General Motors Reports Q2 Revenue Decline Due to Tariffs

On July 22, General Motors announced that its global net revenue for the second quarter of this year declined by 1.8% year-on-year to $47.1 billion, influenced by the import tariff policies implemented by U.S. President Trump. Adjusted earnings before interest and taxes dropped significantly by 32% to $3.04 billion, and net profit fell by 35% to $1.9 billion. Since the implementation of the tariff policy in April, General Motors has incurred a total loss of $1.1 billion. In the second quarter, despite revenue in North America (its largest and most profitable market) reaching $39.5 billion, pre-tax profit decreased by 46% year-on-year to $2.4 billion, and the adjusted profit margin fell to 6.1%, down from 10.9% in the same period last year. CFO Paul Jacobson revealed in a conference call that without the impact of tariffs, the profit margin could have approached 9%. However, restructuring of its business in China led to improved financial performance for General Motors. The company reported a 20% year-on-year sales growth in the Chinese market in the second quarter, marking the largest quarterly increase in four years. CEO Mary Barra emphasized that General Motors achieved year-on-year sales growth in China for the second consecutive quarter, highlighting the advantage of its new energy vehicle product line. She stated, 'We have been closely collaborating with our joint venture partners to enhance sales, inventory management, cost control, and profitability.' In a letter to shareholders, Mary Barra mentioned, 'I believe that all our current strategic and forward-looking initiatives, along with closer alignment of carbon emission regulations and consumer demand, will further differentiate us from our competitors, enhance corporate resilience, and help us navigate the transition period in a stronger and more profitable manner.' Meanwhile, General Motors maintained its financial outlook for 2025, provided in May, expecting adjusted earnings before interest and taxes to be between $10 billion and $12.5 billion, and net profit to be between $8.2 billion and $10.1 billion. It is noteworthy that both metrics are lower than the predictions made at the beginning of the year. General Motors also anticipates that tariffs will reduce its profits by $4 billion to $5 billion this year. The tariff policy has significantly impacted the company’s best-selling models, including pickup trucks assembled in Mexico and Canada, as well as the entry-level Chevrolet Trax and Buick Envista imported from South Korea, which are subject to a 25% tariff. Although vehicles produced in Canada and Mexico that comply with the USMCA only need to pay tariffs on non-U.S. parts, the impact of tariffs remains significant. Paul Jacobson stated, 'Tariffs are clearly a major challenge we are currently facing. The company is in a phase of adjustment, and the team has achieved comprehensive efficient operations.' The company expects to face higher tariff impacts in the third quarter but aims to offset at least 30% of the U.S. tariff impact through production restructuring and other cost-cutting measures. Following the report, General Motors' stock price fell by 7.1% in early trading. To address the challenges posed by tariffs, General Motors announced a $4 billion investment in June to increase production of gasoline vehicles at three U.S. plants. These measures include adding production of the Chevrolet Equinox compact crossover at its Kansas plant and moving production of the Chevrolet Blazer midsize crossover from Mexico to the Spring Hill plant in Tennessee. Paul Jacobson stated that these initiatives would help mitigate the impact of tariffs on General Motors’ profit margins. However, he emphasized that General Motors would not simply raise vehicle prices in the U.S. market due to tariffs but is committed to maintaining price stability and reducing incentives in the U.S. market. The company reported that its average transaction price for vehicles in the U.S. exceeded $51,000 in the second quarter, and the incentive amount as a percentage of the transaction price was 2 percentage points lower than the industry average. Despite facing tariff pressures, vehicles produced in South Korea remain profitable, giving the company time to deal with uncertainties from the U.S.-Korea trade agreement. Paul Jacobson said the company has not yet made long-term decisions regarding its manufacturing operations in South Korea. 'We will continue to monitor the situation. Meanwhile, ensuring a continuous supply of vehicles for our customers is crucial,' he added. Jacobson predicted that General Motors would face greater challenges in the second half of this year, including additional tariff burdens, reduced production days, and increased R&D investments for the design of the all-new full-size pickup truck for the 2027 model year. He also pointed out that as of the end of June, General Motors' dealer inventory in the U.S. had decreased to about 526,000 units, nearly a 10% reduction compared to the same period last year. General Motors is focused on improving the profitability of electric vehicles. According to Paul Jacobson, engineers are developing lighter and more aerodynamic models to achieve battery miniaturization, while the company is pushing for standardization of electric motors used in its product line. General Motors is also advancing battery chemistry improvements aimed at reducing battery and vehicle costs. The company plans to commercialize lithium-manganese-rich (LMR) batteries by 2028, initially applying them to pickups and full-size SUVs, and will produce lithium iron phosphate batteries at its joint venture plant with LG Energy Solution in Tennessee. Although the $7,500 U.S. federal tax credit for new electric vehicles is set to expire in September of this year, Paul Jacobson told analysts, 'While General Motors anticipates that the removal of government incentives could lead to a decline in electric vehicle sales and affect profitability, we remain focused on controlling the factors we can manage. These initiatives are crucial for enhancing the profitability of General Motors' electric vehicles and are key to supporting the company's long-term profitability.