GM to take a $1.6 billion hit as tax incentives for EVs are slashed and emission rules ease

General Motors will record a negative impact of $1.6 billion in its next quarter after tax incentives for electric vehicles were slashed by the U.S. and rules governing emissions are relaxed.

Shares fell less than 2% before the opening bell Tuesday.

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The EV tax credit ended last month. The clean vehicle tax credit was worth $7,500 for new EVs and up to $4,000 for used ones.

General Motors, which had led the way among U.S. automakers with plans to convert production to an electric fleet of vehicles, said in a regulatory filing on Tuesday that it will have to book charges that include non-cash impairment and other charges of $1.2 billion due to EV capacity adjustments. There’s also $400 million in charges mostly related to contract cancellation fees and commercial settlements associated with EV-related investments.

GM warned that it may take additional hits as it adjusts production, with non-cash charges potentially impacting operations and cash flow in the future.

The company said that its EV capacity realignment doesn’t impact its retail portfolio of Chevrolet, GMC and Cadillac EVs currently in production, and that it expects those models to remain available to consumers.

EVs were considered to be the future of the US automotive industry. In 2021 GM said that it planned to have more than half of its North American and China factories be capable of making electric vehicles by 2030. It also also pledged at the time to increase its investment in EV charging networks by nearly $750 million through 2025.

Yet U.S. automakers are being hampered in some of their long-term planning, with drastic changes in economic and environmental policy from one administration to the next.