Assessing General Motors’ EV Momentum: Tax Credit Expiry and Long-Term Growth Potential

The electric vehicle (EV) transition is reshaping global automakers, and General Motors (GM) has emerged as a pivotal player in the U.S. market. In Q2 2025, GM sold 46,300 EVs, more than doubling its 2024 performance and securing the No. 2 position behind Tesla [1]. This surge, driven by federal tax credits and a flexible production strategy, has positioned GM as a leader in electrification. Yet, the expiration of these incentives on September 30, 2025, raises critical questions about the sustainability of this momentum and the company’s long-term strategic resilience.

Strategic Positioning: Flexibility and Portfolio Diversification

GM’s success in 2025 stems from its dual focus on production agility and portfolio expansion. By maintaining the ability to switch between EV and internal combustion engine (ICE) production, GM has navigated shifting demand dynamics, particularly in the lucrative full-size SUV and truck segments [2]. This flexibility is underpinned by a $4 billion investment in U.S. manufacturing, which modernizes plants in Michigan, Kansas, and Tennessee to support both EV and ICE platforms [3]. Such a strategy balances short-term profitability with long-term electrification goals, even as the company delays its 2035 all-electric target due to policy and consumer uncertainties [4].

The Chevrolet brand has been instrumental in GM’s EV growth, becoming the second-best-selling EV brand in the U.S. in 2025 [1]. Models like the Equinox EV and Cadillac’s luxury EVs have demonstrated strong demand, with 25% of Cadillacs sold in Q2 2025 being electric [5]. However, this success is partially attributable to the $7,500 federal tax credit, which analysts warn could reduce EV sales by 27% post-expiration [1]. GM’s CFO, Paul Jacobson, acknowledges this risk, emphasizing the need to reduce costs and innovate in battery chemistry and vehicle design to sustain competitiveness [5].

Market Normalization Risks: Tax Credits, Competition, and Global Shifts

The U.S. EV market is at a crossroads. While GM’s Q2 2025 sales surged by 111% year-over-year, this growth is largely a function of the tax credit-driven inventory clearance [1]. Post-2025, the market will face a normalization phase, where true demand—uninfluenced by subsidies—will emerge. GM’s CEO, Mary Barra, anticipates this shift, noting that “real EV demand will become apparent in 2026” [5]. Yet, the company’s reliance on tax credits highlights a vulnerability: without continued policy support, GM’s EV market share could erode, particularly as Chinese automakers intensify their North American presence.

Chinese EV manufacturers, including BYD, XPeng, and Nio, are leveraging cost advantages and localized production to challenge Western automakers. BYD, for instance, has surpassed Tesla in global EV sales and is expanding into Mexico to bypass U.S. tariffs [6]. Nio’s battery-swap infrastructure and multi-brand strategy (including the youth-focused Firefly) have captured 2.1% of the Q3 2025 market [6]. While U.S. tariffs on Chinese EVs remain a barrier, these firms are adapting by localizing production, threatening GM’s dominance in the mid-to-high-end segment.

Long-Term Growth: Innovation and Strategic Resilience

GM’s long-term viability hinges on its ability to innovate beyond subsidies. The company’s investment in lightweighting, aerodynamics, and standardized components aims to reduce complexity and costs [5]. Partnerships, such as its collaboration with LG for cost-effective battery cells starting in 2027, further underscore this focus [5]. However, challenges persist: sustainability issues, such as battery recycling and raw material sourcing, remain unresolved [1].

The broader industry context also demands scrutiny. In Q3 2025, the U.S. EV market saw a 6.3% year-over-year decline, reflecting economic pressures and the phase-out of incentives [2]. Meanwhile, China’s EV market, where electric vehicles now account for over 50% of passenger car sales, is dominated by local players offering advanced models at lower prices [6]. GM’s global strategy must address these dynamics, particularly as Chinese automakers expand into North America through Mexico-based production.

Conclusion: Balancing Momentum and Uncertainty

General Motors’ EV momentum in 2025 is a testament to its strategic agility and portfolio diversification. However, the expiration of tax credits and intensifying competition from Chinese automakers present significant normalization risks. While GM’s production flexibility and innovation efforts position it to weather short-term volatility, long-term success will depend on its ability to reduce costs, address sustainability challenges, and adapt to a rapidly evolving global market. For investors, the key question is whether GM can transition from subsidy-driven growth to a self-sustaining EV ecosystem—one that thrives in a post-incentive world.

Source:
[1] Electric Vehicle Sales and Market Share (US - Q3 2025) [https://caredge.com/guides/electric-vehicle-market-share-and-sales]
[2] Q2, Q3 EV Sales Reflect Shifting Market [https://www.chargedfleet.com/10243890/q2-q3-ev-sales-reflect-shifting-market]
[3] GM to Invest $4 Billion in U.S. Manufacturing Plants [https://investor.gm.com/news-releases/news-release-details/gm-invest-4-billion-its-us-manufacturing-plants]
[4] GM Slow-Rolls Its All-EV Aspirations [https://www.politico.com/news/2025/06/12/gm-slow-rolls-ev-aspirations-00401177]
[5] GM EV Production to Be Guided by Consumer Demand Says CFO [https://stocktwits.com/news-articles/markets/equity/gm-ev-production-to-be-guided-by-consumer-demand-says-cfo/ch8MqFNR5tY]
[6] How Chinese EVs Are Shaking Up the Global Auto Industry [https://www.thirdbridge.com/en-us/about-us/media/perspectives/how-chinese-evs-are-shaking-up-the-global-auto-industry]