Is GM stock a buy at its ATH after pivoting away from EVs?
News Summary
General Motors (GM) stock has surged to a record high of $70.2, up 70% from its April low after President Donald Trump launched his trade war, bringing its market capitalization to over $64 billion. This rise is primarily attributed to the company scaling back its electric vehicle (EV) ambitions and pivoting back to its Internal Combustion Engine (ICE) business, where it holds a leading market share and sees sustained demand. GM plans to cut 5,500 jobs in its EV division, with the CEO stating that ICE volumes will "remain higher for longer." Latest quarterly revenue was $48.5 billion, largely flat year-over-year, despite achieving its highest third-quarter US market share and returning its Chinese business to profitability. However, net income margin plunged from 6.3% to 2.7% due to external issues like tariffs implemented by the Trump administration. Breakthroughs in US-China talks, particularly regarding rare earth materials and magnets, and an improved overall relationship, also contributed to the stock's jump. Analysts project GM's revenue to stagnate around $185.83 billion for 2025 and 2026, but profitability is expected to improve as the company focuses on its more profitable ICE segment. Technical analysis indicates the stock has broken above key resistance levels and may retest the $64.8 support.
Background
Spurred by Tesla's robust growth, traditional automakers like General Motors quickly pivoted to the electric vehicle (EV) industry, launching EV models for brands such as Hammer, Bolt, Buick, and Cadillac. However, initial strong sales trends faded due to lingering concerns about these vehicles, with only Cadillac EVs performing relatively well. In April 2025, incumbent US President Donald Trump launched a trade war, imposing tariffs on imports, which negatively impacted global supply chains and corporate profitability, including GM's. Recently, breakthroughs in US-China trade talks have emerged, offering potential benefits for GM's global supply chain and operations in the Chinese market.
In-Depth AI Insights
What does GM's strategic pivot truly reveal about the broader EV market and automaker strategies, especially under the current Trump administration? - GM's shift underscores the significant challenges to mass-market EV adoption, including charging infrastructure, battery costs, range anxiety, and varied acceptance across different segments (e.g., luxury EVs may perform better). - It also suggests that under the "America First" and protectionist policies of the Trump administration (e.g., tariffs), automakers might prioritize more stable, lower-risk traditional operations when balancing global supply chains and domestic production strategies to navigate uncertainty. - The fundamental difference between traditional auto giants and Tesla's model lies in their vast legacy ICE assets and markets; a full pivot to EVs in the short term carries extremely high costs and risks, making the "ICE for longer" strategy a pragmatic business choice. How significant are the reported US-China breakthroughs for GM's long-term strategic positioning, and could this signal a broader shift in Trump's trade policy? - Breakthroughs with China on rare earth materials and magnets, alongside an overall improvement in relations, are critical for GM's global supply chain and profitability in its key Chinese market. This reduces supply risks for crucial raw materials and operational uncertainties. - This might signal a more pragmatic and strategic evolution in Trump's trade policy, moving from broad tariff wars towards selective de-escalation in areas directly beneficial to key American industries like automotive manufacturing, balancing political commitments with corporate and economic realities. - It doesn't imply an end to trade disputes but rather a negotiating approach that emphasizes specific industry and corporate-level outcomes to secure domestic jobs and stabilize key sectors. Given analysts' stagnant revenue projections but improved profitability outlook, what are the underlying risks and opportunities for GM's stock valuation? - Risks: In the long term, if global EV transition accelerates and GM's ICE-focused strategy fails to transition effectively, it could face market share erosion and technological obsolescence. Competition in the ICE market also remains fierce, potentially squeezing profit margins. - Opportunities: By focusing on high-margin ICE businesses, GM is poised to improve operational efficiency and free cash flow in the short term, delivering shareholder returns. Cutting costs from the EV division will also directly contribute to profitability. The market may re-rate its value, shifting from a "chaser" to an "efficiently profitable traditional giant." - Valuation: Investors will need to weigh the short-term stability derived from an "extended ICE era" against the potential long-term challenges of future EV disruption. Valuation will depend on how the market perceives its ability to profit in traditional segments versus its capacity to evolve towards new energy technologies.