Earnings Preview | Facing Both Declining Sales and the Retreat of Electric Vehicles, Can General Motors (GM.US) Strong Pricing Power Defend Its Profit Margins?

According to Zhitong Finance APP, General Motors (GM.US) will release its Q2 earnings before market open on Tuesday. Despite declining sales, investors still expect this leading U.S. automaker to maintain profit growth. Market expectations point to Q2 revenue of $46.61 billion, down about 1% from $47.1 billion in the same period last year. Adjusted earnings per share are expected to be $3.18, with adjusted EBIT at $3.7 billion.

In comparison, General Motors reported adjusted EBIT of $3 billion in Q2 last year—a figure then heavily pressured by tariff costs, but the burden has since eased as tariff offset measures took effect.

Beyond government offsets reducing tariff expenses, General Motors has also been restructuring its supply chain, adjusting production layouts, and negotiating with suppliers for the past year to further mitigate the impact of tariffs.

As a result, GM raised its full-year 2026 guidance when it released its Q1 earnings in April.

However, while tariff relief will help improve profits, GM's revenue has persistently declined. In Q2, about 715,000 vehicles were sold in the U.S., a 4.2% year-over-year decrease, but GM still retains its position as the best-selling automaker in the U.S. market.

The company attributes the sales decline mainly to discontinued models such as the Cadillac XT4 and XT6, and the Chevrolet Malibu. In addition, after the expiration of the U.S. federal EV tax credit, EV demand dropped sharply—the policy had accelerated demand into late 2025.

Chevrolet Equinox EV sales plunged by 61.8%, Blazer EV by 68.1%, and GMC Hummer EV by 56.8%. Nevertheless, GM continues to grow its EV market share, ranking second only to Tesla with a share between 13.5% and 14%.

GM’s pickup trucks and large SUVs helped cushion the blow. GMC Sierra sales rose 5% to 95,147 units, setting a single-quarter record for the model, with overall light-duty pickup truck sales increasing 4%.

GM says it is on track to lead the full-size pickup segment for the seventh consecutive year, with market share near 42%. Crossovers also contributed, with Chevrolet Traverse up 19.5% and Trailblazer up 28.4%.

Crucially for profit margins, GM states this growth was achieved with no discounting. The average transaction price this quarter exceeded $52,400, and the company says incentive levels have remained below the industry average for three consecutive years.

However, vehicle affordability in the U.S. remains a concern, with high interest rates and record-high transaction prices deterring buyers. Tightening inventory has already impacted full-size SUV sales, with Tahoe down 8.1% and Suburban down 20.4%.

This indicates that even GM’s powerful profit engine cannot fully shield itself from macroeconomic headwinds. Concerns within the company and the broader automotive industry have kept investors cautious on GM stock, which is down about 8% year-to-date, underperforming the market.

Profit Recovery Becomes Market Consensus

Analysts have reached a broad consensus on GM’s improved profitability this quarter. Expectations show Q2 EBIT at $3.7 billion, far exceeding last year’s $3 billion, driven primarily by effective tariff offsets and supply chain restructuring resulting in cost reductions. Evercore ISI analyst Chris McNally commented after GM's Q1 earnings, "This is a very strong guidance."

Investment banks such as Morgan Stanley and JPMorgan also note that GM’s internal combustion business—especially full-size pickups and large SUVs such as the GMC Sierra and Chevrolet Traverse—remains an absolute cash generator. Analysts emphasize GM’s Q2 average transaction price (ATP) remained above $52,400, with promotional discounts continuing to stay below industry averages for three years, demonstrating strong pricing power and a robust profit margin moat.

RBC Capital maintains an “outperform” rating in its latest report. Analysts point out that as supply chain restructuring and tariff offset policies take hold, last year’s profit drag due to tariffs is showing marginal improvement. The market focus will be whether GM raises its full-year adjusted EBIT guidance of $13.5-15.5 billion toward the upper end of the range in this earnings release.

Stagnant Revenue Growth

In sharp contrast to the bright profit outlook, GM’s revenue growth has nearly stagnated. Market consensus expects Q2 revenue of $47.09 billion, basically flat year-over-year. This “flat revenue, high profit” combination makes profit margins the focal point of this earnings report.

Analysts broadly focus on whether GM can continue profit expansion amid stagnant revenue. TIKR’s analysis model projects GM’s long-term revenue growth at only 1.2% per year, with profit expansion expected to depend highly on improved product mix, pricing discipline, and cost control rather than volume acceleration. The current forward P/E of roughly 6.6 times already reflects this steady-state outlook. To win a higher valuation, GM must demonstrate sustained free cash flow generation, successful launch of its next-generation pickups, and measurable progress in EV business profitability.

EVs: From Growth Engine to Profit Drag

EVs were once central to GM’s valuation narrative but have now become the most debated area among analysts. After the federal EV tax credit expired, demand was sharply overstated; the company has warned the EV market would weaken after the incentive sunset.

Wells Fargo maintains an “underweight” rating on GM with a $60 price target, warning investors that as subsidy policies fade and prior demand was pulled forward, the EV segment is facing a distinct downturn. Meanwhile, high auto loan rates are squeezing consumer purchasing power, and some models such as Tahoe and Suburban are already seeing tighter inventories and signs of demand pressure.

Nonetheless, some analysts are positive on GM’s strategic retrenchment in the EV space. It’s noted that the company's shift from aggressive EV production to a profitability-first tactical adjustment helps avoid rapid EV supply gluts and thin margins. GM still firmly holds the No.2 EV market share in the U.S. (at about 13.5%-14%), just behind Tesla, preserving chips for long-term transformation.

Overall, Wall Street’s optimism on GM essentially recognizes its “low valuation (forward P/E only about 5.4x) + high free cash flow + ongoing share buybacks” approach to capital allocation. As earnings are released, the market will closely monitor management’s latest statements on macro consumer demand for the second half, strategies for dealing with slowing EV momentum, and the stock buyback plan.