Automakers betting on new EVs — despite sales downturn: ‘Market is going to come back’

EV share of US new-vehicle sales fell to 6.5% in the past three months from 9.6% in 2025 after the $7,500 federal tax credit expired on Sept. 30, signaling weakened demand. Despite the downturn, major automakers (Kia, Subaru, GM, Nissan, Hyundai, Toyota) unveiled new or lower-priced EV models — e.g., Kia’s lower-priced EV3 coming to the US later this year, Subaru’s three-row 'Getaway', and GM’s Bolt starting at $27,600 — and some executives expect a market rebound over the next 3-4 years, aided by rising gasoline prices. Firms are adjusting mixes toward more hybrids and smaller EV share gains (management forecasts ~10-15% vs. prior higher targets), leaving near-term sector outlook uncertain but keeping medium-term product-driven upside potential.

Analysis

The near-term pullback in consumer EV purchases has created a two-speed market: OEMs with flexible powertrain platforms and strong hybrid portfolios will buy time, while those who front-loaded capital into high-fixed-cost EV lines face margin pressure and inventory write-down risk. Expect residual-value deterioration to be the primary margin lever for dealers and captive finance units over the next 6–18 months, which will force higher incentives and compress OEM FCF even if headline production stays steady.

Battery and upstream suppliers are the hidden arbiter of winners: firms with diversified cathode footprints and scalable North American cell capacity can claw back pricing power as OEMs race to reprice models to stimulate demand. Conversely, suppliers tied to a single chemistry or region are exposed to order volatility and contract renegotiation risk; this will show up first in 2–4 quarter order delays rather than immediate revenue misses.

Policy and energy-price shocks are the wildcards. A renewed subsidy program or persistent fuel-price inflation over several months can flip consumer economics rapidly and re-accelerate demand, while regulatory loosening lowers the absolute addressable EV target and extends the useful market for hybrids and ICE — shifting total industry capex outlays over a multi-year horizon. Monitor used-EV pricing, captive finance delinquencies, and fleet procurement cadence as leading indicators that will precede OEM guidance changes by 1–3 quarters.

Key Decisions for Investors

• Pair trade (6–12 months): Long TM equity (or buy 12-month calls, 1.5x notional) / Short STLA equity (equal notional). Thesis: Toyota’s hybrid-centric portfolio and lower EV capex intensity should outperform Stellantis if incentives remain muted. Target 20–30% pair return; downside limited to 12–15% by stop or options hedges.
• Event-style trade (9 months): Long GM via a call-spread (buy 9–12 month ITM call, sell higher strike call) to capture asymmetric upside from US-centric EV repricing and fleet demand recovery. Objective: 30–50% upside on spread if volumes normalize; max loss = premium paid (~100% of premium).
• Opportunistic short (3–6 months): Buy STLA puts or short stock on any post-launch multiple expansion. Catalysts: weaker European margins, capex reforecast, or slower battery ramp. Risk: policy support or strong SUV gas-economy tie-in; set a 20% stop and scale into weakness.
• Volatility/hedge (next 1–3 months): Buy a short-dated straddle on F around the upcoming earnings/catalyst window to monetize guidance dispersion and product-launch binary risk. Position size small (<1% NAV); breakeven requires ~15% move in either direction, premium lost if market is complacent.