EV realism is here. The reaction of GM, Hyundai and Ford in 2026 will be clear

DETROIT – The U.S. auto industry has entered a new phase for fully electric vehicles: realism.

The industry was ecstatic about the electric vehicle sector in early 2020, but consumer demand never rose as much as expected, and as it faded, automakers watched and planned how to respond. Now, they’re turning around, as companies have wasted billions of dollars in capital, Detroit automakers are refocusing on big, gas-guzzling trucks and SUVs, and many have acknowledged that politics, not consumers, are driving the costs of electric vehicles.

“We have to make investments to get to … the regulatory environment that they have identified,” Mary Barra, GM’s CEO and chairman, said earlier this month during the New York Times’ DealBook conference. “We’ve seen a complete change in that. One way, 180 degrees. And one way, 180 degrees back. That’s the world that automaker CEOs live in.”

How automakers like General Motors, which has invested heavily in electric vehicles, respond over the next year will determine the future of cars in the United States, according to experts and industry insiders.

Barra said “it’s too early to know” the true demand for electric vehicles after federal incentives of up to $7,500 to purchase an electric vehicle expire in September. She said the industry is likely to find its normal demand within the next six months.

Meanwhile, General Motors continues to reevaluate its electric vehicle plans after revealing the impact of its $1.6 billion divestment, with more writedowns expected in the future. ford motor It said last week that it expects to record about $19.5 billion in special items related to restructuring its business priorities and declining its investments in fully electric vehicles.

“We evaluated the market, and we made the call,” Ford CEO Jim Farley told CNBC last week. “We follow customers to where the market is, not where people think it will be.”

U.S. electric vehicle sales peaked in September, before federal stimulus expired, at 10.3% of the new-vehicle market, according to Cox Automotive. This demand fell to initial estimates of 5.2% during the fourth quarter.

“The long-term trend toward electrification remains clear: the future is electric. However, the timeline is being reset,” said Stephanie Valdez Streety, director of industry insights at Cox. “In the near term, automakers will continue to adjust their strategies and significantly expand hybrid offerings to meet consumers where they are today.”

Most industry experts, including those at consultancy PwC, don’t believe these are the last days for EVs, but rather that expectations are now more realistic. PricewaterhouseCoopers expects the electric vehicle industry to rebound at the end of this decade, with electric vehicles expected to make up 19% of the US industry by 2030.

“As many of the United States [automakers] “We’ve announced, there’s some level of tariffs, and we’ve gone out in front of customer demand and potentially the infrastructure that’s available here in the United States,” CJ Finn, U.S. auto industry leader for PricewaterhouseCoopers, told CNBC.

This projected share of the electric vehicle market does not justify the billions of dollars companies have spent on research, development and production of vehicles, so automakers are dramatically changing their plans to allow customers more choices between fully electric vehicles, hybrids and traditional internal combustion engines.

“If you think back a few years ago, it was like, if you’re not all about electric cars, you’ll eventually go out of business. Your terminal value is zero,” Lenny LaRocca, a KPMG partner and U.S. auto industry leader, told CNBC. “Now, I think the multi-propulsion technology approach is what will work well. We used to call it ‘mosaic of engines.’

The changes have taken different forms for companies that already invested heavily in electric vehicles.

GM, which has largely pioneered such investments in the United States, will continue to offer its current models but has little plans to expand in the future, according to Barra. Instead, it will use some of its planned capacity to increase production of large trucks and SUVs. The automaker also said it plans to introduce plug-in hybrids in the coming years, but did not reveal many other details.

Ford said it will refocus its investments on hybrid vehicles, including plug-in models rather than pure electric vehicles; scrapping the next generation of all-electric large trucks in favor of smaller, more affordable electric vehicles; And rebalancing its investments in basic products such as trucks and SUVs.

and Stellantis It is deprioritizing electric vehicles, including its coveted Jeep brand, as it tries to revive its US sales.

“We’re all waiting to see what the demand is and how it’s going to continue to shake out,” Jeep CEO Bob Bruderdorff told CNBC. “the [EV] The industry will slide. It will slow down. Then what is the normal situation for electric vehicles?

Hyundai, which has also invested billions in electric vehicles, is taking a mixed approach compared to its peers. Like GM, it plans to continue offering its current models but is also expected to have new models coming. On the other hand, like Ford, it has decided to focus more on hybrid cars and dedicate production at a new $7.6 billion plant for Hyundai and Kia vehicles in Georgia.

Other companies such as Honda, Nissan, Porsche, Volvo and Jaguar, which have announced ambitious plans for electric vehicles, have canceled or significantly reduced these goals. GM also backed away from its pledge to offer exclusively electric vehicles by 2035, including many of its brands before that time frame.

A range of factors have played a role in the current electric vehicle market, including industry dynamics and external factors such as pressure from Wall Street and political blows from the Trump and Biden administrations.

“There is no doubt that this policy has had a significant impact on customer demand,” Farley told CNBC last Monday. “The net of the network is a market change.”

The bull trend around electric vehicles started with a rise Tesla. The company, which remains the US leader in electric vehicle sales by a wide margin, was able to significantly boost sales and its market valuation from Wall Street analysts at the beginning of this decade.

That has other automakers taking notice and, as the industry does, trying to replicate Tesla’s success, according to officials. But what executives didn’t realize was that consumers were buying Tesla cars — and not just any electric car.

“Tesla wasn’t creating a market for battery electric vehicles. It was creating a market for the Tesla brand.” said Stephanie Brinley, associate director of Automated Intelligence at S&P Global Mobility.

Brinley said Tesla cars were, and continue to be, a “technology purchase” of software-first products that happen to be electric cars. The company has also created its own shipping network and created a tech-savvy customer base of loyalists who have weathered many quality issues and growing pains.

This success has sent Wall Street searching for the “next Tesla,” spawning an unsustainable number of new companies. From 2019 to 2022, nearly a dozen electric vehicle makers went public as well as a series of related companies. Most of them have gone bankrupt amid federal investigations, scandals and executive turmoil.

“The interest Tesla has gotten has woken up everyone,” Brinley said. “But now there is competition, and there is competition from trusted, well-known and respected brands.”

The euphoria surrounding electric vehicles is beginning to wane as companies continue to spend with little success, and “old” car makers enter the market, investing large sums of money to bring unprofitable vehicles to market.

Hopes for profitable electric vehicles have eroded further with President Donald Trump’s second inauguration this year. Trump has killed or rolled back many of the Biden administration’s support and funding for the sale and production of electric vehicles.

The biggest hit came in September with the expiration of federal incentives of up to $7,500 to purchase an electric car.

“The end of the federal stimulus came to an abrupt halt at the end of the third quarter, leading to increased demand and sales in the new and used market,” Jeremy Robb, interim chief economist at Cox, said last week. “Since then, we have seen a slowdown in sales as well as growth in new vehicle production. Next year will be pivotal for electric vehicles.”