Is GM's $7.6B EV Impact in 2025 a Step Toward Better Profit Focus?

U.S. legacy automaker General Motors GM is taking a financial hit as it slows down its aggressive electric vehicle (EV) push. The company notified that it will record about $6 billion in special charges in fourth-quarter 2025 due to its EV rollback. These one-time expenses will drag down net income but won’t affect adjusted earnings.

A major part of this burden comes from $1.8 billion in unused EV equipment and about $4.2 billion in supplier settlements, contract cancellations and other related costs. This follows a $1.6 billion EV-related charge it absorbed in the third quarter, pushing GM’s total EV-linked hit for 2025 to $7.6 billion.

Notably, GM will also book another $1.1 billion tied mostly to restructuring a Chinese joint venture.

Why GM Stepped Back From EVs

General Motors is scaling back its EV plans amid a shift in U.S. policy and consumer demand. Under the Trump administration, several EV-friendly incentives and stricter emission rules introduced during the Biden era have been rolled back. This resulted in slower EV adoption, weaker demand and fading tax benefits for buyers.

General Motors had gone all-in on EVs during the Biden years. CEO Mary Barra set bold goals, including selling only zero-emission vehicles by 2035. But with consumer demand cooling and incentives fading, GM decided to “right-size” its EV plans to match real demand instead of chasing volumes that no longer look achievable in the near term.

The company has made several operational changes as part of this pivot. The Orion plant, originally planned for EVs, will now build profitable pickup trucks like the Cadillac Escalade, Chevrolet Silverado and GMC Sierra. GM is also reducing battery production exposure by selling part of its stake in Ultium Cells to LG Energy Solution. It cut shifts and laid off workers at its Factory Zero EV plant as demand softened.

The slowdown is already visible in the numbers. After federal EV tax credits expired, GM’s EV sales fell 43% year over year in fourth-quarter 2025 to just over 25,000 vehicles.

GM also warned that more costs could come in 2026 as it continues negotiations with suppliers, though those are expected to be smaller than the EV-related charges recorded in 2025.

By scaling back EV capacity that no longer matches demand, GM is basically shifting resources toward higher-margin vehicles and proven revenue drivers. While the $7.6B charge hurts 2025 results, the pivot is intended to improve capital efficiency and near-term profitability.

GM Isn’t Alone in Retreating

General Motors is not the only automaker hitting the brakes on its EV ambitions.

Its closest peer, Ford F, is also stepping back from its once-aggressive EV narrative. After pouring billions into EVs, Ford is now shifting toward what makes financial sense — profitable gas vehicles, hybrids and lower-cost EVs instead of expensive flagship programs. The company expects around $19.5 billion in special charges, mostly in the fourth quarter, as it restructures its U.S. EV strategy. Importantly, about $5.5 billion of this will hit cash flows, mainly through 2026 and 2027.

Italian-American automaker Stellantis STLA is also realigning its EV vision in the United States. Its RAM brand discontinued its planned all-electric pickup and delayed the Ramcharger EREV to late 2026. The company has acknowledged that strategic changes will lead to meaningful one-time costs as it pivots back toward hybrids and a more balanced lineup. Even though Stellantis hasn’t disclosed exact charge amounts, the message is clear — plans built during a different policy and demand environment won’t work now.

Final Thoughts

Together, these moves show that legacy automakers are no longer racing blindly toward an EV-only future. They are prioritizing flexibility, profitability, and a consumer-led strategy. Having said that, EVs remain a long-term priority, but automakers are now moving more cautiously, balancing ambition with financial discipline.

Zacks Rundown on GM

Shares of General Motors have risen 67% over the past year, outperforming the industry.

From a valuation perspective, GM appears undervalued. Going by its price/sales ratio, the company is trading at a forward sales multiple of 0.43, lower than the industry’s 3.27. 

See how General Motors’ earnings estimates have been revised over the last 90 days.

GM stock sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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