**USA:** UBS has downgraded General Motors from Buy to Neutral, cutting its price target due to the financial impact of US auto tariffs. Tariffs are expected to lower GM’s sales by 9% in 2025 and increase costs by $5 billion annually, affecting production and shareholder returns.
UBS has revised its outlook on General Motors (GM), downgrading the automaker from a Buy to a Neutral rating and lowering its price target from $64 to $51, attributing the downgrade primarily to the impact of President Trump’s 25% tariffs on auto imports. The Swiss financial services firm projects that these tariffs will lead to weaker sales and increased production costs for GM, significantly affecting the company’s financial performance in the coming years.
Joseph Spak, an autos analyst at UBS, explained in a note that while the full economic impact of trade and tariff policies remains uncertain, the US automotive industry appears poised to enter a new phase characterised by persistently lower vehicle volumes and higher manufacturing costs. Following the UBS announcement, GM shares slipped nearly 5% during mid-day trading.
Earlier in the week, President Trump announced a 90-day pause on reciprocal tariffs affecting most countries, termed “Liberation Day” tariffs. However, he simultaneously raised tariffs on China and maintained the existing 25% auto tariffs alongside baseline 10% tariffs on all countries starting from April 5. This continuation of tariffs has led UBS to forecast a 9% year-over-year decrease in GM’s sales volumes in 2025, followed by an additional 4% decline in 2026.
UBS anticipates that the tariffs could impose an annual cost burden of roughly $5 billion on GM, potentially complicating the automaker’s efforts to sustain share repurchase programmes and return capital to shareholders. Spak detailed how the tariffs would affect vehicle costs: for vehicles produced in Mexico and Canada, which have approximately 50% US content, a 25% tariff is applied to half of the material costs (estimated at $35,000 per vehicle), leading to an effective increase of about $4,300 per vehicle manufactured in these countries. For GM models made in Korea and China and sold in the US, a 25% tariff is applied to the entire vehicle cost, estimated at $25,000, resulting in an additional $6,250 per vehicle.
Several of GM’s models are produced in Canada and Mexico, including the Chevrolet Silverado and GMC Sierra pickup trucks, the Chevrolet Equinox and its electric variant, and the GMC Terrain SUV. Additionally, GM’s Buick brand assembles the Envista SUV in China, which also faces the tariffs.
While GM might soften the immediate consumer impact by absorbing some of the tariff costs through reduced incentives or smaller price increases, UBS notes that passing the full cost to customers would likely render GM vehicles uncompetitive in the US market. Earlier this year, GM CEO Mary Barra indicated the possibility of shifting more production to US factories to lessen tariff exposure. However, capacity and supply chain constraints may limit this strategy’s effectiveness.
GM’s recent sales performance has been strong, with a substantial increase in US sales in the first quarter fuelled by consumer rushes to purchase vehicles ahead of tariff implementation. The company reported a 17% year-over-year rise to 693,363 units sold across its Chevrolet, Cadillac, Buick, and GMC brands, marking its best first quarter for trucks and SUVs since 2007. Electric vehicle sales also surged by 94% during this period. Despite these gains, GM announced a temporary layoff of 200 workers at its Factory Zero facility in Michigan, where it produces several electric vehicle models.
GM is set to provide more detailed insights into the tariff impact and its strategic responses when it releases its first-quarter earnings report on 29 April. The ongoing tariff measures and associated costs represent a significant variable for the company’s near-term outlook.
Source: Noah Wire Services
