Electric Vehicles and the Post-Subsidy Era: Assessing Tesla and GM's Long-Term Viability

The U.S. electric vehicle (EV) market is at a crossroads. In Q3 2025, EV sales surged by 21.1% year-over-year, reaching a record 10% market share, as consumers rushed to secure the $7,500 federal tax credit before its September 30 expiration, according to Cox Automotive. Automakers like General Motors (GM) and Tesla capitalized on this frenzy, with GM reporting a record 66,501 EV deliveries and Tesla hitting 497,099 units-a new quarterly high, according to TechCrunch. However, the expiration of this incentive has sparked a critical question: Can EV manufacturers sustain growth and profitability in a post-subsidy era?

The Tax Credit's Role and Its Aftermath

The federal tax credit was a linchpin for EV adoption. According to a J.D. Power report, 72% of Tesla buyers and 77% of Chevrolet buyers cited incentives as a primary factor in their purchase decisions. With the credit gone, analysts predict a sharp drop in demand. Ford CEO Jim Farley warned that EV sales could plummet to as low as 5% of the market, according to Cox Automotive, while industry reports suggest a 24% year-on-year decline in plug-in vehicle sales for Q4 2025, according to Forbes.

For Tesla, the expiration of the tax credit has already triggered volatility. Despite a record Q3, CEO Elon Musk acknowledged "a few rough quarters" ahead, Reuters reported (Reuters). Meanwhile, GM has scaled back production of high-priced EVs like the GMC Hummer to align with anticipated demand, signaling a strategic pivot toward affordability, according to Forbes.

Strategic Divergence: Tesla's Innovation vs. GM's Pragmatism

Tesla and GM are taking divergent paths to navigate the post-subsidy landscape. Tesla is doubling down on AI and robotics, allocating $5 billion to develop a 50,000 GPU Cortex AI cluster and deploying 10,000 Optimus humanoid robots by 2025 to reduce manufacturing costs, according to GuruFocus. The company's energy division, including the Megapack, is also a growth driver, though supply chain constraints remain a hurdle, as noted by GuruFocus.

GM, by contrast, is focusing on cost optimization and hybrid strategies. The automaker is repurposing autonomous driving technologies from Cruise into ADAS features and exploring licensing agreements to diversify revenue streams, according to Forbes. GM's Ultium battery platform and vertically integrated supply chain are key differentiators, enabling cost reductions and scalability. Analysts at UBS and Wedbush have raised GM's price targets, citing its balanced approach to EVs and hybrids, according to Nasdaq.

Risk-Adjusted Returns: High Volatility vs. Conservative Growth

From an investment perspective, Tesla and GM present contrasting risk profiles. Tesla's stock, while down 22% in 2025, retains a "Hold" rating with a price target of $341.63, reflecting its dominance in software-driven revenue and global expansion, according to Nasdaq. However, its high P/E ratio and reliance on speculative bets like robotaxis elevate risk.

GM, trading near its 52-week high with a forward P/E under 6, offers a more conservative bet. Analysts project GM to generate $185.3 billion in revenue by 2028, with a focus on affordable EVs like the Chevrolet Equinox EV, according to Forbes. The company's hybrid strategy and ICE dominance (94% of sales) provide a buffer against EV market volatility, per Cox Automotive.

Strategic Case for GM Over Tesla

While Tesla's long-term vision is ambitious, its current challenges-including brand erosion and margin pressures-make it a high-risk, high-reward play. A Bank of America report, as covered in an InsideEVs report, notes that Tesla's U.S. market share is projected to drop from 78% in 2018 to 18% by 2026 as competitors like GM and Ford expand their EV portfolios. GM's ability to scale affordable models, leverage cost-saving partnerships, and balance EV and hybrid offerings positions it as a more resilient choice in a post-subsidy era.

Conclusion

The expiration of the federal EV tax credit has exposed the fragility of incentive-driven demand. While Tesla's innovation and brand equity remain formidable, GM's pragmatic approach to cost control, affordability, and market diversification offers a stronger foundation for long-term profitability. For investors seeking risk-adjusted returns, GM's conservative yet adaptive strategy appears more aligned with the realities of a maturing EV market.