Struggling Electric Vehicle Market: GM Must Write Off Billions

US automaker General Motors (GM) will have to write off costs of 1.6 billion US dollars in the third quarter – the figures will be published next week – due to plans for fully electric vehicles that did not go as expected. The Detroit-based automotive group announced this on Tuesday to the US Securities and Exchange Commission (SEC) in a public announcement. The costs include a non-cash impairment of 1.2 billion US dollars related to capacity adjustments for electric vehicles (EVs) and 400 million US dollars for contract cancellation fees. The write-off is primarily a reaction to the expiry of tax incentives for electric cars in the USA and the relaxation of emissions regulations.

Cancellation of Government Subsidies

The market for electric vehicles in the United States has come under pressure after the US government under President Donald Trump allowed federal tax credits for EVs worth 7,500 US dollars to expire. "Given the recent policy changes by the US government, including the cancellation of certain tax benefits for the purchase of electric vehicles and the relaxation of emissions regulations, we expect a decline in the acceptance of electric vehicles," GM stated in the announcement.

Following the cancellation of government subsidies, GM will realign its electric vehicle strategy. GM has invested billions of US dollars in the electric car market. According to US news channel CNBC the company planned to invest up to 30 billion US dollars in electric vehicles by this year, including dozens of new models and battery production capacities. This is now being put to the test. The re-evaluation of its EV capacities and production sites is still ongoing, the automaker stated. This suggests, according to CNBC, that further costs could be announced in future quarters.

Ford with Billion-Dollar Write-off in 2024

GM's write-offs for electric vehicles come a little more than a year after competitor Ford shelved its plans for a three-row electric SUV and also wrote off a billion-dollar amount. Ford wrote off 400 million US dollars on product-specific assets and materials directly and additionally calculated further write-offs and costs of up to 1.5 billion US dollars in the following quarters.

General Motors, which offers the most EV models in the USA, has recently achieved significant growth in EV sales, but last year the EV market in the USA already grew slower than the non-electric market. This trend is likely to intensify after Trump's policy shift. In the short term, industry observers expect a sharp decline in electric car sales before a recovery eventually occurs.

(akn)