GM announces massive China restructuring write-down and EV reset

Yesterday, General Motors (NYSE: GM ) announced that it will record a total of $7.1 billion in special charges for the fourth quarter of 2025. This financial crackdown stems from two main areas: massively scaling back its electric vehicle (EV) ambitions and restructuring its long-struggling operations in China.

Much of the financial damage ($6 billion) is directly linked to GM’s decision to reduce electric vehicle production capacity in North America. That brings GM’s total EV-related write-offs for the year to $7.6 billion, after an earlier $1.6 billion charge in October.

GM Announces Massive Write-off on EV Pullback

The most painful part of this fee is the $4.2 billion monetary hit. That money will go toward settling contracts and compensating suppliers who built the infrastructure and tools based on GM’s original (and much more aggressive) production goals.

The remainder is non-cash impairment, which is the write-off of property and specialized equipment that is no longer needed as the company transitions back to gas-powered vehicles.

“With the end of certain tax incentives for consumers and the easing of emissions regulations, global consumer demand for EVs in North America has begun to slow in 2025,” GM said in a statement. filing.

Sales of electric cars in the US have fallen

He added: “As a result, GM has proactively reduced EV capacity, including converting the company’s assembly plant in Orion, MI from EV production to full-size SUVs and full-size internal combustion engine-powered pickup trucks where we believe we have not met demand, and proactively reducing battery cell capacity, including by selling our interest in Ultium Cells, MILC to Lan Solution.”

Concurrent with the EV write-down, GM is taking a $1.1 billion charge related to its joint venture in China (SAIC-GM). GM once dominated China, but the rise of local EV giants like BYD has made it increasingly difficult for foreign brands to compete on price and technology. This fee covers the cost of “right-sizing” the business to match much lower sales volumes. This follows a previous $5 billion writedown GM took at the end of 2024, signaling the company is struggling to find its footing in what was once its biggest market.

Ford also announced a write-off last month

GM is not alone in this retreat. Its primary rival, Ford, took an even bigger hit of $19.5 billion in December 2025 to shrink its “Model e” division and cancel several future electric truck programs. Both companies are now doubling down on hybrid technology and high-margin gasoline vehicles as a bridge to an uncertain electric future.

Morgan Stanley upgraded GM Stock

Meanwhile, despite its struggles with electric cars, analysts were bullish on GM because of strength in its internal combustion engine business. Last month, Morgan Stanley’s new auto analyst, Andrew Percoco, updated the stock and gave some compelling reasons for the improved forecast, highlighting GM’s strong execution and favorable macro environment. These include:

• Outstanding operational execution: The firm praised GM for its “industry-leading inventory and incentive discipline in the U.S.,” suggesting the company is effectively managing supply to maintain pricing and profit margins.
• Favorable mix of shift to high-margin vehicles: GM’s focus on its core business of high-margin trucks and SUVs is expected to drive long-term sales and profitability, a strategy that is proving highly effective in the current market.
• Strategic capital discipline: Morgan Stanley noted GM’s improved capital allocation, including a strategic realignment of its electric vehicle (EV) and autonomous vehicle (AV) plans and the completion of an accelerated $10 billion share buyback program. The company has also raised its dividend four years in a row.
• Shifting Policy Environment: Analyst points to reduced political uncertainty and expected end of federal EV tax credit. The shift is expected to create an “electric car winter” by 2026, which is seen as a boon for traditional carmakers such as GM, whose sales of powerful internal combustion engine (ICE) cars are likely to soar in the meantime.
• Expected Economic Impact: Reduced political uncertainty and potential rate cuts in the second half of 2026 are expected to improve vehicle affordability and further boost demand for GM’s core product line.

GM raised its guidance for 2025

Meanwhile, GM reported 3Q2025 revenue of $48.6 billion, which was almost flat compared to the same period a year earlier, yet comfortably beat market expectations of $45.26 billion. The company’s adjusted pretax profits came in at $3.38 billion, well ahead of the $2.72 billion analysts were expecting.

However, total GAAP net income attributable to shareholders was $1.3 billion, a significant year-over-year decline of more than 56%, mainly due to one-time charges.

GM raised its outlook for the full year 2025, citing better clarity on the impact of tariffs and a narrower outlook for EV-related losses as the main reasons. It now forecasts its full-year adjusted EBIT between $12 billion and $13 billion, up from its previous range of $10 billion to $12.5 billion. Similarly, full-year adjusted earnings per share are now expected to be between $9.75 and $10.50, down from previous estimates of $8.25 to $10. GM also raised its auto free cash flow estimate to $10 billion to $11 billion, up from previous estimates of $7.5 billion to $10 billion.

GM expects earnings in 2026 to be higher than in 2025

General Motors expects its earnings in 2026 to be higher than this year. “Looking ahead to 2026, we have several levers to take our current momentum forward, including progress in [electric vehicle] losses, warranty costs, tariff compensation, regulatory requirements and fixed costs,” CFO Paul Jacobson said during the earnings call, adding, “As a result, we expect next year to be even better than 2025.”

In a Q3 shareholder letter, Barra said: “Going forward, our top priority is to restore North America to our historic 8-10% adjusted EBIT margin. We are focused on increasing EV profitability, maintaining production and pricing discipline, managing fixed costs and further reducing tariff exposure.”