Can General Motors (GM) navigate the tariff challenge ahead?

General Motors’ (NYSE: GM) stock tumbled last week after the Trump administration imposed new tariffs on automobile imports, raising concerns about their potential impact on the company’s production as it heavily relies on Canada and Mexico. Of late, the auto giant has been regularly investing in portfolio expansion, with new models lined up for launch, and to optimize the EV business to improve profitability in that area.

GM’s stock suffered losses in the last few days and slipped below its 52-week average price, ending the last session significantly lower. After several months of high volatility, the shares are currently trading near the level they reached a year ago. However, long-term shareholders have reason to be optimistic about the stock’s prospects, supported by regular dividend hikes and a healthy yield that exceeds the S&P 500 average. Last month, the management announced a $6-billion share buyback program, lifting investor sentiment. From an investment perspective, the positive aspects include consistent shareholder returns, relatively low valuation, and a positive price-to-earnings ratio.

Tariff Woes

For the company, 2024 was a year of recovery, marked by stable growth in sales and market share. While the momentum is expected to continue this year, it will depend on how the tariff scenario evolves. With only a couple of days left until the 25% import tariff on automobiles and auto parts comes into effect, a lack of clarity on its duration casts uncertainty over the near-term performance of General Motors. The market will be keeping a close watch on the company’s upcoming first-quarter report, looking for updates on the matter.

In addition, the challenging market environment in China remains a concern, with economic slowdown and competition from local automakers impacting GM’s sales. A few weeks ago, the management said it expects net profit in the range of $11.2 billion to $12.5 billion for fiscal 2025. Earnings per share for FY25, both adjusted and unadjusted, are expected to be between $11 and $12.

GM’s CEO Mary Teresa Barra said at the Q4 2024 earnings call, “With respect to possible tariffs, we are working across our supply chain, logistics network, and assembly plants so that we are prepared to mitigate near-term impacts. Many of these actions are no cost or low cost. What we won’t do is spend large amounts of capital without clarity. Whatever happens on these fronts, we have a very broad and deep portfolio of ICE vehicles and EVs that are both growing market share, and we’ll be agile and execute as efficiently as possible.”

Road Ahead

The leadership is following a balanced capital allocation strategy, focused on developing the EV segment and overall portfolio expansion. Recently, the company announced a partnership with Nvidia to build custom AI systems using the latter’s Accelerated Compute Platforms. The system will be used to train AI manufacturing models for optimizing GM’s factory planning and robotics.

In the final three months of FY24, revenue increased across all three operating segments. There was 12% revenue growth in the core North America division, reflecting a year-over-year increase in vehicle sales. At $47.7 billion, total revenue was up 11%. Adjusted earnings, excluding special items, jumped 55% annually to $1.92 per share in Q4. On a reported basis, it was a net loss of $2.96 billion or $1.64 per share in the December quarter, compared to a profit of $2.10 billion or $1.59 per share last year. Quarterly sales and profit consistently beat estimates for more than three years.

On Monday, GM opened lower, extending the weakness experienced throughout last week. The stock is down 12% since the beginning of 2025.