GM's Profit Slide Highlights Tariff Headwinds as Outlook Uncertainty Lingers

General Motors (GM) reported a 6.6% decline in net income for Q1 2025, underscoring the growing pressure on automakers from trade policy uncertainty. While the company’s revenue and adjusted earnings per share (EPS) beat Wall Street estimates, its decision to withdraw full-year guidance due to 25% tariffs on vehicles from Canada and Mexico has left investors in limbo. The results reveal a stark dichotomy: strong demand for trucks and electric vehicles (EVs) in the U.S. is being offset by rising costs and geopolitical risks abroad.

Financial Results: Strength in Sales, Strain in Margins

GM’s Q1 revenue rose 2.3% to $44.02 billion, exceeding estimates by $1.0 billion. Adjusted EPS of $2.78 beat forecasts by $0.09, driven by robust U.S. sales and cost management. However, net income fell to $2.78 billion from $2.98 billion in 2024, while operating income dropped 9.8% year-over-year to $3.49 billion. Margins compressed to 7.9% from 9% in 2024, with CFO Paul Jacobson citing “higher costs, product mix shifts, and foreign exchange headwinds” as key culprits.

Sales Surge in Trucks, Stumbles Abroad

U.S. sales surged 17% year-over-year to 693,363 units, with full-size pickups—Chevrolet Silverado and GMC Sierra—hitting a 17-year record of over 200,000 units sold. SUVs like the Tahoe and Suburban also saw a 31% sales jump, reflecting enduring demand for large vehicles.

However, international sales collapsed 21% to $2.43 billion, missing estimates by $403 million. GM’s North American segment (GMNA) posted a 3.6% revenue rise to $37.39 billion, but its global operations (GMI) struggled with weak overseas markets.

Tariffs: The Wild Card Derailing Guidance

The biggest surprise was GM’s withdrawal of its 2025 outlook, with CFO Jacobson stating, “We’ll look for more clarity before we get into any forward projections.” The company had initially projected net income of $11.2–12.5 billion and adjusted EPS of $11–12, but 25% tariffs on Canadian and Mexican imports—unaccounted for in January’s guidance—now threaten those targets.

GM had previously estimated it could offset 50% of tariff costs through pricing adjustments or supplier deals, but the full 25% duty now forces the company to pause share buybacks until clarity emerges. While the stock dipped 2% post-earnings, it remains up 3% year-to-date, suggesting investors are betting on a potential tariff relief deal.

Cruise and the EV Hurdle

GM’s Cruise autonomous vehicle division posted just $1 million in revenue—$24 million below estimates—highlighting ongoing challenges in scaling self-driving technology. This contrasts with strong EV sales in the U.S., where models like the Chevrolet Bolt and Hummer EV contributed to the company’s 23% rise in EV deliveries year-over-year.

Analysts Split on GM’s Near-Term Prospects

While Deutsche Bank and UBS downgraded GM’s stock, the average price target held at $53.91, reflecting mixed views on tariff resolution. A potential deal reported by the Wall Street Journal—limiting tariffs to non-overlapping duties—eased some investor anxiety but did not fully restore confidence.

Conclusion: Tariffs Remain the X-Factor

GM’s Q1 results demonstrate its resilience in high-margin truck markets but expose vulnerabilities to trade policies. With net income down 6.6% and margins pressured, the company’s ability to navigate tariff uncertainty will determine its 2025 trajectory. Investors should monitor two key metrics:

1. Tariff Resolution Timeline: A retroactive rebate deal or phased tariff reduction could add ~$1 billion to GM’s net income, per estimates.
2. U.S. Truck Demand Sustainability: GM’s Q1 U.S. sales beat consensus by 25,000 units, but a slowing economy could dampen demand for high-priced trucks.

For now, GM’s stock—trading at 9.8x 2024 EPS estimates—appears fairly valued. However, without clarity on tariffs, the company’s path to its original $12.5 billion net income target remains uncertain. Investors may want to wait for a resolution before betting on a rebound in GM’s shares.