The realism of electric vehicles is there. How GM, Hyundai and Ford react in 2026 will be telling

DETROIT – The U.S. auto industry has entered a new phase for fully electric vehicles: realism.

The industry was euphoric about the electric vehicle segment in the early 2020s, but consumer demand never took off as much as expected, and as it faltered, automakers monitored and planned how to respond. Now they’re pivoting: Companies have wasted billions of dollars in capital, Detroit automakers are refocusing on big trucks and gas-guzzling SUVs, and many have admitted that it’s politicians, not consumers, who are driving up the price of electric vehicles.

“We have to invest to get to…the regulatory environment that they’ve established. We’ve seen a complete shift in this area. In one sense, 180 degrees. In one sense, 180 degrees backwards. This is the world that auto company CEOs live in,” GM CEO and Chairman Mary Barra said earlier this month at the New York Times DealBook conference.

How automakers like GM, which have invested heavily in electric vehicles, respond over the next year will be indicative of the future of vehicles in the United States, according to industry insiders and experts.

Barra said “it’s too early to tell” what the real demand for electric vehicles is after federal incentives of up to $7,500 end in September for purchasing an electric vehicle. She said the industry would likely return to its natural demand over the next six months.

Meanwhile, GM continues to reevaluate its electric vehicle plans after revealing a $1.6 billion impact from withdrawing those investments, and more writedowns are expected in the future. Ford engine Last week, it said it planned to record about $19.5 billion in special items related to a restructuring of its business priorities and a withdrawal of its investments in fully electric vehicles.

“We evaluated the market and we made the decision. We’re following customers to where the market is, not where people thought it was going to be,” Ford CEO Jim Farley told CNBC last week.

U.S. electric vehicle sales peaked in September, before federal incentives ended, at 10.3% of the new vehicle market, according to Cox Automotive. This demand fell to preliminary estimates of 5.2% during the fourth quarter.

“The long-term direction toward electrification remains clear: the future is electric. However, the timeline is being recalibrated,” said Stephanie Valdez Streaty, Cox’s director of industry studies. “In the near term, automakers will continue to adjust their strategies and significantly expand their hybrid offerings to meet the needs of consumers where they are today.”

Most industry experts, including those at consultancy PwC, do not believe this is the end of electric vehicles, but rather that expectations are now more realistic. PwC expects the electric vehicle industry to recover toward the end of this decade, with electric vehicles expected to make up 19% of the U.S. industry by 2030.

“Like several United States [automakers] “We announced, there is a certain level of fees, and we responded to customer demand and probably the infrastructure that is otherwise available here in the United States,” CJ Finn, U.S. auto industry leader at PwC, told CNBC.

This projected market share of electric vehicles does not justify the billions of dollars companies have spent on vehicle research, development and production. Automakers are therefore significantly changing their plans to offer customers a greater choice of fully electric vehicles, hybrids and traditional internal combustion engines.

“If you think back to a few years ago, it was like, ‘If you’re not all-in on electric vehicles, you’ll end up going bankrupt. Your terminal value is zero,'” Lenny LaRocca, KPMG partner and U.S. auto leader, told CNBC. “Now I think this multi-drive technology approach is what works well. We used to call it the ‘powertrain mosaic’.”

The changes have taken different forms for companies that have already invested heavily in electric vehicles.

GM, which was by far the leader in such investments in the United States, will continue to offer its current models but has few or no plans for expansion in the future, according to Barra. Instead, it will use some of its planned capacity to increase production of large trucks and SUVs. The automaker also announced plans to offer plug-in hybrid vehicles in the coming years, but it hasn’t disclosed many other details.

Ford said it would refocus its investments on hybrid vehicles, including plug-in models rather than pure electric vehicles; cancel a next generation of large, all-electric trucks in exchange for smaller, more affordable electric vehicles; and rebalance its investments in core products such as trucks and SUVs.

And Stellantis is deprioritizing electric vehicles, including for its coveted Jeep brand, as it tries to revive sales in the United States.

“We’re all waiting to see what the demand is, how it’s going to continue to evolve,” Jeep CEO Bob Broderdorf told CNBC. “THE [EV] the industry will slide. It will slow down. And then what is the normal state of electric vehicles?

Hyundai, which has also invested billions in electric vehicles, is taking a mixed approach compared to its peers. Like GM, it plans to continue offering its current models, but new models are also expected to arrive. On the other hand, like Ford, it decided to put more emphasis on hybrids and spread production to a new $7.6 billion plant for Hyundai and Kia vehicles in Georgia.

Others, like Honda, Nissan, Porsche, Volvo and Jaguar, which announced ambitious plans for electric vehicles, have canceled or significantly reduced those goals. GM also returned to its commitment to exclusively offering electric vehicles by 2035, including several of its brands before then.

A litany of factors have played into the current electric vehicle market, including industry dynamics and external factors such as pressure from Wall Street and political boost from the Trump and Biden administrations.

“There’s no question that policy has had a big impact on customer demand. Net-net is the market that has changed,” Farley told CNBC last Monday.

The excitement around electric vehicles began with the rise of Tesla. The company, which remains by far the US leader in electric vehicle sales, managed to significantly increase its sales and stock market valuation according to Wall Street analysts at the start of this decade.

That caused other automakers to take note and, as the industry does, try to replicate Tesla’s success, officials say. But what executives failed to realize was that consumers were buying Teslas, not just any electric vehicle.

“Tesla wasn’t creating a market for battery electric vehicles. They were creating a market for the Tesla brand.” said Stephanie Brinley, associate director of AutoIntelligence at S&P Global Mobility.

Tesla vehicles were, and continue to be, a “technology purchase” of software products that happened to be electric vehicles, Brinley said. The company also established its own charging network and created a loyal, tech-savvy customer base, who overcame many quality issues and growing pain.

This success led Wall Street to search for the “next Tesla,” paving the way for an unsustainable number of new companies. From 2019 to 2022, nearly a dozen electric automakers have gone public, along with a litany of related manufacturers. Most of them went bankrupt amid federal investigations, scandals and executive branch upheaval.

“The attention to Tesla has woken everyone up. But now there’s competition, and there’s competition from trusted, known, respected brands,” Brinley said.

The euphoria surrounding electric vehicles began to wane as companies continued to spend with little or no success and “legacy” automakers entered the market, investing large sums to bring unprofitable vehicles to market.

Hopes of profitability for electric vehicles have further eroded with President Donald Trump’s second inauguration this year. Trump killed or canceled much of the Biden administration’s support and funding for the sale and production of electric vehicles.

The biggest blow came in September with the end of federal incentives of up to $7,500 for the purchase of an electric vehicle.

“The end of federal incentives came to an abrupt end at the end of the third quarter, leading to strong demand and sales in the new and used home market,” Jeremy Robb, Cox’s acting chief economist, said last week. “Since then, we have seen a slowdown in both the pace of sales and growth in new vehicle production. Next year will be crucial for electric vehicles.”