General Motors (GM) delivered second-quarter earnings that exceeded Wall Street’s expectations for both profit and revenue, but the auto giant’s stock fell sharply Tuesday.
The culprit: a $1.1 billion blow to profits from new tariffs, with more pain expected in the coming quarter. Despite resilient consumer demand and firm guidance for the year, investors were rattled by the size of the tariff hit and lingering uncertainties in the global trade environment.
Tariff Shock Wipes $1.1 Billion from GM's Quarterly Profits
GM reported an adjusted operating profit of $3.04 billion in Q2—down about 32% from a year ago—as new tariffs took a substantial bite out of margins. The automaker estimated the tariffs shaved $1.1 billion off its earnings before interest and taxes, with adjusted EBIT margin slipping to 6.4% from 9.3% last year. The company warned that the impact could worsen in Q3 as more indirect tariff costs roll through the system.
Overall, GM reaffirmed its full-year forecast of $10 billion to $12.5 billion in adjusted EBIT, a range previously lowered in response to the tariffs. The company expects to offset at least 30% of the $4 billion to $5 billion in full-year tariff costs through supply chain reconfigurations, cost cuts, and consistent pricing strategies.
CEO Mary Barra acknowledged in her letter to shareholders that the road to recovery won’t be immediate. “We’re positioning the business for a profitable, long-term future as we adapt to new trade and tax policies, and a rapidly evolving tech landscape,” she wrote.
U.S. Demand Surges and China Returns to Growth
Amid the headwinds, GM’s core business showed strength. U.S. vehicle sales rose 12% year-over-year in the first half of 2025, outperforming the broader market and gaining market share despite increasing competitive incentives. The company also reduced dealer inventory by nearly 10% compared to last year, a sign of healthy sell-through.
GM’s portfolio of redesigned crossovers and SUVs helped drive that performance. The Chevrolet Equinox alone gained nearly six percentage points in retail market share, while new models like the Buick Envista and GMC Acadia posted strong initial results.
In China, GM returned to profitability after previous losses, reporting its second straight quarter of year-over-year sales growth. New energy vehicles performed particularly well, helping GM gain the most market share among foreign automakers.
Despite the strong showing, warranty expenses weighed on margins, rising $300 million from last year. This was largely tied to quality issues with the EcoTec3 engine used in several trucks and SUVs—a problem GM says it is actively addressing through supplier improvements and tighter component controls.
Amid the headwinds, GM’s core business showed strength. U.S. vehicle sales rose 12% year-over-year in the first half of 2025, outperforming the broader market and gaining market share despite increasing competitive incentives. The company also reduced dealer inventory by nearly 10% compared to last year, a sign of healthy sell-through.
GM’s portfolio of redesigned crossovers and SUVs helped drive that performance. The Chevrolet Equinox alone gained nearly six percentage points in retail market share, while new models like the Buick Envista and GMC Acadia posted strong initial results.
In China, GM returned to profitability after previous losses, reporting its second straight quarter of year-over-year sales growth. New energy vehicles performed particularly well, helping GM gain the most market share among foreign automakers.
Despite the strong showing, warranty expenses weighed on margins, rising $300 million from last year. This was largely tied to quality issues with the EcoTec3 engine used in several trucks and SUVs—a problem GM says it is actively addressing through supplier improvements and tighter component controls.
Long-Term Investments Aim to Shield GM from Trade Fallout
Looking ahead, GM is betting big on expanding its U.S. manufacturing footprint to blunt the impact of ongoing tariffs. In June, the automaker announced $4 billion in new investments across plants in Michigan, Kansas, and Tennessee, adding 300,000 units of annual production capacity. Combined with an earlier $888 million investment in New York, these projects are expected to come online within 18 months.
Barra said these initiatives will “greatly reduce our tariff exposure” and meet strong demand for light-duty pickups and crossovers—vehicles that remain GM’s most profitable products.
EVs also remain a strategic focus. Chevrolet is now the second-largest EV brand in the U.S., buoyed by the Blazer EV and Equinox EV, while Cadillac is emerging as a leader in luxury EVs. GM is leaning into fast-charging partnerships and domestic battery production as it prepares for a more competitive electric future, especially with the federal EV tax credit set to expire in September.
Conclusion
GM’s second-quarter results were a mixed bag—solid underlying operations overshadowed by macroeconomic and policy shocks. While the company beat expectations and reaffirmed its full-year outlook, the sharp tariff impact and increased warranty expenses have spooked investors. Still, with demand firm in key markets and long-term investments underway to localize production, GM appears to be navigating the storm with a steady hand. The challenge now is whether it can turn resilience into renewed investor confidence.
Looking ahead, GM is betting big on expanding its U.S. manufacturing footprint to blunt the impact of ongoing tariffs. In June, the automaker announced $4 billion in new investments across plants in Michigan, Kansas, and Tennessee, adding 300,000 units of annual production capacity. Combined with an earlier $888 million investment in New York, these projects are expected to come online within 18 months.
Barra said these initiatives will “greatly reduce our tariff exposure” and meet strong demand for light-duty pickups and crossovers—vehicles that remain GM’s most profitable products.
EVs also remain a strategic focus. Chevrolet is now the second-largest EV brand in the U.S., buoyed by the Blazer EV and Equinox EV, while Cadillac is emerging as a leader in luxury EVs. GM is leaning into fast-charging partnerships and domestic battery production as it prepares for a more competitive electric future, especially with the federal EV tax credit set to expire in September.
Conclusion
GM’s second-quarter results were a mixed bag—solid underlying operations overshadowed by macroeconomic and policy shocks. While the company beat expectations and reaffirmed its full-year outlook, the sharp tariff impact and increased warranty expenses have spooked investors. Still, with demand firm in key markets and long-term investments underway to localize production, GM appears to be navigating the storm with a steady hand. The challenge now is whether it can turn resilience into renewed investor confidence.
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