General Motors Company (NYSE:GM) reported that it incurred a $1.6 billion charge in the third quarter, driven primarily by underutilized electric vehicle (EV) production capacity and contract cancellations.
Per a filing with the Securities and Exchange Commission (SEC), the charge includes a $1.2 billion non-cash impairment tied to reduced use of EV production equipment and $400 million in cash costs from contract terminations and commercial settlements.
The company attributed the write-downs to shifts in US government policy, including the discontinuation of a $7,500 federal EV tax credit and the easing of emissions regulations, which GM said could slow EV adoption.
“Following recent US government policy changes, we expect the adoption rate of EVs to slow,” GM said in its filing. “These developments have caused us to reassess our EV capacity and manufacturing footprint.”
While GM is scaling back EV expansion plans and emphasizing cost reductions, the company noted that further charges related to EV capacity adjustments could occur over the next 24 to 36 months, depending on market conditions.
Despite these developments, GM’s EV sales rose last quarter, boosted in part by buyers rushing to take advantage of the now-expired tax credit.
GM highlighted that the strategic realignment of EV capacity does not affect its current retail lineup of Chevrolet, Buick, GMC, and Cadillac vehicles.
After initially falling on the news, shares of GM added 0.9% in early trade on Tuesday.