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, a move likely to dampen demand.
U.S. carmakers have delayed or canceled new EV models and battery plants and pared other investments, citing weaker-than-expected demand.
The market faces further strain after the Trump administration removed a $7,500 federal tax credit for EVs, a key support for the industry.
EV adoption rate to slow
“Following recent U.S. Government policy changes, including the termination of certain consumer tax incentives for EV purchases and the reduction in the stringency of emissions regulations, we expect the adoption rate of EVs to slow,” GM said in a filing on Tuesday.
Shares of the Detroit, Michigan-based automaker were down 2.5% in premarket trading. The stock has been up about 4.5% this year.
Some auto industry executives, including Ford CEO Jim Farley, have warned that EV sales will drop significantly in the absence of the tax credit. However, some, including the CEO of Hyundai Motor North America, have said that the EV market remains resilient.
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 changes will not affect GM’s current portfolio of its Chevrolet, GMC, and Cadillac EVs that are in production.
The Detroit automaker warned of the possibility of further charges as a result of the reassessment of its capacity and manufacturing footprint, which it said was still ongoing.
The charges comprise a $1.2 billion non-cash impairment related to EV capacity adjustments and $400 million for contract-cancellation fees and commercial settlements.
The charges will be recorded as adjustments to the automaker’s non-GAAP results for the third quarter scheduled for early next week.
—By Utkarsh Shetti, Reuters