General Motors Q2 profit exceeds expectations but still falls 8%, tariff costs reach $1.1 billion, and are expected to worsen in the future | Earnings Report Insights
According to the financial report released by General Motors, although the company has already incurred tariff costs of up to $1.1 billion in the second quarter, it warned that the negative impact of tariffs will become more severe as it enters the second half of the year, especially in the third quarter. This forward guidance directly triggered pessimism in the market, with General Motors' stock price falling more than 8% on Tuesday
General Motors announced second-quarter earnings that exceeded analysts' expectations, but simultaneously warned that the impact of future tariffs would significantly worsen. This negative news completely overshadowed the positive performance, leading to a substantial decline in its stock price.
On July 22, according to the financial report released by General Motors, although the company incurred tariff costs of up to $1.1 billion in the second quarter, it warned that entering the second half of the year, especially in the third quarter, the negative impact of tariffs would become more severe. This forward guidance directly triggered pessimism in the market, causing General Motors' stock price to drop more than 8% on Tuesday. 
However, CEO Mary Barra emphasized General Motors' resilience in a letter to shareholders, stating:
As we adapt to new trade and tax policies and a rapidly evolving technological landscape, we are preparing the company for profitability and a long-term future.
Strong Business Struggles Against Tariff Impact
Despite the burden of tariffs, General Motors' core business remains strong.
The second-quarter financial report showed that automotive sales in the U.S. market, its main profit source, increased by 7%, primarily due to strong demand for high-margin pickup trucks and SUVs. Additionally, in the Chinese market, benefiting from the growth in electric vehicle sales, General Motors reversed last year's losses and achieved a small profit.
However, these positive factors were not enough to fully offset the financial pressure from tariffs. As of June 30, the company's revenue decreased nearly 2% year-on-year to approximately $47 billion. Adjusted earnings before interest and taxes (EBIT) plummeted 32% to $3 billion. According to LSEG data, adjusted earnings per share fell from $3.06 in the same period last year to $2.53, but still exceeded analysts' forecast of $2.44.
Mary Barra pointed out in her letter:
In the U.S., we continue to lead the industry in the full-size truck and SUV segments, driving record demand and revenue growth. In China, our performance in electric vehicles is particularly strong, and we have gained the largest market share among foreign automakers, reporting positive equity earnings.
Against the backdrop of increasing uncertainty in the electric vehicle market, General Motors is recalibrating its strategy but has not abandoned its long-term electrification goals. Industry data shows that the growth in electric vehicle sales has slowed, and U.S. government tax credit policies, including a $7,500 new vehicle subsidy and a $4,000 used vehicle subsidy, are set to expire in September, which is expected to further suppress demand.
Nevertheless, Mary Barra remains confident in the company's electrification future:
Although the growth of the electric vehicle industry is slowing, we believe that in the long term, the future lies in profitable electric vehicle production, which remains our North Star.
She added that General Motors will continue to leverage its flexible manufacturing strategy and battery investments in the U.S. to navigate the changing market landscape
Localization of Investment to Mitigate Risks
In the face of escalating trade pressures, General Motors is actively responding through strategic adjustments.
The company reiterated its forecast for adjusted core profits for the year to be between $10 billion and $12.5 billion, in line with earlier guidance. At the same time, General Motors stated that the goal is to offset at least 30% of the tariff impact through cost reductions and strategic adjustments. The company maintains its forecast that tariff costs for the year could be between $4 billion and $5 billion.
To strengthen its domestic manufacturing base and reduce reliance on imports, General Motors announced a $4 billion investment plan for new factories in the U.S. in June. The plan aims to increase the production capacity of key high-margin models such as pickups, SUVs, and crossovers by 300,000 units at plants in Michigan, Kansas, and Tennessee. Barra stated:
This will help us meet unmet customer demand, significantly reduce our tariff exposure, and seize upward opportunities as we launch new models.
Currently, about half of the vehicles sold by General Motors in the U.S. are imported from countries such as Mexico and South Korea. In contrast, approximately 80% of the vehicles sold by its competitor Ford are domestically produced.
