GM said it will incur costs of $1.6 billion in the third quarter as it reviews its strategy for electric vehicles following the cancellation of a $7,500 federal tax credit on electric vehicles, according to Reuters. GM believes that such a policy change will slow down the introduction of electric vehicles in the United States, as well as weaken emissions regulations.
The costs, reflecting lower-than-planned electric vehicle production volumes, consist of $1.2 billion in non-monetary losses from adjustments to production capacity for electric vehicles and $400 million in penalties for contract cancellations and commercial settlements. While it won't affect the current production of Chevrolet, GMC, and Cadillac electric vehicles, GM has warned that additional costs are possible as it overestimates production capacity and manufacturing space. The company's shares rose about 2.1% during morning trading. The company, which already incurred $1.1 billion in tariff costs last quarter, estimates the negative impact of trade measures in 2025 at $4-5 billion, but aims to offset at least 30%.
Analysts said GM's move highlights the industry-wide contraction due to lower demand; some expect other automakers to suffer similar losses and argue that it could be beneficial for players like Toyota and Honda, which focus on hybrid vehicles.
