On Tuesday, October 14, American multinational corporation General Motors (GM) announced its plan to adjust electric vehicle production capacity and investment plans due to lower-than-expected demand for electric vehicles. The company will incur a total of $1.6 billion in expenses, which will be reflected in its third-quarter financial report.
In a filing submitted to the U.S. Securities and Exchange Commission (SEC) on Tuesday, GM cited the termination of government subsidies and regulatory support for electric vehicle growth as factors contributing to the anticipated decline in electric vehicle sales.
Over the past few years, GM has invested billions of dollars in advancing electrification. In 2021, the company announced a $35 billion investment in electric vehicles and autonomous driving technology, earmarked for developing new vehicle models, battery technology, and converting combustion engine plants into electric vehicle production lines. However, with weakening market demand, the expansion of electric vehicles has notably slowed down.
GM, once one of the most vocal advocates for relaxing electric vehicle regulations, argued that consumers were not yet ready to give up traditional fuel vehicles.
Recent policy changes have given automakers more time to improve their struggling electric vehicle business and continue selling more profitable combustion engine vehicles. The industry believes that part of the reason for the stagnation of electric vehicle growth in the United States is the high pricing.
The federal tax credit of $7,500 for electric vehicles expired at the end of September, leading many consumers to rush to purchase electric vehicles before the deadline. This surge in demand helped GM achieve record electric vehicle sales in the third quarter. However, the industry anticipates that the electric vehicle market will slump with the cessation of federal subsidies.
GM announced on Tuesday that its Board of Directors’ Audit Committee approved a $1.6 billion loss expenditure a week prior, stating that it was based on strategic adjustments to electric vehicle production capacity and manufacturing layout in response to consumer demand. Of the total amount, $12 billion is related to electric vehicle capacity adjustments, while the remaining $4 billion will be used for contract terminations and commercial settlements.
Additionally, the company expects to incur $4 to $5 billion in tariff-related expenses this year and plans to offset these costs through cost-cutting measures and increasing domestic production.
In 2021, GM CEO Mary Barra stated that the company plans to launch a fully electric vehicle production line by 2035. At that time, Tesla’s electric vehicle sales were soaring, and there was a widespread expectation in the market for a prolonged period of rapid growth in electric vehicles supported by government emission reduction policies.
However, electric vehicle sales last year fell far below expectations, leading GM and other automakers to scale back production. Last year, the Trump administration and Congress repealed several long-standing energy and emission regulations, dealing another heavy blow to the electric vehicle business of automakers.
GM’s competitor, Ford, suffered a $5 billion loss in its electric vehicle business last year, indicating that the overall U.S. electric vehicle industry is in a period of losses and adjustments.