General Motors (NYSE: GM) released its Q2 2025 earnings today before the US markets opened. While the Detroit auto giant posted better-than-expected numbers in the quarter and reaffirmed its full-year guidance, the stock is trading lower today as the company’s profits nosedived in the quarter due to President Donald Trump’s tariffs.

GM Reports Better-Than-Expected Q2 Earnings

GM reported revenue of $47.1 billion, a slight decrease of 1.8% from Q2 2024 but ahead of the $46.28 billion that analysts were expecting. Net income attributable to stockholders, however, fell 35.4% year-over-year, landing at $1.9 billion. The company’s adjusted EBIT fell 31.6% to $3.0 billion, leading to a contraction in adjusted EBIT margin from 9.3% in Q2 2024 to 6.4% in Q2 2025. Diluted EPS-adjusted came in at $2.53, down from $3.06 in the corresponding quarter last year but ahead of the $2.44 that analysts were modelling.

Tariff Hit General Motors’ Profits

The tariffs had a net impact of $1.1 billion on GM’s Q2 profits, which is in line with the annual guidance of between $4 billion-$5 billion. For the full year, GM expects to offset at least 30% of the tariffs through strategic actions like manufacturing adjustments, targeted cost initiatives, and pricing actions.

Notably, GM is more exposed to the tariffs compared to Ford, as apart from importing parts and vehicles from Mexico and Canada, it also imports finished cars from South Korea and China into the US.

GM Maintained Its Full Year Guidance

GM maintained its May guidance of adjusted EBIT of between $10 billion and $12.5 billion this year. In January, while releasing its Q4 2024 earnings, the company had forecast an adjusted EBIT between $13.7 billion and $15.7 billion.

Similarly, it cut the adjusted automotive free cash flow to between $7.5 billion and $10 billion, compared to the previous guidance of between $11 billion and $13 billion.

For the full year, GM expects net income attributable to stockholders of $8.25 billion to $10 billion, down from $11.2 billion to $12.5 billion that it originally guided for before the tariffs.

GM’s International Business Fared Well

GM’s North America operations, typically a strong profit driver, saw its adjusted EBIT fall 45.5% to $2.4 billion in Q2, with margins contracting to 6.1% amid the tariff headwinds and pricing pressure.

A bright spot for the quarter was GM’s international business, which turned profitable with an adjusted EBIT of $204 million, a significant improvement from the prior year. This was primarily driven by a positive swing in China equity income, which recorded $71 million, a substantial recovery from a $104 million loss in Q2 2024. GM’s new energy vehicle (NEV) sales surged by 50% YoY in China in Q2 as new models received good reception from buyers.

Last year, GM restructured its China business, and there are early signs of a turnaround. During the Q2 earnings call, CEO Mary Barra said, “In China, we have been working closely with our JV partner to improve sales, inventory management, cost, and profitability. The performance of our new energy vehicles has been especially strong. And in Q2, we reported our second consecutive quarter of year-over-year sales growth.”

The company gained market share in China in Q2 – the only foreign company to do so – and also reported positive equity income in its China operations.

GM Has Become the Second Largest EV Player in the US

GM has become the second biggest EV seller in the US, trailing only Tesla. While the EV industry is going through a challenging period amid tepid sales, GM is optimistic about that market in the long term.

“Despite slower EV industry growth, we believe the long-term future is profitable electric vehicle production, and this continues to be our north star. As we adjust to changing demand, we will prioritize our customers, brands, and a flexible manufacturing footprint, and leverage our domestic battery investments and other profit-improvement plans,” said Barra in her prepared remarks.

Notably, the EV tax credit is set to expire in September under President Trump’s tax and spending bill named “One Big Beautiful Bill Act (OBBA).” There are fears that the removal of these credits would further dampen EV demand in the country.

The Act also removes the penalties for not meeting CAFÉ emission standards, which could positively impact legacy automakers like Ford and GM, as they had to purchase these credits from the likes of Tesla.

The Automotive Industry Faces Several Challenges

The automotive industry in the West is going through turmoil amid weak sales of ICE (internal combustion engine) cars. Another concern for legacy automakers has been their EV (electric vehicle) business. The sales of their EVs have been quite soft, while the losses are mounting.

There is also rising competition from Chinese companies, not only in China but also globally. Despite facing tariffs in several jurisdictions, including in Europe, Chinese automakers have been able to take market share from established players by offering attractively priced models.

GM Completed $2 Billion ASR

In April, while releasing its Q1 earnings, GM put its share buyback plan on hold amid the tariff uncertainty. However, the company has since resumed the repurchases.

During their Q2 2025 earnings call, General Motors confirmed that they had completed the $2 billion accelerated share repurchase (ASR) program. This program was part of a larger $6 billion share buyback authorization approved by the board in February 2025.

The company retired 10 million shares through this program in Q2 2025. While the ASR is concluded, GM still has $4.3 billion of capacity remaining under its broader share repurchase authorizations for additional, opportunistic buybacks.

Management reiterated its commitment to returning capital to shareholders as part of its capital allocation strategy, balancing this with reinvestment in the business for profitable growth and maintaining a strong investment-grade balance sheet. While the company did not talk about the pace of future buybacks, it alluded to higher activity in the back half of the year.