General Motors lifts forecast as tariff outlook improves, shares surge 10%
News Summary
General Motors (GM) has raised its full-year financial outlook and slightly lowered its expected hit from tariffs. The company now anticipates an annual adjusted core profit between $12.0 billion and $13.0 billion, up from its prior estimate of $10.0 billion to $12.5 billion. The tariff impact is now projected to be in the range of $3.5 billion to $4.5 billion, down from $4 billion to $5 billion. This positive news sent GM shares up about 10% in premarket trading and boosted peers like Ford and Stellantis. GM's adjusted earnings per share for the third quarter dropped to $2.80, beating LSEG analysts' expectation of $2.31. GM CEO Mary Barra stated that the company is recalibrating its EV strategy, expecting lower near-term EV adoption due to President Trump largely unraveling stringent federal requirements. The company took a $1.6 billion charge this month related to EV strategy changes and expects future charges. Nevertheless, EVs remain its "North Star." U.S. President Trump approved an order to expand credits for U.S. auto and engine production, allowing companies to receive a credit equal to 3.75% of the suggested retail price for U.S.-assembled vehicles to offset import tariffs on parts. This move will help make U.S.-produced vehicles more competitive over the next five years, with GM planning to mitigate 35% of its anticipated tariff hit through this program.
Background
Since President Trump's re-election in 2025, his administration has been recalibrating trade and industrial policies, particularly within the automotive sector. Previously, U.S. tariffs on imported goods had imposed significant cost pressures on global companies, including automakers. In the EV sector, the Biden administration had pursued stringent federal emission standards and aggressive EV adoption targets. However, with the Trump administration taking office, these policies have been largely unraveled. Concurrently, EV tax credit programs, such as the $7,500 tax credit for battery-powered models, expired at the end of September, contributing to softening demand and uncertainty in the EV market. Against this backdrop, U.S. automakers face the challenge of balancing the profitability of traditional internal combustion engine vehicles with costly EV investments and a shifting policy landscape. Major players like General Motors, Ford, and Stellantis have been increasing their domestic investments in the U.S. to navigate tariff policies and seek competitive advantages.
In-Depth AI Insights
What is the broader strategic implication of the Trump administration's tariff adjustments and EV policy shifts for the U.S. auto industry? - These policies strongly incentivize domestic auto production, encouraging supply chain re-shoring and creating a competitive advantage for U.S.-based manufacturing. - While potentially straining international trade relations, they shift the U.S. automotive industry's focus from a rapid EV transition to a more market-demand-driven, incremental evolution, favoring traditional ICE vehicles in the near term. Beyond the immediate financial uplift, what does GM's recalibration of its EV strategy signal about the long-term viability and pace of the EV transition for legacy automakers? - It signals a pivot by legacy automakers from policy-driven targets to acknowledging market demand realities, suggesting a more pragmatic and slower transition process. - It implies that the costs and profitability of EVs might be higher than initially projected, driving a greater emphasis on hybrid technologies and the efficiency of internal combustion engine vehicles. - This also raises questions about the competitive landscape between traditional automakers and pure-play EV companies. How might the interplay of tariff policies and shifting EV mandates influence the competitive dynamics between U.S. domestic automakers and their foreign counterparts operating in the U.S. market? - U.S. domestic automakers will benefit from domestic production credits, potentially disadvantaging importers. - This could lead to increased foreign direct investment in U.S. manufacturing by international players to qualify for credits, intensifying localization efforts. - Such an uneven playing field could impact market share and pricing strategies.