GM Beats in Q2 but Warns on Tariff Drag; EVs Gain Traction as Margins Face Pressure

Key Takeaways:

• GM posted better-than-expected Q2 results but warned of mounting tariff-related pressures in the second half of 2025.
• The automaker reaffirmed its full-year outlook while accelerating domestic production investments to offset trade-related headwinds.
• EV momentum continues with 30K Ultium deliveries, but the segment remains unprofitable and vulnerable to tariff costs,

General Motors reported strong second-quarter results on Tuesday, beating Wall Street expectations on both the top and bottom lines. However, shares slipped about 2% in early trading, hovering just above the $50 level, which also marks the 200-day moving average. The pullback reflects growing investor caution as GM flagged higher-than-expected tariff drag in the third quarter and ongoing cost pressure tied to EV ramp-up. While the quarter demonstrated GM’s resilience across core ICE models and improving EV execution, the path forward is clouded by macro risks, pricing dynamics, and geopolitical crosscurrents.

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GM posted adjusted EPS of $2.53, easily topping the $2.44 consensus. Revenue rose to $47.1 billion, beating expectations of $46.3 billion and marking a 5% increase year over year. Adjusted EBIT held firm at $3.9 billion, though margins compressed modestly to 8.5% from 8.9% last year. Automotive free cash flow came in at $3.8 billion, up from $2.5 billion a year ago. North America remained the core earnings engine, delivering $3.5 billion in EBIT-adjusted profit with a 10.2% margin. International operations improved modestly, with EBIT-adjusted of $400 million, double from a year ago. Cruise continued to be a drag, with a $600 million loss.

Despite the solid quarter, GM emphasized that new U.S. and Chinese tariffs are already weighing on the business. The company absorbed a net $1.1 billion tariff hit in Q2 and expects that figure to rise in Q3. Management reiterated its intent to mitigate at least 30% of the anticipated $4–5 billion gross tariff burden through a mix of cost-saving actions, sourcing shifts, and production localization. CEO Mary Barra noted in her shareholder letter, “We are positioning the business for a profitable, long-term future as we adapt to new trade and tax policies, and a rapidly evolving tech landscape.”

EV performance showed encouraging signs, with Ultium-based deliveries rising to 30,000 units in Q2, nearly doubling from Q1. Vehicles like the Silverado EV, Blazer EV, and Cadillac Lyriq led the charge, while battery module and pack production improved 30% sequentially. GM expects to double Ultium EV production in the second half of 2025 compared to the first. However, EV gross margins remain negative, and the company acknowledged that battery supply chain tariffs will weigh on profitability. Barra reiterated GM’s long-term focus, stating, “Despite slower EV industry growth, we believe the long-term future is profitable electric vehicle production, and this continues to be our north star.”

Full-year 2025 guidance was reaffirmed, with the company still expecting adjusted EBIT of $12.0–$14.0 billion, adjusted EPS of $8.50–$9.50, and $8.0–$10.0 billion in automotive free cash flow. Management warned, however, that Q3 would carry heightened risk as new model launches and tariffs create margin pressure. Among the upcoming launches are the Silverado HD refresh and the Equinox EV, both key to maintaining momentum.

On the strategic front, GM is aggressively investing in North American production to reduce tariff exposure and meet rising demand for high-margin vehicles. In June, the company announced $4 billion in new U.S. assembly plant investments aimed at adding 300,000 units of annual capacity. Barra noted, “This will help us satisfy unmet customer demand, greatly reduce our tariff exposure, and capture upside opportunities as we launch new models.”

Meanwhile, GM continues to lead in the ICE market, particularly in full-size trucks and SUVs, with Barra highlighting the success of new and redesigned crossover SUVs like the Chevrolet Trax and Buick Envista. This traditional strength provides a financial cushion as GM ramps its EV ambitions and navigates the bumpy transition.

Looking ahead, investors will remain focused on GM’s ability to deliver margin stability despite mounting cost headwinds. With shares still well above technical support near $50, sentiment may hinge on Q3 execution and commentary around tariff mitigation. As Barra put it, “Everything we’re doing strategically and proactively... will further differentiate us from our competitors, increase our resilience, and help us emerge from this transition period even stronger and more profitable than before.”