by 2030. It also pledged at the time to increase its investment in EV charging networks by nearly $750m (€648m) through 2025.
A year later, GM chief executive Mary Barra said the car maker would sell more electric vehicles in the US than Tesla by the middle of the decade.
GM also had a goal of making the vast majority of the vehicles it produces electric by 2035, and the entire company carbon neutral, including operations, five years after that.
Yet US vehicle makers are being hampered in some of their long-term planning, with drastic changes in economic and environmental policy from one administration to the next.
They are also facing increased competition from companies such as China’s BYD, which announced in July that its sales grew 31% in the first six months of the year to 2.1 million cars.
BYD’s sales have skyrocketed on the back of a government-driven EV boom in China.
The rise of BYD and other Chinese electric vehicle makers is a challenge for Tesla and the world’s other major automakers as Chinese competitors push into Europe, Southeast Asia and other overseas markets with a relatively affordable option for drivers who want to go green.
