General Motors reports $7B loss after scaling back EV plans
What's the story
General Motors (GM) has announced a major financial setback, estimating a one-time earnings hit of $7.1 billion in its upcoming quarterly results. The Detroit-based automaker's fourth-quarter results will be impacted by $6 billion in charges related to its withdrawal from electric vehicle (EV) investments. The remaining $1.1 billion loss relates to restructuring costs in China. This massive earnings hit comes after a similar $1.6 billion write-down in Q3 following US policy shifts under President Donald Trump.
Strategy shift
GM's EV strategy and market response
During President Joe Biden's tenure, GM CEO Mary Barra had heavily invested in expanding EV production. The company had even set a goal in 2021 to make all its cars and trucks emissions-free by 2035. However, with the end of certain consumer tax incentives and less stringent emissions regulations, GM observed a slowdown in industry-wide consumer demand for EVs in North America last year.
Market adaptation
GM's response to changing consumer demand
In light of the changing consumer demand, GM said it "proactively reduced EV capacity." The company also clarified that while EVs remain a long-term priority, it is adjusting its investments in accordance with market trends. The additional $1.1 billion in non-EV charges includes costs associated with restructuring its joint venture SAIC General Motors Corporate Limited in China and an "additional legal accrual."