Facing significant losses associated with EV production, GM is now rethinking its plans.Diego Vara/Reuters
General Motors Co. GM-N is rediscovering the importance of gas-powered trucks and big sport-utility vehicles, and investors couldn’t be happier.
But could GM’s move away from electric vehicles hurt the company over the longer term?
This week, it was all cheers after the automaker delivered upbeat quarterly financial results that demonstrated the company’s resilience to tariffs, disrupted supply networks and cash-strapped consumers.
GM reported adjusted earnings of US$2.80 a share, down from the same period last year but more than 20 per cent higher than analysts’ expectations, according to S&P Global Market Intelligence. Reported revenues beat estimates by more than US$3-billion.
The share price surged 14.9 per cent on Tuesday, after the results were released, closing at a record high. The gain pushed the performance of the stock ahead of the S&P 500 by more than 12 percentage points so far this year and left Tesla Inc. TSLA-T in the dust.
The stock’s attraction went beyond the better-than-expected quarterly results.
It also reflected GM’s ability to pivot with new trade policies and shifting consumer tastes – through increasing production at U.S. plants and downsizing its money-losing EV business.
“In the past, it was said it was difficult to turn the big ship GM too quickly. Given the changing landscape, GM has found a way to turn it much faster than in the past,” Michael Ward, an analyst at Citigroup, said in a note.
GM will stop producing BrightDrop commercial electric vans at its Ontario facilities, due to low demand.
And it will produce more full-sized SUVs with internal combustion engines at its Orion Assembly in Michigan, which had previously been envisioned as an EV plant.
This shift might be welcome news to anyone who is skeptical of EVs.
Sales growth in North America has been slower than expected, while consumers wrestle with limited range, spotty public charging infrastructure and the high upfront cost of new vehicles. EVs are out of contention for many younger consumers who might not have access to home-charging facilities.
Changing government policies aren’t helping either. The administration of U.S. President Donald Trump has ended financial incentives, relaxed clean emission standards and revoked the EV sales goals championed by the previous administration of Joe Biden.
Facing significant losses associated with EV production after taking a US$1.6-billion EV-related charge during the quarter, GM is now rethinking its plans.
“EVs remain our North Star,” GM CEO Mary Barra said during a call with analysts this week.
How China built BYD, its Tesla killer
But, she added: “It is clear that ICE volumes will remain higher for longer.”
The problem here?
Apart from Tesla, North American automakers appear to be falling behind the EV production efforts of Chinese manufacturers, which pumped out more than 11 million electric vehicles last year. This EV output accounted for nearly half of all car sales in the country, according to the International Energy Agency.
The IEA estimates that worldwide EV sales will rise to 20 million in 2025, up from 17 million in 2024, and account for about a quarter of all car sales.
It’s not hard to envision a day when EVs dominate the roads, with or without sales mandates and financial incentives. The IEA puts the EV share of new car sales at 40 per cent by 2030. The only thing that’s missing in North America is cheap EVs.
Full disclosure: I’m an enthusiastic EV owner. I’m approaching four years of ownership, and have mostly great things to say about the experience, including low-cost charging and zero emissions.
The few inconveniences, such as frequent public charging on long trips, simply can’t compare to the advantages, especially for commuters living in cities.
That’s why GM’s tilt back toward gas-powered vehicles, after stating in 2021 that it hoped to have all of its production geared toward EVs by 2035, could be short-sighted.
If Chinese manufacturers are already ahead, with cheaper vehicles and a vast operational scale that promises to lower prices even more as efficiencies improve, GM may be surrendering the future to the likes of China’s BYD Company Ltd.
Sure, North American automakers can point to lacklustre consumer demand for EVs and inconsistent government support.
But demand would likely get a significant boost with cheaper EVs that could make the switch from gas to electric more attractive to more people.
The world is going electric. GM, it seems, is dragging its feet – and that’s a long-term risk for investors.
Right now, the company’s EV business is being saved by high tariffs on Chinese imports. If that’s GM’s best strategy, investors should be worried.