GM Just Took a $1.6 Billion EV Write-Down. Why the Stock Is Rising.

GM renamed its Detroit-Hamtramck Assembly plant Factory ZERO in 2020, as it prepared to make more EV vehicles to meet growing U.S. demand. (AFP via Getty Images)

Key Points

• General Motors announced a $1.6 billion charge in the third quarter due to a strategic realignment of its electric vehicle capacity.
• GM attributes the slower electric vehicle adoption rate to recent US Government policy changes, including the termination of tax incentives.
• GM delivered 66,501 electric vehicles in the third quarter, an increase of 110% year over year, representing 9.4% of its US car sales.

Electric-vehicle sales in America simply haven’t materialized as fast as car companies expected a few years ago. That’s leading to some financial pain for General Motors , if not its stock.

General Motors announced a $1.6 billion special charge on Tuesday, hitting third-quarter income “on a planned strategic realignment of our EV capacity and manufacturing footprint to consumer demand.”

GM stock traded as low as $54.33 before rallying to close at $57.15, up 2.8%. The S&P 500 fell 0.2% and the Dow Jones Industrial Average gained 0.4%.

It’s a painful realization for the company. GM stock, however, recovered because investors already understand EV adoption is slowing. What’s more, GM makes essentially all its money selling traditional gasoline-powered vehicles. Still, it invested a lot over the years in the EV transition, and that money now isn’t expected to generate adequate returns.

The company put some of the blame on changing policies. “Following recent U.S. Government policy changes, including the termination of certain consumer tax incentives for EV purchases and the reduction in the stringency of emissions regulations, we expect the adoption rate of EVs to slow,” reads part of the news release. That means battery plants and assembly capacity costing tens of billions won’t fill up as quickly as expected.

“For long-lived assets…you compare the net carrying value of the assets to the undiscounted net cash flows the assets are expected to produce over their useful lives,” explained accounting expert Robert Willens. “If the carrying amount exceeds the undiscounted net cash flows…an impairment loss is recognized in an amount by which the carrying amount exceeds the fair value of the assets.”

GM is still selling EVs. It delivered 66,501 in the third quarter—up 110% year over year, and accounting for about 9.4% of its U.S. car sales. It was a record quarter for the company, boosted by the removal of the $7,500 federal EV purchase tax credit, which expired at the end of September.

Coming into Tuesday trading, GM stock was up about 4% so far this year. Investors have been worried mainly about how import tariffs were pushing down profits. Before the EV charge, Wall Street projected 2025 operating profit of about $11.4 billion, down from almost $15 billion earned in 2024.

Write to Al Root at allen.root@dowjones.com