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

The US Automotive Industry’s Shift Towards Realism in Electric Vehicles

The US automotive industry has entered a new era of realism when it comes to electric vehicles (EVs). After a period of euphoria in the early 2020s, consumer demand for EVs has not taken off as expected, and automakers are now reassessing their investments in the segment. The industry’s pivot towards realism is driven by the need to adapt to changing consumer preferences and regulatory environments.

General Motors (GM) CEO and Chair Mary Barra recently stated that the industry has experienced a complete change in the regulatory environment, with policies driving the demand for EVs rather than consumer preferences. Barra noted that it’s too early to tell what the true demand for EVs is, following the end of federal incentives for EV purchases in September. The industry is expected to find its natural demand over the next six months.

Automakers’ Response to Changing Demand

GM, Ford, and other automakers that invested heavily in EVs are now refocusing on large gas-guzzling trucks and SUVs, which have seen consistent demand. Ford CEO Jim Farley stated that the company is following customers to where the market is, rather than where people thought it was going to be. This shift in strategy is expected to have a significant impact on the future of EVs in the US.

According to Cox Automotive, US EV sales peaked in September at 10.3% of the new vehicle market, but plummeted to 5.2% in the fourth quarter. Stephanie Valdez Streaty, Cox director of industry insights, noted that the long-term direction towards electrification remains clear, but the timeline is being recalibrated. Automakers are expected to adjust their strategies and expand hybrid offerings to meet consumer demand.

Industry Experts’ Perspectives

Most industry experts, including those at PwC, believe that the current situation is not the end of EVs, but rather a period of realism. PwC expects the EV industry to pick up towards the end of the decade, with EVs forecast to make up 19% of the US industry by 2030. C.J. Finn, U.S. automotive industry leader for PwC, noted that companies got ahead of customer demand and infrastructure, leading to a recalibration of expectations.

KPMG partner and U.S. automotive leader Lenny LaRocca stated that the industry is moving towards a multi-propulsion technology approach, which is expected to work out well. This approach will allow customers to choose from a range of options, including all-electric vehicles, hybrids, and traditional internal combustion engines.

The Impact of Tesla on the EV Market

The rise of Tesla played a significant role in the current EV marketplace. The company’s success led other automakers to attempt to replicate its model, but they failed to realize that consumers were buying Teslas, not just any EV. Stephanie Brinley, associate director in AutoIntelligence at S&P Global Mobility, noted that Tesla created a market for its brand, rather than a battery-electric vehicle market.

The company’s success also led to an unsustainable amount of new EV companies going public, many of which have since gone bankrupt. 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.

Regulatory Environment and Federal Incentives

The regulatory environment and federal incentives have also played a significant role in the EV market. The end of federal incentives for EV purchases in September had a significant impact on demand, with sales slowing down in the fourth quarter. Jeremy Robb, Cox interim chief economist, noted that the end of federal incentives came to an abrupt stop, driving a lot of demand and sales for the new and used market.

The US automotive industry’s shift towards realism in EVs is expected to continue, with automakers adapting to changing consumer preferences and regulatory environments. As the industry moves forward, it will be important to monitor the impact of regulatory changes and federal incentives on demand and sales.