GM Profits Drop 35% From Trump Tariffs While Electric Vehicle Sales Double
Tariff Tremors and Electric Momentum: GM's Dual Reality Reshapes Auto Landscape
Inside General Motors' Renaissance Center headquarters in Detroit, executives are navigating two starkly different business realities. One threatens the company's immediate financial health, while the other signals its future prosperity in an electrified world.
GM reported Tuesday that its second-quarter profit plunged by over a third as newly imposed Trump administration tariffs inflicted a $1.1 billion wound on its balance sheet. Yet simultaneously, the automaker's electric vehicle sales more than doubled, solidifying its position as America's second-largest EV manufacturer behind Tesla.
Collision Course: Trade Policy Meets Corporate Strategy
The automaker reported core profit of $3 billion, a steep 32-35% decline from the same period last year. Net income fell to $1.8 billion from $2.9 billion. The culprit: a 25% blanket tariff on imported vehicles and parts implemented earlier this year by the Trump administration.
"This is just the beginning of the tariff impact," said one industry analyst who requested anonymity due to ongoing consulting relationships with major automakers. "We're seeing only the first tremors of what could be a seismic shift in the economics of auto manufacturing."
GM executives warned investors that tariffs could cost the company between $4-5 billion for the full year, with the financial pain potentially intensifying in the third quarter. Following the earnings announcement, GM shares dropped approximately 3% in premarket trading to $49.48, representing a notable decline from the previous day's close.
The company is working to counter these headwinds. In a detailed plan revealed during the earnings call, GM outlined efforts to offset roughly 30% of expected tariff costs through production modifications, cost-cutting measures, and targeted pricing adjustments. The automaker has committed $4 billion to expand U.S. assembly plants and is gradually shifting more production stateside.
Charging Ahead: GM's Electric Surge Defies Industry Trends
While trade policies strain GM's immediate profitability, its electric vehicle business tells a markedly different story. The company sold 46,280 EVs in the second quarter, representing a 111% increase year-over-year. Through the first half of 2025, GM's total EV sales exceeded 78,000 units, more than doubling from the same period last year.
This performance stands in stark contrast to EV market leader Tesla, which saw its U.S. deliveries decline by 12% during the same quarter. Ford, another key competitor, reported a 31% drop in EV volume.
The Chevrolet Equinox EV has emerged as GM's electric star, with over 17,400 units sold in Q2 alone, making it America's best-selling non-Tesla electric vehicle. The model's $35,000 starting price point has struck a chord with mainstream consumers looking to enter the EV market without premium pricing.
Industry observers note GM's surprising cost advantage in battery technology. "Their claimed sub-$70 per kilowatt-hour cost for Ultium cells would put them at least 10% below Tesla's latest battery pack estimates," noted one automotive supply chain expert. "If accurate, GM may be one of only two global automakers currently generating positive margins on mass-market EVs."
Manufacturing Reshuffling: Industry in Flux
GM's situation reflects broader disruption across the automotive sector. Multiple major automakers are grappling with similar challenges:
Stellantis reported a $2.7 billion loss in the first half of 2025, driven largely by tariff impacts. The company behind Jeep, Ram, and Chrysler brands warned that its full-year tariff burden could reach $1.6 billion.
Luxury importers face even steeper challenges. Jaguar Land Rover and Audi have temporarily halted or significantly reduced U.S. shipments as the economics of importing vehicles have deteriorated dramatically.
The policy shift has triggered a manufacturing realignment as automakers scramble to reconfigure production networks. This reshaping comes with substantial growing pains. Dealership inventories have whipsawed from panic-buying surges in March-April to depleted stocks by mid-summer.
"Car prices are rising beyond reach. Showrooms are eerily quiet," reported one industry publication, describing "a cascading supply chain disruption...manufacturing slowdown fueling economic fallout."
Wall Street's Valuation Puzzle
The market appears to be pricing in a permanent 200-300 basis point hit to GM's margins, trading at approximately 5.6 times the midpoint of full-year earnings per share estimates. This represents a valuation multiple last seen during COVID-related stress.
The key debate among analysts centers on whether tariffs represent temporary noise or a structural tax on the business. The answer may hinge on political developments and potential World Trade Organization challenges already brewing in Brussels and Ottawa. Most analysts assign greater than 50% probability to some form of negotiated tariff carve-out by 2026, given bipartisan opposition from dealers and farm-state senators.
Despite near-term headwinds, GM maintains substantial financial flexibility with free cash flow guidance of $7-9 billion for 2025, net automotive debt-to-EBITDA below 1x, and $18 billion in available liquidity.
Investment Landscape: Navigating Uncertainty
For investors attempting to value GM amid these crosscurrents, three potential scenarios emerge for 2026:
In a base case with partial tariff relief, GM could generate earnings per share around $10.80, implying a price-to-earnings ratio below 5x at current levels. A more pessimistic scenario with persistent tariffs and plateauing EV growth suggests EPS around $8.20. The bullish case, with successful tariff mitigation and EV mix exceeding 20%, points to potential EPS of $12.50.
Market analysts suggest that risk-adjusted fair value could reach the mid-$60s, representing approximately 30% upside from current levels. However, investors should monitor several critical developments in coming quarters, including the sunset of EV tax credits in October 2025, UAW wage negotiations in November, and the ramp-up of GM's new Tennessee truck production line in early 2026.
Substantial risks remain, including potential tariff escalation to 35% (as hinted by President Trump), consumer sensitivity to rising vehicle prices, possible battery material cost spikes, and potential retaliatory actions from China affecting GM's operations there.
Investment Thesis
| Category | Key Details |
|---|---|
| Stock Data (July 22, 2025) | |
| • Current Price | $49.48 USD (-0.07%) |
| • Previous Close | $53.21 USD |
| • Intraday Range | $49.29 (Low) – $53.52 (High) |
| • Volume | 7.06M shares |
| • P/E (Midpoint FY25 EPS) | ~5.6x |
| Q2 2025 Earnings | |
| • EBIT-adj. | $3.0B (-32% YoY) |
| • Net Income | $1.8B |
| • Tariff Impact | ~$1.1B (~290bp margin hit) |
| FY 2025 Guidance | |
| • EBIT-adj. | $10B–$12.5B (EPS: $8.25–$10) |
| • FCF | $7B–$9B |
| • Net Tariff Drag (Base Case) | $3.1B (30% mitigated) |
| Tariff Scenarios | Gross Bill | Mitigation | Net Drag |
| • Low Case | $4B | 40% | $2.4B |
| • Base Case (Mgmt) | $4.5B | 30% | $3.1B |
| • Stress Case | $5B | 20% | $4.0B |
| Mitigation Levers | Progress | Impact |
| • Localize Assembly (TN/MI) | 2025–26 | +300k tariff-free units |
| • Dual-Sourcing Parts | 2025–27 | 9–12mo ramp |
| • Price Hikes | +2–3% ASP (Fleet/Luxury) |
| • Buybacks | $6B authorized (2024–25) |
| EV Business | |
| • Q2 Sales | 46,280 (+111% YoY) |
| • H1 Sales | 78,000 |
| • Equinox EV | #1 Non-Tesla BEV (17.4k Q2) |
| • Ultium Cost | <$70/kWh (EBIT-positive at $35k MSRP) |
| Balance Sheet | |
| • Net Debt/EBITDA | <1x |
| • Liquidity | $18B |
| Valuation (2026E) | EPS | Implied P/E @ $49 | PT |
| • Base (Partial Relief) | $10.80 | 4.6x | $70 |
| • Bear (Tariffs Stay) | $8.20 | 6.0x | $50 |
| • Bull (90% Offsets) | $12.50 | 4.0x | $80 |
| Key Catalysts | Date | Event |
| • EV Tax Credit Sunset | Oct 2025 |
| • UAW Wage Reopening | Nov 2025 |
| • TN Truck Production | Q1 2026 |
| • WTO Ruling | H1 2026 |
| Risks | |
| • Tariff Escalation | Up to 35% (Trump risk) |
| • Consumer Softness | $54k avg. vehicle price |
| • China Retaliation | GM’s recovery exposure |
Disclaimer: This analysis is based on current market data and established economic indicators. Past performance does not guarantee future results. Readers should consult financial advisors for personalized investment guidance.
Table: General Motors Q2 2025 Financial Performance and Operational Summary.
| Category | Metric | Q2 2025 | Q2 2024 | Change | % Change |
|---|---|---|---|---|---|
| Financial Highlights | Revenue | $47.1B | $48.0B | -$0.85B | -1.8% |
| Net Income (attributable) | $1.9B | $2.93B | -$1.04B | -35.4% | |
| EBIT-Adjusted | $3.04B | $4.44B | -$1.40B | -31.6% | |
| Net Income Margin | 4.0% | 6.1% | -2.1 ppts | -34.4% | |
| EBIT-Adjusted Margin | 6.4% | 9.3% | -2.9 ppts | -31.2% | |
| EPS (GAAP) | $1.91 | $2.55 | -$0.64 | -25.1% | |
| EPS (Adjusted) | $2.53 | $3.06 | -$0.53 | -17.3% | |
| Adj. Auto Free Cash Flow | $2.83B | $5.30B | -$2.47B | -46.6% | |
| Auto Operating Cash Flow | $4.65B | $7.71B | -$3.06B | -39.7% | |
| Segment Performance | GM North America (GMNA) EBIT-Adj. | $2.42B | N/A | N/A | N/A |
| GMNA EBIT Margin | 6.1% | 10.9% | -4.8 ppts | -44% | |
| GM International (GMI) EBIT-Adj. | $204M | $50M | +$154M | +308% | |
| China Equity Income | $71M | -$104M (loss) | +$175M | N/A | |
| GM Financial EBT-Adjusted | $704M | N/A | N/A | N/A | |
| Operational Metrics | Total Vehicles Sold | 974,000 | N/A | N/A | N/A |
| EV Sales | 46,300 units | N/A | N/A | N/A | |
| Strategic Highlights | U.S. Investment | $4B (realloc from Mexico) | N/A | N/A | N/A |
| Guidance (2025) – Net Income | $7.7B–$9.5B | — | — | — | |
| Guidance – Adjusted Free Cash Flow | $7.5B–$10B | — | — | — | |
| H1 2025 Summary | Revenue | $91.1B | $91.0B | +$0.16B | +0.2% |
| Net Income | $4.68B | $5.91B | -$1.23B | -20.9% | |
| EBIT-Adjusted | $6.53B | $8.31B | -$1.78B | -21.5% |