General Motors has announced a major production shift at its Tonawanda Propulsion plant in New York state, reallocating a previously announced $300 million capital investment in electric-vehicle drive units and investing $888 million in the production of its sixth-generation V-8 gas-powered engine in 2027. The move represents a significant shift in the wind direction of the market, reflecting changing attitudes and policies related to EVs and the expected impacts of President Donald Trump’s tariffs. It may also be a bellwether of consumer demand.
Cars With New Muscle?
The new engines are not designed to revive the muscle cars of yesteryear, but history offers an interesting contrast to the current car climate. The 1960s provided American consumers with heavy, super-powerful sports cars that burned a lot of gasoline, spewed copious plumes of air pollution, and were made in the good ol’ USA.
In the 1970s, the OPEC oil embargo slowed Middle East oil production, choking supplies to an energy-thirsty America, which resulted in gas pump prices doubling nearly overnight and sent US car manufacturing into a tailspin. Sales of more efficient foreign car models surged as domestic carmakers redesigned vehicles to accommodate lower weights, smaller engines, and improved fuel efficiency. The “compact car” was born.
Following the ebb of the oil crisis, versions of the muscle car returned as gas prices relaxed. Still, the era of huge big-block engines and high-horsepower, Starsky & Hutch-style flashiness faded into cultural memory. Foreign car makers secured name recognition on US shores. Subarus, Hondas, and Toyotas became familiar sights in suburban American driveways – consumers liked them.
Clouds Hover Over EVs
Then came the push for EVs, hailed as saviors from an existential climate crisis. Backed by legal mandates, hefty government subsidies, and a “carcophony” of media approval, EV cars – often manufactured abroad – made a rapid appearance. Major US car manufacturers rushed to keep up with the times. GM’s EV sales leapt 94% in the first quarter of 2025 compared to the same period last year.
But the times they are a-changin’. Biden’s Inflation Reduction Act EV subsidies are expiring. A bizarre campaign to vandalize, burn, and sell Teslas has consumers puzzled. EV depreciation rates are increasingly astronomical in the first year of ownership. As consumers rushed to buy new cars pre-tariff in early 2025, many chose gas-powered options. Promised EV muscle cars don’t exist, and consumers and the media are becoming aware that EVs pitched as sparing the world from greenhouse gases are decidedly unsparing to the environment: Lithium and cobalt mining pollutes horribly, and massive batteries create an environmental nightmare upon disposal. The electric grid is still largely powered by fossil fuels (and will increase in electricity usage by 40% due to EV power needs), and electric car charging stations are not widely available. Consumers have also seen that EVs are neither reliable nor efficient in the cold winter temperatures that many endure seasonally.
The recent Senate reversal on California’s EV mandates reflects a realist market approach. Vermont Gov. Phil Scott recently paused unrealistic market controls that would have banned the sale of gas-powered vehicles there. New York State has similarly slammed the brakes on banning gas-powered vehicles, perhaps aided by the 870 good-paying jobs expected at Tonawanda Propulsion.
Gas-Powered Economic Growth
New York Gov. Kathy Hochul (D) has praised GM’s expansion of gas-powered vehicles, and the state will provide up to $16.96 million in tax credits in return for the company’s investment commitments. Hochul gushed about GM’s plant-change announcement:
“I look forward to seeing New York’s partnership with GM bring the next generation of automotive technology to its Tonawanda plant and I thank them for their tremendous support and belief in Western New York.”
Meanwhile, foreign carmakers are reeling from US tariffs, which raise the sticker price of their EVs and other cars. Volvo has announced significant layoffs. GM’s CEO, Mary Barra, says she supports Trump’s 25% auto import tariffs as a way to level the playing field for US automakers. OPEC just announced it will be increasing production by 411,000 barrels per day in June, causing oil prices to post their most significant monthly drop since 2021. For US car manufacturers, the current changes are driving production shifts like the 1970s oil crisis (when America lost 300,000 auto industry jobs) in reverse gear.
The truth about EVs is that they are not what they have been cracked up to be by public relations departments, politicians, and automotive and mainstream media. Meanwhile, there have been substantial design improvements that have boosted internal combustion energy efficiency and performance, many of which were initiated during the OPEC crisis, requiring US companies to develop fuel injection technology, computer-controlled engines, and improved aerodynamic designs.
Consumers Drive GM’s Future
GM is not abandoning EV cars. A recent Barron’s report cites the company as still allocating 45% of its capital and R&D spending to EV development, while 55% will be directed toward conventional gas-powered engines. This allocation comes in the wake of recent engine failures in the company’s L87 V8 engines, resulting in a recall of more than 600,000 units.
EV sales made up a mere 6% of total US vehicle sales in early 2025. GM’s Cadillac Lyriq, an electric SUV, achieved record sales of 5,800 units in the first quarter of the year, a 499% year-over-year increase. Yet its gas-powered Silverado pick-up dwarfed that feat with sales of 128,926 units in the first quarter.
Those sales figures may be the most potent driver of GM’s investment in new gas-powered engine production. Consumers want reliability, affordability, and something that doesn’t need to be plugged into a dubious national electric grid, subsidized by even more dubious federal and state tax breaks. American carmaking is getting back on track!
