Automaker Strategy Shifts and Their Impact on EV Tax Credit Markets

A line graph illustrating the projected U.S. EV market share from 2025 to 2033, with Tesla and GM leading, followed by Ford. The x-axis shows years, and the y-axis represents market share percentages. Annotations highlight the 2025 tax credit expiration and the introduction of lease-based incentives by Ford and GM.

The expiration of the U.S. federal $7,500 electric vehicle (EV) tax credit on September 30, 2025, has forced automakers to recalibrate their strategies to sustain demand for EVs. Ford and General Motors (GM), two of the largest players in the U.S. automotive industry, have adopted divergent approaches to mitigate the impact of this policy shift. These strategies not only reflect their distinct capital allocation priorities but also signal critical risks and opportunities for investors navigating the evolving EV landscape.

Ford's Strategic Rebalancing: Cost Efficiency Over Scale

Ford has pivoted toward smaller, more affordable EVs and hybrids to improve profitability, a stark departure from its earlier focus on large, battery-heavy models like the F-150 Lightning. The company announced a $5 billion investment to revamp its EV production, including the development of a universal platform for compact vehicles and a $30,000 electric pickup truck slated for 2027, according to a Fortune report. This shift acknowledges the financial reality that large EVs remain unprofitable due to high battery costs, a challenge exacerbated by Ford's EV division reporting $3.7 billion in losses in the first three quarters of 2024, as described in a TechStory article.

To extend the benefits of the expired tax credit, Ford leveraged its captive finance arm, Ford Credit, to make down payments on EV inventory before the deadline, enabling dealers to offer lease terms that include the $7,500 credit through December 2025, according to a USA TODAY report. This temporary workaround, while innovative, underscores the fragility of demand without direct government subsidies. Ford CEO Jim Farley has emphasized that such measures are transitional, signaling a long-term reliance on cost efficiency and hybrid technologies to meet regulatory requirements, as noted in a Fortune interview.

GM's Vertical Integration and Profitability Gambit

General Motors has taken a contrasting approach, doubling down on vertical integration and large-scale EV production. The company's $4 billion investment in battery cell manufacturing and standardized platforms aims to achieve profitability at 200,000 units produced annually, according to a USA TODAY article. GM's EV sales surged 111% year-over-year in 2025, with its market share climbing from 8.7% to 13.8% by September, as reported in a CNBC article. However, the automaker canceled its tax credit extension program after Republican Senator Bernie Moreno criticized the IRS for allowing such workarounds, per a TheStreet report. Instead, GM funded lease incentives internally, a move that reflects its confidence in scaling production to offset the loss of subsidies.

This strategy, while ambitious, carries risks. GM's reliance on large EVs-such as the all-electric Hummer and Escalade-could backfire if consumer demand shifts toward affordability. Moreover, the company's decision to forgo IRS-validated workarounds may limit its ability to cushion the post-tax-credit slump compared to Ford.

Expert Analysis: Capital Allocation Risks and Market Realities

J.P. Morgan analysts project that EVs and hybrids will account for 30% of global vehicle sales by 2025, with EVs alone capturing 23% of the market, according to J.P. Morgan analysts. However, Deloitte highlights persistent challenges, including affordability gaps and infrastructure bottlenecks, which could hinder growth, as discussed in a Deloitte report. Over half of U.S. consumers remain concerned about EV affordability, with many expecting monthly payments below $600. Ford's pivot to smaller models aligns with these consumer preferences, but its $1.9 billion cost to realign its product roadmap raises questions about short-term financial strain, according to an NBC News report.

For GM, the risk lies in its capital-intensive vertical integration. While battery production in-house could reduce costs, it also locks in significant fixed expenses. Deloitte warns that automakers must balance such investments with flexibility to adapt to shifting market dynamics in a Deloitte outlook.

Investment Implications: Navigating Uncertainty

The contrasting strategies of Ford and GM present distinct opportunities and risks for investors. Ford's focus on cost efficiency and hybrid technologies may stabilize its near-term cash flow, but its reliance on temporary tax credit workarounds highlights vulnerability to policy changes. Conversely, GM's vertical integration and scale offer long-term growth potential but expose it to higher operational risks if EV demand softens.

A bar chart comparing Ford and GM's capital expenditures on EVs and hybrids from 2024 to 2025, with annotations showing Ford's shift from 40% to 30% allocation for pure EVs and GM's sustained 45% allocation.

Investors should also monitor the broader market. Market research forecasts the U.S. EV market to grow to $537.53 billion by 2033, driven by technological advancements and regulatory pressures, according to a ResearchAndMarkets report. However, this growth hinges on the emergence of new incentives or private-sector solutions to fill the gap left by the expired tax credit.

Conclusion

The expiration of the EV tax credit has accelerated strategic realignments at Ford and GM, each with unique implications for capital allocation. Ford's cost-conscious pivot and GM's vertical integration reflect divergent paths through a market still grappling with affordability and infrastructure challenges. For investors, the key lies in assessing which strategy aligns better with long-term industry trends and regulatory trajectories. As a Deloitte analysis notes, the EV transition is not a sprint but a marathon-one that demands resilience, adaptability, and a clear-eyed view of both risks and rewards.