General Motors Faces Tariff Challenges
General Motors (GM) experienced a $1.1 billion loss in its second quarter due to tariffs, yet still managed to meet analysts’ expectations, largely thanks to robust sales in its key gasoline trucks and SUVs.
The automaker, which leads in U.S. sales, foresees that the tariff situation could worsen in the third quarter. They remain cautious, estimating that trade issues could impact final profits by between $4 billion and $5 billion.
GM mentioned possible measures to reduce at least 30% of the tariff’s effect. However, early trading saw shares drop by roughly 6%.
In terms of revenue, GM reported nearly a 2% decline from the previous year, totaling around $47 billion. Adjusted earnings were down, about $2.53 per share compared to $3.06 the year before, while analysts had estimated around $2.44 per share.
Their earnings prior to interest and taxes fell 32% to $3 billion. GM is one of several companies adjusting their annual projections due to the ramifications of tariffs imposed under President Trump, reducing anticipated annual core profits to between $10 billion and $12.5 billion.
Despite these obstacles, GM’s core business showed strength this quarter; U.S. sales—a crucial profit source—increased by 7%, supported by solid pricing on their pickup trucks and SUVs. Remarkably, they’ve started to turn a small profit in China after experiencing losses the previous year.
Analysts suggest that GM may need to seek ways to cut future project investments or reduce operational spending to counterbalance the tariff impacts. Meanwhile, competitor Stellantis has warned that tariffs will significantly affect its performance in late 2025, forecasting losses of around 300 million euros in the first half of that year.
In a related note, shares of rival Ford and Stellantis fell about 1% in early trading on Tuesday.
Additionally, GM has reconsidered its goal of phasing out gas-powered vehicles by 2035. They have been taking steps to bolster their internal combustion engine business, which includes increased investments in U.S. facilities. CEO Mary Barra noted that, while the growth of the electric vehicle (EV) market may be slow, they believe that this sector still holds long-term profitability potential, which remains a guiding principle for the company.
In June, GM announced a $4 billion investment across three facilities in Michigan, Kansas, and Tennessee, including the transition of Chevrolet Blazer production from Mexico to Tennessee.
It’s worth noting that about half of the vehicles sold in the U.S. are imported, mainly from Mexico and South Korea, while Ford produces around 80% of its vehicles within the U.S. Ford is slated to report its second-quarter results next week.
The automotive industry is increasingly pivoting towards shoring up their offerings of gas trucks and SUVs as the demand for EVs appears to be tapering off after a rapid early growth period. This shift comes amid the looming expiration of government incentives for battery-powered vehicles, including the recently passed Tax and Budget Act, which eliminates substantial tax credits for new and second-hand electric vehicle purchases by the end of September. Additionally, Trump’s tax and budget law removes penalties for not meeting fuel economy standards.
