GM stock buckles under multiple headwinds and risky bets on EVs

Yahoo

2 days ago

General Motors (GM) is navigating a rocky road as Trump tariffs hit its profits while its EV efforts face an uncertain future.
The storied automaker reported that net income dropped 35% year over year, as tariffs hit its profit by $1.1 billion during the quarter. GM warned the toll could grow in the second half of the year, reiterating its previous estimate of a $4 billion to $5 billion hit for the year.
Shares dropped 7% during the day, even as the company's adjusted earnings per share of $2.53 and revenue of $47.1 billion beat Bloomberg consensus estimates of $2.33 and $46.27 billion, respectively. Its stock is down 4% year to date.
GM said it's 'making solid progress' in mitigating at least 30% of the expected tariff burden through manufacturing and supply chain shifts.
Those include a $4 billion investment in US-based assembly plants, which will add 300,000 units of production capacity for light-duty pickups, full-size SUVs, and crossovers. CEO Mary Barra said on its earnings call that "GM expects to build over 2 million US vehicles annually within 18 months."
Citi analyst Michael Ward noted it appears GM is "prepared for the worst case scenario, so there's potential for some upside the way we look at it."
GM's underlying results showed some resilience. During Q2, it sold 974,000 vehicles, a 7.3% increase year-over-year. It sold 46,300 electric vehicles, up from 31,900 last quarter.
RBC Capital's Tom Narayan said in a research note there's a broader market trend where companies report earnings "beats and/or raises are still seeing stock sell-offs." He said it reflects investor concerns about tariffs, rising costs, and a challenging macroeconomic environment.
For GM, its EV division's profitability also remains uncertain, as competition heightens and consumer demand slows. The $7,500 federal EV tax credit, key to EV's affordability, expires in September.
Barclays analysts Dan Levy said "these changes indicate profitability is probably gonna get a little trickier." GM was supposed to use scale to drive profit for EVs, which is harder to do when sales are slowing, Levy added.
Barra, however, reaffirmed the company's commitment to profitability on every EV model. She did not provide a hard timeline, but said "I'm very bullish on where we're gonna be on EVs as we continue to move forward in the next couple of years."
Meanwhile, GM is regaining ground in China, with profitable joint ventures, new hybrid models, and tighter inventory control. The company posted year-over-year sales growth in the region for the second consecutive quarter, and returned to profitability this quarter.