Ahead of the EV Tax Credit Sunset, Big Auto Faces an EV-Autonomy Catch-22

Gene Munster, Brian BakerSeptember 17, 2025

Autonomous Vehicles, Google, Ridesharing, Tesla

At the end of the month, the U.S. EV tax credit will sunset, which may explain why in August Ford and GM reset their EV plans and in September VW cut its U.S. 2030 EV target to 20%, down from 50% three years ago. This tempered EV outlook contrasts with increasing investments into autonomy, pushing these companies into a Catch-22: saving money by slowing the path to electrification dampens the autonomy reward.

Key Takeaways

Big Auto continues to step away from pure electrification by further slowing development or rebooting their go to market approach.

While Big Auto is increasingly concerned about the path to EV profitability, they have been inching back into the autonomy development game. If they do solve for autonomy, they won’t have a profitable EV business at scale to monetize autonomy.

Eventually Tesla and Waymo autonomy come to rescue traditional car makers through licensing.

Big Auto Slow Plays EVs

Investing in EVs has been rough over the past two years. EV investments have underperformed during that time. While shares of TSLA are up 57% (Nasdaq up 63%) since September 2023, driven largely by investor optimism around autonomy ambitions, and shares of BYD are up 34%, the balance of the EV trade has been downward. LI is down 35%, Nio down 36%, Rivian down 42%, Polestar down 63%, and Canoo is now bankrupt.

Adding to demand concerns is the U.S. sunsetting the EV tax credit at the end of September, which will effectively increase the cost of an EV by about 15%. This new reality has led Big Auto to further pull back from EV investments or reboot their path forward.

Ford and GM are rebooting their EV approach toward lower priced vehicles in 2027 and beyond:

Ford: In late 2023, Ford cut back its EV expansion plans amid slowing demand and growing losses. The company postponed about $12B in planned EV investments, including a new battery plant in Kentucky, after EV sales fell short and its Model e division lost over $3B in the first nine months of 2023. CEO Jim Farley attributed the slowdown to the fact that early adopters were mostly served and more price sensitive buyers were hesitating due to high prices. Around the same time GM also delayed the rollout of some EV models and temporarily idled certain EV production lines as inventories grew, a dramatic change from 2021 when both companies were racing to scale up electric output.

In mid 2025, Ford continued to delay key future models, most notably pushing its next generation electric F Series pickup to 2028, while projecting an even larger $5.5B operating loss in its EV division for 2025 (up from roughly $4.7B lost in 2023).

By August 2025, Ford hit the reset button on its EV approach, essentially starting from scratch on EV design. The plan is to build a simplified “universal” EV platform that cuts production costs. Farley called it a “Model T moment” for the electric age, a reference to making EVs truly affordable for the mass market. The company is investing $2B to retool its Louisville plant with innovative production techniques, such as building sections of the vehicle in parallel and using large unicast components, with the goal of producing a $30k midsize electric pickup by 2027, below the $42k average price of a midsize pickup in 2025.

GM: GM plans to reintroduce its low cost Chevy Bolt in 2025 on a next generation platform as a sub $30k electric option.

Volkswagen reduced its U.S. EV outlook and maintained its Europe projections:
Volkswagen dialed back its U.S. EV outlook this month, canceling the upcoming ID.7 electric sedan and reducing its 2030 U.S. electric sales forecast from over 50% (a projection made in 2023) to about 20%. The company’s European outlook remains more favorable, likely yielding half of cars sold in 2030 as electric.

Toyota reduced its EV production plans:
Toyota has also pulled back on near term EV plans. It postponed the start of U.S. production for a three row electric SUV by roughly a year (now due in 2028) and is prioritizing high demand hybrid models in the meantime, making its EV rollout more gradual than planned in 2022.

Honda reduced its EV production plans:
In July 2025, Honda ended plans for a flagship electric SUV slated for 2027, citing high costs and limited near term demand.

Self-Driving Plans Restarted and Refocused

While Big Auto is increasingly concerned about the path to EV profitability, they have been inching back into the autonomy development game. This puts the car makers in an awkward position of resisting the future and embracing it at the same time. If they do solve for autonomy, they won’t have a profitable EV business at scale to monetize autonomy.

GM restarts Cruise after a two year shutdown:

In late 2023, after a Cruise robotaxi struck a pedestrian and California regulators suspended its driverless service, GM paused operations and effectively ended Cruise’s robotaxi project. By the end of 2024, GM took a nearly $10B write down on Cruise (which had lost about $3.5B that year) and CEO Mary Barra told investors that the costs made Cruise’s stand alone strategy unsustainable, so its work was folded into GM’s own teams.

Less than a year later, however, GM reversed course. In August 2025 it started its self-driving program focused on personal vehicles rather than taxis, rehiring roughly 1,000 Cruise employees and bringing in ex-Tesla Autopilot chief Sterling Anderson to lead the effort. Anderson outlined that future GM models will be on the path to full autonomy and declared that “autonomy is the future.”

Ford refocuses autonomy on advanced cruise control:

As for Ford, in late 2022, along with VW, they shut down their joint self-driving venture Argo AI (taking a $2.7B charge) after recognizing that true Level 4 autonomy was still far off. As CEO Jim Farley put it at the time, there would be no quick “aha” moment for full autonomy, only a long road requiring many breakthroughs.

Since then, Ford has focused on incremental driver assistance technology for consumers instead of robotaxis. Its focus became BlueCruise, which is basically advanced cruise control and hands free driving features (Level 2/3).

Volkswagen and Toyota have shifted away from trying to develop the tech alone to partnering:

Volkswagen, after its Argo AI venture exit in 2022, restarted autonomy development in mid-2025 by partnering with Uber to roll out self-driving ID.Buzz vans in LA, signaling a more measured approach to robotaxis.

Toyota, long cautious about autonomy, is also turning to partnering. In April 2025 it announced plans to work with Waymo to integrate Waymo’s self-driving systems into future Toyota models.

Enter Tesla & Waymo

I believe solving for autonomy is harder than it looks, and it already looks difficult. In other words, I anticipated most of the autonomy efforts from big auto to fall short of the mark, leaving Tesla and Waymo in a power position to license the tech to desperate car makers. I don’t believe autonomy will be just a feature in the future, it will be mandated.

That begs the question, what is Elon’s latest thinking on the FSD licensing topic. A good place to start is looking at his comments over the past three earnings calls. Based on comments from the last three calls, Musk has reiterated openness to licensing on the late January call, but there were no deals announced then or on the April and July calls, which focused on Tesla’s own robotaxi rollout rather than third party integrations.

What Musk actually said on the last three calls:

Jan 29, 2025: Discussed the potential to license FSD to other automakers, framing it as something Tesla is open to, but did not disclose timelines.
Apr 22, 2025: There was no new licensing news or partners. The emphasis shifted to getting unsupervised capability into the field and timing of robotaxi service.
Jul 23, 2025: There was no new licensing news or partners. Again, the focus was on scaling Tesla’s own robotaxi footprint to new U.S. markets.

My sense is traditional car makers are viewing Tesla as a last resort option, and would prefer to partner with Waymo, although their tech stack would be more difficult to integrate into third party vehicles. Their thinking is we have time, and there is no rush to partner with Tesla. I believe that outlook has about a two year shelf life, and as Tesla and Waymo continue to make progress, the pressure will be turned up to make a deal.

In the end, the treasures of autonomy will likely belong to Tesla and Google.

Disclaimer