Waning EV Demand and Automaker Valuations: Strategic Production Cuts Reshape the Landscape

The electric vehicle (EV) market, once heralded as the inevitable future of mobility, is now facing a reckoning. While global EV sales surged to 17 million units in 2024, capturing over 20% of new car sales, growth has since decelerated to 21% year-on-year in July 2025, signaling a shift in consumer behavior and industry dynamics [1]. This slowdown, driven by affordability concerns, infrastructure gaps, and the expiration of key incentives, has forced automakers to recalibrate their strategies. General Motors (GM), a pivotal player in the EV transition, exemplifies this recalibration through strategic production cuts and financial adjustments, offering insights into the broader sector’s challenges and opportunities.

The Drivers of Waning EV Demand

Affordability remains a critical barrier. Despite government incentives, EVs still carry a premium over internal combustion engine (ICE) vehicles, with battery costs and limited charging infrastructure deterring price-sensitive buyers [4]. In the U.S., where EVs accounted for just 7.4% of Q2 2025 sales, the expiration of the $7,500 federal tax credit on September 30, 2025, triggered a last-minute surge in purchases but also foreshadowed a post-deadline slump [3]. Data from market analysts indicates that EV sales growth in 2025 will lag behind ICE and hybrid vehicles, which are projected to grow at three times the rate of EVs [3].

China, the world’s largest EV market, continues to outperform, with EVs capturing 51% of total sales in 2025 due to competitive pricing and robust policy support [1]. However, even in this stronghold, automakers face margin pressures as battery costs fluctuate and competition intensifies.

GM’s Strategic Production Cuts and Financial Implications

General Motors has responded to waning demand with targeted production cuts. In September 2025, the company temporarily paused shifts at its Detroit Factory Zero plant for the GMC Hummer EV and Cadillac Escalade IQ models, citing weaker-than-expected U.S. demand [3]. This move aligns with GM’s revised 2025 production target of 200,000–250,000 EVs in North America, a figure that reflects a balance between profitability and market share [5].

Financially, GM’s EV strategy is underpinned by a focus on high-margin models like the Chevrolet Equinox EV, which drove much of the company’s 2025 sales growth [5]. However, external pressures, including tariffs on imported components, are expected to reduce EBIT from $14.4 billion to $8.6 billion in 2025 [6]. Despite these challenges, GM’s stock valuation remains attractive, with a forward price-to-sales ratio of 0.32, below the industry average [1]. Analysts project a stable stock price, with a median target of $56.00 for 2025–2026, reflecting confidence in the company’s long-term EV roadmap [2].

Broader Sector Implications

GM’s actions mirror a broader industry trend. Automakers in Europe and North America are scaling back EV production as demand normalizes. In Europe, where EV sales stagnated in 2024, automakers face additional headwinds from reduced policy incentives and stringent CO2 emission targets [1]. Meanwhile, Chinese automakers are expanding their global footprint, leveraging cost advantages and local production hubs in Europe to counter regulatory barriers [3].

The U.S. market, however, remains a wildcard. While Tesla retains a dominant 46% market share, its sales growth has slowed, and competitors like GM are gaining ground. The expiration of tax credits, however, threatens to shrink the EV market share to below 4% in the coming months, according to some analysts [5]. This scenario underscores the sector’s reliance on policy support and the risks of over-reliance on subsidies.

Investment Outlook and Strategic Considerations

For investors, the EV sector presents a mix of caution and opportunity. Automakers that prioritize profitability over aggressive scale—like GM—are better positioned to navigate near-term volatility. However, those that fail to align production with demand risk eroding long-term competitiveness. The key differentiator will be the ability to innovate in cost reduction, charging infrastructure, and software-defined vehicles [2].

GM’s stock, with its undervalued metrics and strategic flexibility, offers a compelling case study. While production cuts may temporarily dampen EV sales, the company’s focus on high-margin models and operational efficiency could drive shareholder value in the medium term. Broader sector performance, meanwhile, will hinge on policy clarity, technological advancements, and the resolution of supply chain bottlenecks.

Conclusion

The waning EV demand of 2025 marks a pivotal moment for the automotive industry. As automakers like GM navigate production cuts and financial recalibrations, the sector’s resilience will depend on its ability to adapt to shifting consumer priorities and regulatory landscapes. For investors, the path forward lies in discerning which players can balance innovation with profitability in an increasingly competitive and uncertain market.

Source:
[1] The Global Electric Vehicle Market In 2025 [https://www.virta.global/global-electric-vehicle-market]
[2] GM Stock Forecast 2025-2026 [https://tickernerd.com/stock/gm-forecast/]
[3] Electric Vehicle Sales and Market Share (US - Q3 2025) [https://caredge.com/guides/electric-vehicle-market-share-and-sales]
[4] Advanced Auto Trends 2025: EVs, Tech & Market Shifts [https://www.accio.com/business/advanced-auto-trends]
[5] Tesla Still Dominates as U.S. EV Market Evolves with GM on the Rise [https://opentools.ai/news/tesla-still-dominates-as-us-ev-market-evolves-with-gm-on-the-rise]
[6] General Motors' SWOT Analysis: Tariff Concerns Weigh on Stock Outlook [https://www.investing.com/news/swot-analysis/general-motors-swot-analysis-tariff-concerns-weigh-on-stock-outlook-93CH-4155045]