GM’s EV Woes Offset by Software Surge and ICE Gains

Date of Call: Jan 27, 2026

Financials Results

• Revenue: $45 billion, down approximately 5% year-over-year
• EPS: $2.51 per diluted share, increased year-over-year
• Operating Margin: North America EBIT adjusted margin of 6.1% in Q4; expected to return to 8% to 10% range in 2026

Guidance:

• EBIT adjusted for 2026 expected to be $13B to $15B.
• EPS diluted adjusted for 2026 expected to be $11 to $13 per share.
• Adjusted automotive free cash flow for 2026 expected to be $9B to $11B.
• Gross tariff costs for 2026 anticipated to be $3B to $4B.
• North America ICE wholesale volumes expected flat to up modestly.
• Expect benefit of $1B to $1.5B from EV capacity right-sizing actions.
• Expect $1B benefit from improved warranty performance versus 2025.
• Expect deferred revenue from software and services to reach ~$7.5B by end of 2026, up nearly 40% from 2025.
• Expect headwinds of $1B to $1.5B related to onshoring production and software investments.

Business Commentary:

Market Share and Financial Performance:

• General Motors achieved its highest full year market share in a decade and delivered a total return of 54% for investors in 2025.
• The growth was driven by strong performance in the U.S. market, with low inventory, low incentives, and strong pricing, along with leading in full-size pickups and SUVs.

Tariff Management and Cost Reduction:

• Gross tariff costs for 2025 were $3.1 billion, below the predicted range, due to effective mitigation strategies and favorable policy developments.
• The reduction was achieved through self-help initiatives, including go-to-market actions, footprint adjustments, and cost reduction efforts.

EV Strategy and Capacity Adjustments:

• GM recorded significant charges in Q3 and Q4 totaling $7.6 billion, primarily due to impairments and contract cancellations related to EV capacity reduction.
• This adjustment was in response to softer-than-expected consumer demand and changes in U.S. government policies, including the elimination of consumer tax incentives.

Cash Flow and Shareholder Returns:

• Adjusted automotive free cash flow for 2025 was $10.6 billion, enabling substantial shareholder returns, including $6 billion in share repurchases and a dividend increase.
• The robust cash generation allowed GM to execute its capital allocation program, enhancing shareholder value and improving its financial flexibility.

OnStar and Super Cruise Growth:

• OnStar Services reached 12 million subscribers in 2025, with Super Cruise subscribers growing by nearly 80% year-over-year.
• The growth in subscribers and deferred revenue from software and services is expected to increase to $7.5 billion by the end of 2026, driven by expansion into new markets and technological advancements.

Sentiment Analysis:

Overall Tone: Positive

• Management expressed pride in 2025 performance, delivered market share growth, and stated 'We are confident in our ability to deliver this goal ahead of investor expectations' regarding North America margins. They highlighted strong cash generation, increased dividend, share repurchases, and multiple future growth initiatives, including EV cost reductions and software expansion.

Q&A:

• Question from Dan Levy (Barclays Bank PLC, Research Division): Can you unpack the assumption for pricing to be flat to up in 2026?
  Response: Pricing guidance assumes annualization of 2025 increases with no further significant price hikes projected, relying on vehicle momentum and new truck launches.

• Question from Dan Levy (Barclays Bank PLC, Research Division): To what extent does the current product portfolio align with the higher near-term ICE mix, and what is the potential for adding hybrids?
  Response: Management believes the portfolio is right, with a strong ICE foundation and planned hybrids in key segments, and is focused on cost reduction and future EV adoption.

• Question from Michael Ward (Citigroup Inc., Research Division): Will inventory discipline continue, and what are the implications for cash flow?
  Response: Inventory discipline to continue, helping drive consistent cash generation, with potential to rebuild to the 50-60 day target range.

• Question from Michael Ward (Citigroup Inc., Research Division): How much can GM Financial save on cost of capital from the new industrial bank?
  Response: The new bank will provide a complementary funding source to lower cost of funds over time, but not by a large magnitude like 100 bps.

• Question from Joseph Spak (UBS Investment Bank, Research Division): Can you shed light on hybrid evolution, and will vehicles be able to use the next-gen architecture launching in 2028?
  Response: Hybrids are being evaluated segment-by-segment; SDV next-gen platform and Super Cruise will be available across both ICE and EV platforms.

• Question from Joseph Spak (UBS Investment Bank, Research Division): Can you unpack the $1B-$1.5B in onshoring and software expense headwinds?
  Response: Split roughly 50-50 between onshoring ramp-up costs (temporary) and ongoing software investment; onshoring costs will be offset as production ramps.

• Question from Andrew Percoco (Morgan Stanley, Research Division): What is the impact if Korea tariff returns to 25%, and what tariff mitigation is planned for 2026?
  Response: Guidance assumes 15% tariff; if higher, will work to offset. Mitigation includes go-to-market actions, footprint changes, and fixed cost reductions, leading to a >40% offset in 2026.

• Question from Andrew Percoco (Morgan Stanley, Research Division): What are the regulatory approvals and roadmap for Super Cruise international expansion and functionality improvements?
  Response: Regulatory specifics not provided, but global expansion planned with no major barriers; roadmap includes more features and enhancements leading to eyes-off/hands-off capability by 2028.

• Question from James Picariello (BNP Paribas, Research Division): How do you get to 8%-10% North America margin yet have total company EBIT at the $14B midpoint?
  Response: Confidence in delivering North America margin improvement driven by EV profitability, warranty, and regulatory tailwinds, with international and China performance also contributing.

• Question from James Picariello (BNP Paribas, Research Division): How much of 2026 memory chip supply and pricing is locked in?
  Response: No issues seen; team is actively working on supply, with no current disruptions expected.

• Question from Itay Michaeli (TD Cowen, Research Division): What is embedded in guidance for the full-size pickup launch, including downtime and volume/mix impacts?
  Response: New trucks will cause some downtime and volume impact in 2026; pricing benefit expected more in 2027, with confidence in share momentum.

• Question from Itay Michaeli (TD Cowen, Research Division): How much of EV volume decline could translate to incremental ICE demand for GM?
  Response: Uncertain steady-state EV demand; team will maximize ICE production where possible, aided by lean inventory position.

• Question from Colin Langan (Wells Fargo Securities, LLC, Research Division): What is driving the expected EBIT increase in guidance if quantified puts and takes net out?
  Response: Main drivers are lower net tariff exposure, regulatory savings, and continued EV profitability improvement, leading to margin upside.

• Question from Colin Langan (Wells Fargo Securities, LLC, Research Division): Why is pricing guidance more optimistic this year versus last?
  Response: 2026 guidance assumes no new pricing increases, just annualization of 2026 model year pricing, reflecting current landscape conservatively.

• Question from Emmanuel Rosner (Wolfe Research, LLC): What mix benefits are assumed in the outlook, and what drives the $1B warranty cost benefit?
  Response: Mix benefits from EV volume decline and ICE optimization; warranty savings driven by stable cash flows, fixes for V8 issues, and detailed cost analysis across the vehicle portfolio.

• Question from Ryan Brinkman (JPMorgan Chase & Co, Research Division): Why is the emissions regulation savings $500M-$750M versus roughly $1B spent annually?
  Response: Savings reflect a disconnect between cash and P&L as credits are amortized over their remaining life; CAFE credits already zeroed, GHG credits pending resolution.

• Question from Ryan Brinkman (JPMorgan Chase & Co, Research Division): How are you seeing international operations outside China, particularly in LatAm?
  Response: Seeing improvement in South America (e.g., Brazil) despite Chinese competition; strong vehicle performance and brand presence driving results.

• Question from Mark Delaney (Goldman Sachs Group, Inc., Research Division): What is driving the big step-up in Super Cruise revenue in 2026, and what offsets could GM have in China if market softens?
  Response: Super Cruise revenue growth driven by vehicle sales with prepaid services and high renewal rates; China stability driven by right product portfolio, disciplined operations, and strong brand equity.

Contradiction Point 1

Tariff Mitigation and 2026 Net Tariff Exposure

Contradiction on whether 2026 tariff benefits are included in guidance.

What is the impact of South Korea's tariff increasing to 25% from the assumed 15%, and what mitigation is planned for 2026 along with the 2025 offset? - Andrew Percoco (Morgan Stanley)

2025Q4: For 2026, annualization of these actions should lead to net tariffs lower than 2025. - [Paul Jacobson](CFO)

What parameters are assumed to reduce EV losses, and how do you assess the EV lineup in a market without regulatory tailwinds? - Dan Levy (Barclays Bank PLC)

2025Q3: The current 2025 tariff guidance does not include any impact from potential Korea tariff changes, which are still pending finalization. - [Paul Jacobson](CFO)

Contradiction Point 2

Expectations for 2026 Pricing/Profitability

Contradiction on the primary driver for expected profitability improvement.

What is driving the expected 2026 EBIT increase if quantified factors net out? - Colin Langan (Wells Fargo Securities)

2025Q4: The increase comes from ongoing cost improvements and margin recovery, including reduced net tariff exposure, regulatory savings, and continued EV profitability gains. - [Paul Jacobson](CFO)

What are the preliminary high-level industry and macro factors for 2026, considering consumer and credit concerns as well as competitor product launches in pickups? - Joseph Spak (UBS Investment Bank)

2025Q3: It is too early to speculate on 2026. The expectation is that 2026 can be better than 2025 assuming a similar macro environment, driven by internal levers like lower EV losses, improved warranty, reduced net tariff burden, and fixed cost management. - [Paul Jacobson](CFO)

Contradiction Point 3

Tariff Mitigation Expectations

Contradiction on the timeline and scale of tariff cost offsets.

What are the 2026 tariff mitigation plans and the 2025 offset? - Andrew Percoco (Morgan Stanley)

2025Q4: For 2026, annualization of these actions should lead to net tariffs lower than 2025. - [Paul Jacobson](CFO)

What is the best-case scenario for 2025 if a settlement is reached regarding tariffs, and what is the strategic upside of the $4 billion U.S. manufacturing investment? - Michael Patrick Ward (Citigroup Inc.)

2025Q2: Mitigation efforts are on track to offset at least 30% of the $4–5 billion full-year 2025 tariff impact. - [Mary T. Barra](CEO)

Contradiction Point 4

EV Volume & Pricing Outlook

Contradiction on the expected trajectory and profitability drivers for Electric Vehicles.

What benefits from mix optimization in 2026 are assumed, such as those from ICE mix adjustments post-emissions deregulation or inventory rebuilding? - Emmanuel Rosner (Wolfe Research)

2025Q4: EV volumes are expected to be down due to lost consumer tax credits and truck transition. - [Paul Jacobson](CFO)

With regulatory changes and tax credit phaseouts, how will GM's EV strategy and lineup evolve, especially at lower price points with challenging profitability? - Dan Meir Levy (Barclays Bank PLC)

2025Q2: Demand for EVs persists even without tax credits. - [Mary T. Barra](CEO)

Contradiction Point 5

Pricing Guidance Assumptions

Contradiction on whether pricing is assumed to remain flat or includes room for future increases.

What assumptions underlie the projected flat to up pricing in 2026, and how much is attributed to ICE or other factors? - Dan Levy (Barclays Bank PLC)

2025Q4: The pricing guidance assumes no significant price increases in 2026. It is primarily the annualization of model year 2026 price increases from late 2025. - [Paul Jacobson](CFO)

How does the updated guidance address tariff impacts and mitigation strategies, and what pricing actions are anticipated considering competitor behavior? - Joe Spak (UBS)

2025Q1: Pricing is assumed constant at current levels (not factored for additional increases). GM’s disciplined pricing strategy... will continue despite competitor discounting. - [Paul Jacobson](CFO)