GM to Take $1.6 Billion Charge as Tax Credit Blow Muddies EV Plans

General Motors said on Tuesday it would take a $1.6 billion charge in the third quarter as it reshapes its electric vehicle strategy following the scrapping of a key federal incentive that is likely to dampen demand.

GM’s disclosure is one of the clearest indications yet that U.S. automakers are scrambling to adapt their production plans in response to slowing EV demand.

The EV market also faces fresh strain after the Trump administration scrapped a $7,500 federal tax credit for electric vehicles, a key industry support, with auto executives warning of a sharp near-term drop in battery-car sales before an eventual rebound.

In a filing, GM said it expects “the adoption rate of EVs to slow” following recent policy changes, including the termination of certain consumer tax incentives and reduced emissions-rule stringency.

“The charge is a special item driven by our expectation that EV volumes will be lower than planned because of market conditions and the changed regulatory and policy environment,” GM told Reuters in a statement.

Shares of the company were up 2.1% in morning trade.

Automakers are also working to cushion the impact of President Donald Trump’s tariffs, which forced GM to take a $1.1 billion hit in the previous quarter.

The company has estimated a bottom-line impact of $4 billion to $5 billion this year from trade headwinds and said it could take steps to offset at least 30% of the blow.

Morningstar senior analyst David Whiston noted that other automakers could follow GM’s suit and announce their own EV-related impairments.

Ford F.Ndeclined to comment on its EV plans, while Stellantis did not immediately respond to a Reuters request for comment.

“The charge doesn’t come as a surprise given recent market developments and the fact GM had made probably the most aggressive EV push of any traditional automaker,” said Garrett Nelson, a senior equity analyst at CFRA Research.

“We think the automakers who chose to invest more heavily in hybrid vehicle development such as Toyota and Honda are poised to benefit in the U.S. auto market.”

Both GM and crosstown rival Ford had launched a program that would have allowed dealers to offer a $7,500 tax credit on EV leases after the federal subsidy expired, before walking back on those plans.

The charges include a $1.2 billion non‑cash impairment tied to EV capacity adjustments and $400 million for contract‑cancellation fees and commercial settlements.

While the changes will not affect GM’s current portfolio of Chevrolet, GMC, and Cadillac EVs in production, the company did warn of possible additional charges as it reassesses capacity and manufacturing footprint.

GM said the charges will be recorded as adjustments to non‑GAAP results for the third quarter, which are scheduled for release early next week.

(Reporting by Shetti and Tiwary in Bengaluru; Editing by Tasim Zahid)