GM's EVs Burn $11 Billion as Q2 Profits Propped Up by Gas Guzzlers

General Motors (GM-US) released its fiscal 2026 second-quarter results (ended June 30) before U.S. markets opened on Tuesday (21st), reporting adjusted profits above Wall Street expectations. Strong pricing on large pickup trucks and SUVs, improved North American profit margins, and lower tariff costs contributed to the beat. The company raised its full-year forecast again, but net profit declined over 30% due to restructuring expenses tied to its electric vehicle (EV) business.

GM shares rose 1.6% in pre-market trading before turning volatile, falling 1.41% to $74.73 per share at press time. The stock has declined 6.8% year-to-date through Monday’s close, compared to Ford (F-US) rising 6.6% and the S&P 500 gaining 8.7% over the same period.

According to the earnings report, GM’s second-quarter revenue increased 1.9% year-over-year to $48.03 billion, ending four consecutive quarters of decline and surpassing the $47.01 billion expected by analysts surveyed by FactSet. Adjusted earnings per share (EPS) rose from $2.53 in the same quarter last year to $3.57, also exceeding the market forecast of $3.19 to $3.20.

Adjusted EBIT reached $3.9 billion in the second quarter, a 30% increase from approximately $3.0 billion a year earlier. However, net profit declined 31.1% year-over-year to $1.31 billion, primarily due to costs related to restructuring EV manufacturing facilities.

Large ICE Vehicles Prop Up Profits, Full-Year Forecast Raised Again

Despite economic volatility, rising gasoline prices, persistent inflation, and slowing job growth, GM maintained profitability through high-margin large pickup trucks and SUVs. By managing inventory and maintaining prices on popular models, North American profit margins rose from 6.1% a year earlier to 8.6%, delivering strong results even as local sales declined about 4%.

GM raised its 2026 adjusted EBIT forecast by another $500 million, increasing the range from $13.5–15.5 billion to $14–16 billion. The full-year adjusted EPS forecast was also raised from $11.50–13.50 to $12–14 per share.

This marks the second time GM has raised its profit outlook this year. The company previously raised its forecast by $500 million in Q1, reflecting expected tariff refunds after the U.S. Supreme Court overturned parts of the Trump administration’s tariffs.

CEO Mary Barra stated in her shareholder letter that customer demand in North America remains strong, and the company has multiple engines to expand margins and drive growth. She added that while maintaining capital discipline, these trends are expected to further strengthen performance in 2027 and beyond.

However, GM maintained its estimate that tariffs will erode $2.5–3.5 billion in full-year profits. Rising raw material, automotive chip, and logistics costs are expected to reduce profits by another $1.5–2.0 billion. Bringing overseas production back to the U.S. and increased software spending will add $1.0–1.5 billion in additional costs.

Cumulative EV Write-Downs Reach $11 Billion, Global Deliveries Decline for Third Consecutive Quarter

GM continues to scale back its once-aggressive EV strategy, adding approximately $2.3 billion in related expenses in Q2, including about $1.9 billion in cash outlays to restructure EV plant operations. As the company reduces pure EV production, cumulative asset write-downs for EVs have reached $11 billion.

Due to these expenses, GM lowered its full-year net profit forecast by at least $1.5 billion to $9.9–11.4 billion. Last year’s relaxation of fuel efficiency and emissions regulations by the Trump administration allowed automakers to sell more internal combustion engine (ICE) vehicles, benefiting GM through higher-margin ICE vehicle sales and a sharp reduction in unprofitable EV deliveries.

In terms of sales, GM’s global deliveries in Q2 declined 7.2% year-over-year to 1.43 million units, marking the third consecutive quarter of decline. North American deliveries fell 3.4%, with U.S. deliveries down 4.3%. Global market share dropped from 8.3% to 8.1%, and U.S. market share declined from 17.4% to 16.6%.

Despite declining deliveries and market share, GM’s average promotional spending accounted for only 4.7% of each vehicle’s suggested retail price, below the industry average of 6.3%, indicating the company still maintains relatively strong pricing power.

China operations generated $83 million in equity income in Q2, up from $71 million a year earlier but below Q1’s $165 million. Core earnings from international operations excluding China declined 7% to $190 million. The company also repurchased $2 billion worth of shares during the quarter.