EV realism is here. How GM, Hyundai, Ford react in 2026 will be telling

DETROIT – The U.S. automotive industry has entered a new phase for all-electric vehicles: realism.

The industry was euphoric about the EV segment in the early 2020s, but consumer demand never took off as much as expected and, as it fizzled, automakers monitored and planned how to react. Now, they’re pivoting, as companies have wasted billions of dollars in capital, Detroit automakers are refocusing on large gas-guzzling trucks and SUVs, and many have admitted that policies, not consumers, were driving the charge for EVs.

“We have to make the investments to get to … the regulatory environment they set. We’ve seen a complete change in that. One way, 180 degrees. One way, 180 degrees back. That’s the world CEOs of automakers are living in,” GM CEO and Chair Mary Barra said earlier this month during The New York Times’ DealBook conference.

How automakers like GM that invested heavily in EVs will respond over the next year will be telling for the future of the vehicles in the U.S., according to industry insiders and experts.

Barra said “it’s too early to tell” what true demand for EVs is following the end of up to $7,500 in federal incentives in September to purchase an electric vehicle. She said the industry will likely find its natural demand over the next six months.

In the meantime, GM continues to reassess its EV plans after disclosing a $1.6 billion impact from its pullback in those investments, with more write-downs expected in the future. Ford Motor last week said it expects to record about $19.5 billion in special items related to a restructuring of its business priorities and a pullback in its all-electric vehicle investments.

“We evaluated the market, and we made the call. 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. EV sales peaked in September, ahead of the federal incentives ending, at 10.3% of the new vehicle market, according to Cox Automotive. That demand plummeted 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 director of industry insights. “In the near term, automakers will continue to adjust their strategies and significantly expand hybrid offerings to meet consumers where they are today.”

Most industry experts, including those at consulting firm PwC, don’t believe it’s the end days for EVs, but rather that expectations are more realistic now. PwC expects the EV industry to pick up toward the end of this decade, with EVs forecast to make up 19% of the U.S. industry by 2030.

“As several of the U.S. [automakers] have announced, there’s some level of charges, and we got out in front of the customer demand and likely the infrastructure that’s otherwise available here in the U.S.,” C.J. Finn, U.S. automotive industry leader for PwC, told CNBC.

That projected EV market share doesn’t justify the billions of dollars companies have spent on the research, development and production of the vehicles, so automakers are significantly altering their plans to allow customers more choice of all-electric vehicles, hybrids and traditional internal combustion engines.

“If you think back a few years ago, it was like, ‘If you’re not all-in on EV, you’re going to eventually go out of business. Your terminal value is zero,'” KPMG partner and U.S. automotive leader Lenny LaRocca told CNBC. “Now I think that multi-propulsion technology approach is what’s panning out to work out well. We used to call it the ‘mosaic of powertrains.'”

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

GM, which was by far leading in such investments in the U.S., will continue to offer its current models but has little to no plans of expanding in the future, according to Barra. Instead, it will use some of its planned capacity for increased production of large trucks and SUVs. The automaker also has said it plans to offer plug-in hybrid vehicles in the years ahead, but it hasn’t disclosed many other details.

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

And Stellantis is deprioritizing EVs, including for its coveted Jeep brand, as it attempts to revive its U.S. sales.

“All of us are waiting to see what the demand is, how it’s going to continue to shake out,” Jeep CEO Bob Broderdorf told CNBC. “The [EV] industry will slide. It’s going to slow down. And then what is the normal state of EVs?”

Hyundai, which also invested billions in EVs, is taking a mixed approach compared with its peers. Like GM, it plans to continue offering its current models but it is also expected to have new models coming. On the other hand, like Ford, it’s decided to more heavily emphasize hybrids and allocated production at a new $7.6 billion plant for Hyundai and Kia vehicles in Georgia.

Others such as Honda, Nissan, Porsche, Volvo and Jaguar that announced ambitious plans for EVs have canceled or significantly scaled back those goals. GM also has backtracked on its pledge to exclusively offer EVs by 2035, including several of its brands before that time frame.

A litany of factors played into the current EV marketplace, including industry dynamics and external factors such as pressure from Wall Street and political whiplash from the Trump and Biden administrations.

“No doubt the policy had a big impact on customer demand. The net-net is the market’s changed,” Farley told CNBC last Monday.

The bullishness around EVs began with the rise of Tesla. The company, which remains the U.S. leader in EV sales by a wide margin, was able to significantly boost sales and its market valuation from Wall Street analysts at the beginning of this decade.

That led other automakers to take notice and, as the industry does, attempt to replicate Tesla’s success, according to officials. But what executives didn’t realize was consumers were buying Teslas — not just any EV.

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

Tesla vehicles were, and continue to be, a “tech-buy” of software-first products that just happened to be EVs, Brinley said. The company also set up its own charging network and created a tech-savvy customer base of loyalists who looked past many quality and growing pain issues.

That success led Wall Street to seek out the “next Tesla,” ushering in an unsustainable amount of new companies. From 2019 to 2022, nearly a dozen EV carmakers went public as well as a litany of related ones. Most of those have gone bankrupt amid federal investigations, scandals and executive upheaval.

“The attention that Tesla got woke everyone else up. But now there’s competition, and there’s competition from trusted, known and respected brands,” Brinley said.

The euphoria surrounding EVs started waning as companies kept spending with little to no success and “legacy” automakers entered the market, investing big sums to bring unprofitable vehicles to market.

Hopes for profitable EVs further eroded with the second inauguration of President Donald Trump this year. Trump has killed or rolled back many of the Biden administration’s support and funding for the sale and production of EVs.

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

“The end of federal incentives came to an abrupt stop at the end of Q3, driving a lot of demand and sales for the new and used market,” Jeremy Robb, Cox interim chief economist, said last week. “Since then, we’ve seen the slowdown in both the pace of sales as well as the growth of new vehicle production. Next year will be pivotal for EVs.”