American automaking giant General Motors was forced to absorb a $1.6 billion third-quarter loss due to the abrupt reversal of a long-standing federal incentive, the New York Times reports.
What's happening?
GM filed documents with the Securities and Exchange Commission on Oct. 14, disclosing a combined loss totaling $1.6 billion.
As recently as August 2024, EV Magazine touted GM's "bold" turn toward an "All-Electric Future," detailing the automaker's plans to go fully electric by 2035.
Along with other American automakers, GM had already invested in infrastructure to make its EV plans a reality, increasing investments in battery technology and manufacturing facilities.
Car manufacturers were forced to pivot from their in-progress plans after legislation signed on July 4 abruptly discontinued a pivotal federal EV tax credit that had been in place since 2008. Lawmakers didn't just eliminate the credit; they did so on incredibly short notice.
That legislation went into effect on Sept. 30, after a months-long EV sales boom. Although automakers have yet to gauge what the Times called "natural demand" for EVs, the sudden change prompted GM to record a Q3 loss in excess of $1 billion.
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Of the third-quarter loss, $1.2 billion was attributed to "adjustments to [GM's] EV capacity," while $400 million came as a result of canceling in-progress contracts with EV suppliers.
Why is GM's billion-dollar EV hit concerning?
Although the Times alluded to a "natural demand" level for EVs irrespective of the federal tax credit's cancellation, the paper further noted that it was too early for automakers to make plans and investments based on such recent market fluctuations.
In September, General Motors Chief Financial Officer Paul Jacobson discussed the manufacturer's evolving strategy on EVs, admitting that the policy reversal slowed its growth.
"The journey to profitability was heavily driven by scale, and the reality is we're probably going to scale up much slower now over the next few years," Jacobson said of GM's EV strategy.
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Would you still consider buying an EV if there weren't tax incentives for doing so?
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Definitely 👍 In recent years, the EV market has expanded immensely, powered in part by more robust electric options from mainstream automakers.
When manufacturers are forced to contend with sudden policy shifts affecting sales, as GM's Q3 demonstrates, they're typically cornered into prioritizing profits over innovation, irrespective of consumer demand.
As a result, models and improvements to lineups are stalled or halted entirely, uncertainty that can rapidly undermine EV adoption.
Policy setbacks affecting EV manufacturers could easily translate to fewer electric vehicles on the market, exacerbating vehicular emissions and accelerating the planet's overheating.
What's being done about it?
Jacobson conceded GM's EV plans would move more slowly, but also hinted at an upside — GM's renewed commitment to making EVs affordable.
General Motors is "in a position now where we have the opportunity to deploy the capital into electric vehicles not to proliferate the portfolio, but rather to focus on structural cost reductions within [GM's lineup of] EVs," Jacobson remarked.
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