GM to invest $340 million in gas cars as EV demand plummets

• GM is investing $340 million in two facilities to build its popular gas cars.
• EV sales "didn't go as quickly as we thought it was going to," an executive told Business Insider.
• Overall, the company has invested $6 billion in US facilities in the past 12 months.

General Motors is making a fresh $340 million investment in its US plants.

The latest investments will help ramp up production of gas-powered vehicle components amid a nationwide slowdown in demand for EVs. They'll go toward two propulsion facilities — in Romulus, Michigan, and Toledo, Ohio — that produce key parts for internal combustion engine (ICE) vehicles, including 10-speed transmissions and engine components.

The Romulus plant will receive $300 million, while the Toledo plant will get an additional $40 million. GM says it has now invested over $6 billion in its US manufacturing in the past 12 months.

"It's good news, really, for the United States," Mike Trevorrow, GM's senior vice president of global manufacturing, told Business Insider. "We're able to give customers what they want with the increased capacity. At the same time, we'll continue to invest in our workforce."

GM leans into high-profit gas vehicles

GM said the fresh spending will help boost production of its full-size trucks, SUVs, and the Chevrolet Corvette — vehicles that continue to drive a significant share of its profits.

The move also comes as GM recalibrates its production plans, and as electric vehicle sales have slowed.

"The demand for EVs didn't go as quickly as we thought it was going to be, so we're kind of shifting back to make sure we give them the ICE vehicles," Trevorrow said. "We'll continue to give people what they want."

Recent sales data underscores the uneven pace of EV adoption. GM's US deliveries show sharp declines across several electric models in the first quarter, including an 82% drop in Blazer EV sales and a 41% year-over-year decline in Silverado EV deliveries.

Overall, US EV sales fell 27% in the first quarter, according to Cox Automotive. The industry's delivery numbers have tumbled since the federal government canceled the $7,500 tax credit for US-built EVs.

The investment plan also comes as GM continues absorbing billions in costs tied to scaling back parts of its electric vehicle production strategy, including contract cancellations and supplier claims. In its latest earnings report, the company said it spent $2.2 billion in cash on those items over the past three months.

Still, executives said the company is not pulling back from EVs entirely.

"Our focus remains on improving EV profitability and scaling our business as market adoption grows, albeit at a slower expected pace than we had previously seen," Paul Jacobson, the company's CFO, said during GM's Tuesday earnings call.

So far, the automaker has only discontinued one electric vehicle from its lineup: the Canada-built Brightdrop panel van. Meanwhile, the low-cost Chevy Bolt has returned to production at the company's Fairfax assembly plant in Kansas for a limited time.

"We have not gotten rid of any EV production," Trevorrow told Business Insider. "We maintained it and continued to invest in other areas where maybe the demand has gone up as well."

The $340 million in new spending is part of a broader $830 million investment GM is highlighting across three facilities that help build the gas-powered cars. Previously announced investments include funding for its Romulus and Saginaw plants.

Trevorrow said the new spending will go toward processing, boring, and drilling machines, as well as some facility expansions.

"These are increased capacity; some of it may involve some retooling," he said. "Overall, the workforce stays about the same. There really isn't an increase to it."

Rising competition? No problem, GM says

The shifting demand dynamics are also playing out against a backdrop of intensifying global competition.

Chinese automakers have rapidly expanded their electric vehicle offerings — including cars with ultra-fast charging, sub-$20,000 prices, and an expanding global footprint.

Trevorrow, who has worked for GM for 40 years, is still confident in the Detroit automaker's competitive advantages.

"We're a global company. We believe we build the best vehicles at the best values through any of those markets," he said. "There are things that the newer Chinese vehicles might be introducing, but we have not seen a long record of them. There's a reputation issue that could be coming to play."