To The Moon

$General Motors(GM)$

General Motors, long a bellwether of American manufacturing prowess, delivered a quarterly earnings report that reflected the tensions shaping the automotive industry in 2025. On one hand, the Detroit giant reported electric vehicle (EV) sales that more than doubled year-over-year, underscoring its progress toward an electrified future. On the other hand, Trump administration tariffs on imported components and materials took a sizable bite out of profits, reminding investors that geopolitical and policy risks remain potent headwinds.

For GM shareholders, the latest results illustrate the delicate balancing act the company must perform as it pivots from internal combustion engines (ICE) to EVs while navigating a challenging cost environment. The mixed signals in the report also raise a key question: can GM sustain its EV momentum while protecting margins under a protectionist trade regime?

Below we explore the current fundamentals, the drivers of the latest results, and the outlook for GM as it seeks to electrify its portfolio without short-circuiting its profitability.

A Tale of Two Trends

In the just-released second-quarter results, General Motors reported revenue of $46.7 billion, up 4% from the prior year and slightly ahead of analyst expectations. EV sales more than doubled to 142,000 units, driven by strong demand for models like the Chevrolet Equinox EV, Silverado EV, and Cadillac Lyriq. These results helped GM solidify its position as the second-largest EV maker in the U.S., behind Tesla.

Yet despite the top-line strength, net income fell sharply to $1.7 billion, down 31% from the same quarter last year. Earnings per share of $1.26 missed Wall Street’s consensus estimate of $1.48. Management squarely blamed the impact of new tariffs on imported battery materials and components, along with higher steel and aluminum costs, for the margin compression.

CEO Mary Barra noted on the earnings call:

“We are executing on our EV strategy with great momentum, but the near-term impact of tariffs is real. We’re working aggressively to localize more of our supply chain and mitigate these costs over time.”

For investors, the report was a reminder that even as GM rides the wave of EV adoption, it remains exposed to policy risks that can erode profitability.

Current Fundamentals: A Closer Look

Revenue Growth and Volume

GM’s total deliveries rose 2% to nearly 1.5 million vehicles in the quarter, with EVs accounting for 9.5% of that total — up from just 4% a year ago. The company has leaned on aggressive pricing and incentives to drive EV adoption, with the Equinox EV and Blazer EV hitting attractive price points for mainstream buyers.

The North American market remained GM’s strongest region, delivering stable volumes and high vehicle transaction prices. China, however, continued to lag amid fierce competition from local players and shifting consumer preferences, with GM’s sales in the region down 7% year-over-year.

Margins Under Pressure

Operating margin fell to 6.2%, compared to 8.7% in the year-ago quarter, as tariff costs and higher input prices offset operating leverage from higher EV volumes. Management estimated that tariffs added approximately $1.2 billion in incremental costs in the quarter — equal to about $800 per vehicle on average.

The EV segment itself remains dilutive to margins. While unit economics are improving thanks to scale and production efficiencies, EV gross margins remain below ICE vehicle margins by several hundred basis points. GM reaffirmed its target to achieve margin parity between EVs and ICE vehicles by late 2026.

Cash Flow and Balance Sheet

Free cash flow for the quarter came in at $2.3 billion, down modestly from $2.7 billion a year ago, while capital expenditures rose to $2.1 billion as the company continues to invest heavily in EV and battery plant buildouts. GM ended the quarter with $17 billion in cash and equivalents, providing ample liquidity to fund its transition.

The company maintained its quarterly dividend of $0.09 per share and continued its share repurchase program, buying back $750 million of stock during the quarter.

Decoding the Tariff Impact

The Trump administration’s recent escalation of tariffs — part of a broader effort to “reshore” American manufacturing and reduce dependence on China — has directly impacted GM’s cost structure. New tariffs on imported lithium, cobalt, and nickel, as well as on Chinese-made battery components, have raised costs across the EV supply chain.

For GM, which is still in the process of fully localizing its battery materials supply, these tariffs are unavoidable in the near term. The company sources a significant share of its battery-grade materials and some module components from Asia, even as it invests in domestic capacity.

While the long-term strategy of building out U.S.-based battery plants with joint-venture partner LG Energy Solution is sound, those facilities are still ramping to full capacity — leaving GM vulnerable to tariff-driven cost spikes in the interim.

Analysts expect the tariffs to continue weighing on margins through at least mid-2026, though the exact impact will depend on how quickly GM can pivot its supply chain and whether it can pass some costs on to consumers without denting demand.

EV Momentum Is Real

Despite the profit hit, GM’s EV progress is undeniable. The company delivered more than 140,000 EVs in the quarter, compared to just 67,000 a year ago, thanks to a full ramp of its Ultium-based vehicles. The Equinox EV and Blazer EV have been particularly well-received, offering competitive range and technology at attractive prices.

GM’s Ultium platform, which underpins its next-generation EVs, is beginning to deliver the promised scale economies. Battery pack costs have fallen below $100/kWh, a key milestone that supports more affordable EV pricing while maintaining acceptable margins.

Customer reception has also been strong. Surveys indicate GM’s EV buyers skew younger and more affluent than its traditional ICE base, suggesting the company is expanding its reach into new demographic segments.

With several more EV models slated for release over the next 12 months, including an electrified Escalade and additional commercial vehicles, GM appears well positioned to continue gaining EV market share.

What the Future Holds

Localizing the Supply Chain

GM’s immediate priority is to accelerate its supply chain localization strategy. With three U.S.-based battery cell plants under construction and plans to source more lithium domestically, the company aims to reduce its exposure to imported components.

Management has guided that by 2027, more than 80% of GM’s battery materials will come from North American sources, significantly mitigating tariff risks. However, the transition will take time — and in the meantime, margins are likely to remain under pressure.

Margin Recovery

In addition to supply chain localization, GM is working on reducing EV production costs through better manufacturing processes and improved battery chemistries. New lithium-iron-phosphate (LFP) battery options for lower-range vehicles are expected to be 20–30% cheaper than current nickel-based packs, which could support margin recovery over time.

On the ICE side, GM continues to enjoy healthy truck and SUV sales, which provide the cash flow to fund EV investments. Balancing these two sides of the portfolio will remain a key strategic challenge.

Policy Risks Remain

A potential wildcard is the evolution of trade and industrial policy in the U.S. The Trump administration has signaled an intent to continue pushing tariffs and may even escalate them further if re-elected. GM and other automakers are actively lobbying for exemptions or alternative support mechanisms, but investors should assume policy risk will remain elevated for the foreseeable future.

Valuation and Investor Sentiment

GM shares fell about 4% after the earnings release but remain up slightly year-to-date. At about 6.5x forward earnings, the stock trades at a steep discount to the S&P 500 — reflecting both the cyclical nature of the auto industry and investor skepticism about the EV transition.

On a sum-of-the-parts basis, some analysts argue GM’s EV business is undervalued relative to pure-play EV makers, while its profitable ICE and financing operations provide a stable cash flow base. The current dividend yield of roughly 1% and ongoing buybacks provide additional support for total returns.

For value-oriented investors willing to stomach near-term volatility, GM may represent an attractive opportunity — though patience will be required as the company works through its transition challenges.

Conclusion: Takeaways for Investors

General Motors’ latest results capture the complexities of transitioning to an electric future while navigating a fraught policy environment. EV sales growth is undeniably strong, with volume more than doubling and new models resonating with consumers. Yet tariffs and rising input costs are taking a toll on profitability, underscoring the risk of executing such a capital-intensive shift amid geopolitical uncertainty.

For investors, the report is a mixed bag. The EV momentum suggests GM is on the right strategic path, and long-term investments in domestic production should pay off over time. But near-term headwinds — including tariffs, competition, and margin pressure — cannot be ignored.

Key Takeaways:

1. GM’s EV sales doubled year-over-year, cementing its status as a major EV player.

2. Trump administration tariffs cut deeply into profits, dragging net income down 31%.

3. Localizing the supply chain and improving battery economics are top priorities.

4. Valuation remains attractive for long-term investors, but risks are high in the near term.

5. Watch for progress on supply chain resilience, new EV launches, and policy developments.

GM has weathered many storms over its century-long history. Whether it can continue to thrive in this era of electrification and protectionism will depend on its ability to adapt — and investors’ willingness to look beyond short-term shocks to the long-term charge.

Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.

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