With the electric vehicle tax credit gone, the American EV industry is facing an existential moment.
Auto giant GM, a leader in both gas-powered and electric vehicle industries, is at its own crossroads too. The company announced in its third-quarter earnings call that it will be scaling back some of its EV production even further.
GM is now stopping production of its Chevrolet BrightDrop electric vans at the CAMI assembly plant in Ontario, Canada, and will start to assess the site for future opportunities. The company had halted production at the plant in April and laid off about 1,200 workers, but had initially said the move was temporary, with production expected to resume in October.
“This is not a decision we made lightly because of the impact on our employees. However, the commercial electric van market has been developing much lower than expected, and changes to the regulatory framework and fleet incentives have made the business even more challenging,” GM CEO Mary Barra said in the earnings call on Tuesday.
The decision is part of a broader company strategy shift back from EVs to traditional gas-powered vehicles in preparation for weakening demand.
American electric vehicles cost a lot. Even the cheapest options cost $10,000-20,000 more than their Chinese counterparts. As a result, the electric vehicle tax credit was a huge boon for EV demand in the U.S. as it lifted the burden on consumers. It also incentivized automakers to make newer, better electric vehicles. GM was one of these traditional automakers that made electric vehicles a core part of their strategy. The company made a significant commitment to completely electrify its fleet by 2035, with executives frequently calling electric vehicles the company’s “north star.”
With the credit now gone, the industry braces itself for a huge drop in demand.
GM executives think demand will suffer for the remainder of the year and into 2026 before it levels off and finds its natural state.
“Under the changing regulatory environment, we expect EV demand growth to slow pretty significantly from what it was going to be, and so we need to make sure that we right-size the capacity footprint to be able to not have to absorb a lot of those fixed costs,” CFO Paul Jacobson said. “While it’s unfortunate, I think it is a quick adjustment to the reality around us that we’re facing.”
The company recently shared that it will be taking a $1.6 billion hit this quarter, stemming from a drop in the value of EV plants and equipment and supplier contract cancellation costs.
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