General Motors Company (GM) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary suggests a positive outlook with raised guidance, improved tariff exposure, and strategies for EV profitability. Despite some uncertainties in hybrid strategy and Super Cruise expansion, the overall sentiment is bolstered by strong financial metrics, optimistic guidance, and strategic plans for software and autonomous vehicle growth. The Q&A session highlights management's confidence in addressing potential risks, further supporting a positive sentiment. However, the lack of specific details on certain topics slightly tempers the overall positivity.
Key Financial Performance
EBIT adjusted $12.7 billion for 2025, with a year-over-year increase. Reasons include strong product portfolio performance, market share gains, and disciplined production and pricing strategies.
Adjusted automotive free cash flow $10.6 billion for 2025, with a year-end cash balance of $21.7 billion. Reasons include strong cash generation from operations and disciplined capital allocation.
Total company revenue $45 billion for Q4 2025, down approximately 5% year-over-year. Reasons include disciplined production, dealer inventory alignment, and reduced EV production due to demand.
OnStar subscribers 12 million in 2025, including 620,000 Super Cruise subscribers, achieving nearly 80% year-over-year growth. Reasons include strong demand for OnStar services and expansion of Super Cruise.
Deferred revenue from software and services $7.5 billion expected by the end of 2026, up nearly 40% from 2025. Reasons include growth in OnStar and Super Cruise services.
China new energy vehicle sales Nearly 1 million units in 2025, representing more than 50% of total sales in China. Reasons include a growing portfolio and profitability across all price points.
GM Financial EBT adjusted $2.8 billion for 2025, within the guidance range of $2.5 billion to $3 billion. Reasons include higher retail yields and lower provision expenses.
North America EBIT adjusted $2.2 billion for Q4 2025, with margins of 6.1%. Reasons include strong pricing and disciplined inventory management.
Tariff costs $3.1 billion for 2025, below the predicted range of $3.5 billion to $4.5 billion. Reasons include strong execution, favorable policy developments, and cost reduction initiatives.
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Operating Highlights
Chevrolet Trax: Named to Car and Driver's 10 best list for the third year in a row.
Cadillac Escalade IQ: Won MotorTrend's SUV and Technology of the Year awards.
OnStar Services: Achieved a record 12 million subscribers, including 620,000 Super Cruise subscribers, with nearly 80% year-over-year growth.
Super Cruise: Expanded to 620,000 subscribers and plans to grow in North America, South Korea, the Middle East, and Europe.
LMR battery chemistry: Expected to launch in 2028, reducing cell and pack costs by several thousand dollars.
Second-generation software-defined vehicle architecture: Launching in 2028, uniting major systems on a single high-speed compute core with significant performance upgrades.
U.S. market share: Achieved the highest full-year market share in a decade, marking the fourth consecutive year of growth.
China market: Turnaround efforts led to profitability across all price points, with new energy vehicles making up 50% of sales.
Fleet segment: Led the U.S. fleet segment for the second consecutive year.
Super Cruise expansion: Plans to expand into South Korea, the Middle East, and Europe.
Net tariff exposure: Reduced well below initial expectations through self-help initiatives and policy actions.
Orion Assembly: Pivoted from EV to ICE production to adapt to slowing EV demand.
AI and robotics: Implemented predictive weld quality models and robotic systems to improve safety, quality, and speed in manufacturing.
Onshoring production: Increased U.S. production to meet strong ICE vehicle demand.
EV strategy: Reduced EV capacity and costs due to slower-than-expected demand, while continuing to invest in cost reduction and profitability.
Capital allocation: Increased quarterly dividend by 20% and announced a $6 billion share repurchase authorization.
Advanced mobility and software: Investing in Super Cruise expansion and scaling OnStar digital services.
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Risk or Challenges
Slowing EV Demand: GM faced challenges with softer-than-expected consumer demand for EVs, leading to a reassessment of EV capacity and manufacturing footprint. This resulted in significant charges, including $7.6 billion in Q3 and Q4 2025, and a pivot from EV to ICE production at Orion Assembly.
Tariff Costs: GM incurred $3.1 billion in gross tariff costs in 2025, with expectations of $3 billion to $4 billion in 2026. While some costs were offset, tariffs remain a significant financial burden.
Regulatory and Policy Changes: Recent U.S. government policy changes, including the termination of certain consumer tax incentives for EVs, have negatively impacted EV demand and profitability.
Supply Chain Constraints: Production constraints, particularly for the Chevrolet Trax, and alternate chip sourcing costs of $100 million in Q4 2025 and Q1 2026, have posed operational challenges.
Commodity and Input Costs: Higher costs for aluminum, copper, DRAM, and unfavorable foreign exchange movements are expected to create headwinds of $1 billion to $1.5 billion in 2026.
Onshoring and Investment Costs: Investments to onshore vehicle production and enhance supply chain resiliency are expected to create near-term pressures of $1 billion to $1.5 billion in 2026.
Warranty Costs: While warranty costs are improving, they remain a focus area for cost management and operational efficiency.
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Guidance & Outlook
2026 EBIT Adjusted: Expected to be $13 billion to $15 billion.
2026 EPS Diluted Adjusted: Expected to be $11 to $13 per share.
2026 Adjusted Automotive Free Cash Flow: Expected to be $9 billion to $11 billion.
North America EBIT Adjusted Margins: Expected to return to the 8% to 10% range in 2026.
Deferred Revenue from Software and Services: Expected to grow to approximately $7.5 billion by the end of 2026, up nearly 40% from 2025.
U.S. SAAR (Seasonally Adjusted Annual Rate): Expected to be in the low 16 million unit range for 2026.
North America ICE Wholesale Volumes: Expected to be flat to up modestly in 2026.
OnStar Software and Services Revenue: Expected to increase by $400 million in 2026.
China and International Operations Profitability: Expected to remain consistent with 2025 levels.
GM Financial EBT Adjusted: Expected to be in the range of $2.5 billion to $3 billion in 2026.
2026 Tariff Costs: Expected to be in the $3 billion to $4 billion range, slightly higher than 2025.
2026 North America Pricing: Expected to be flat to up 0.5%.
2026 Warranty Costs: Expected to deliver a $1 billion benefit versus 2025.
2026 Investments: Expected to invest $10 billion to $12 billion annually, including $5 billion to expand U.S. manufacturing capacity.
2026 Commodity and Foreign Exchange Headwinds: Expected to face headwinds in the range of $1 billion to $1.5 billion.
2026 Onshoring and Software Initiatives: Expected to face headwinds in the range of $1 billion to $1.5 billion.
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Shareholder Return Plan
Quarterly Dividend Increase: GM announced a 20% increase in its quarterly dividend rate to $0.18 per share, reflecting confidence in its ability to generate strong future cash flows.
Dividend Distribution in 2025: GM distributed more than $500 million in dividends to shareholders in 2025.
Share Repurchase in 2025: GM executed $2.5 billion in open market share repurchases in Q4 2025, retiring 33 million shares. Total buybacks for the year amounted to $6 billion.
Accelerated Share Repurchase Program: Since November 2023, GM has returned $23 billion to shareholders through share repurchases, reducing outstanding shares by 465 million or nearly 35%.
New Share Repurchase Authorization: GM's Board approved a new $6 billion share repurchase authorization, emphasizing its commitment to returning capital to shareholders.
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Key Q&A
Q:What is the assumption on pricing for the year?
A:The company is not modeling any price increases for the year. The pricing assumption is based on the annualization of actions taken in 2025, primarily for model year 2026. Management is confident in their vehicles and new truck launches, which they believe will maintain commercial momentum without significant pricing changes.
Q:How does the product portfolio align with a higher near-term ICE mix, and is there potential to add hybrids?
A:Management believes they have the right portfolio, with a strong internal combustion engine (ICE) lineup and a dedicated EV platform. They are focusing on cost reduction for EVs and have announced plans to introduce hybrids in key segments. They are also investing in charging infrastructure to support EV adoption.
Q:Will inventory discipline continue, and what are the implications for cash flow?
A:The company plans to maintain inventory discipline within the targeted range of 50 to 60 days. This discipline has contributed to consistent cash generation, and no significant inventory builds are expected.
Q:What is the impact of the Industrial Bank approval on GM Financial's cost of capital?
A:The Industrial Bank approval will allow GM Financial to offer depository products and provide an additional funding source, helping to reduce the cost of funds over time. However, the cost reduction is not expected to be as high as 100 basis points.
Q:What is the company's approach to hybrids and next-generation vehicle architecture?
A:Hybrids will be introduced in key segments based on demand, and all vehicles will be compatible with the next-generation software-defined vehicle (SDV) architecture and Super Cruise. The company is focusing on features like AI assistance and advanced driver-assistance systems to differentiate its vehicles.
Q:What is the breakdown of the $1 billion to $1.5 billion in onshoring and software expenses?
A:The expenses are split roughly 50-50 between onshoring costs and software development. Onshoring costs are temporary and will decrease as production ramps up, while software expenses are ongoing and may grow over time.
Q:What are the implications of potential tariff changes for 2026?
A:The company assumes a 15% tariff rate in its guidance. If tariffs increase, it would be a headwind, but management is working on offsets through go-to-market strategies, manufacturing footprint changes, and fixed cost reductions.
Q:What is the roadmap for Super Cruise expansion and functionality?
A:Super Cruise will expand to international markets, and the company plans to introduce more features over time. Regulatory approvals are being addressed, and there are no significant barriers to global expansion.
Q:How does the GM North America margin range of 8% to 10% align with the company's overall EBIT guidance?
A:The margin improvement in North America is driven by tailwinds like improved EV profitability, reduced warranty expenses, and regulatory cost savings. However, international operations and other factors balance the overall EBIT guidance.
Q:What is the status of GM's memory chip supply and pricing?
A:The company does not foresee any issues with memory chip supply that would impact production. Pricing for memory chips is included in the $1 billion to $1.5 billion headwind from commodities, DRAM, and FX.
Q:What is the expected impact of the full-size pickup launch on pricing and volume?
A:The launch will require some production downtime, impacting volumes. Pricing benefits are expected to materialize more significantly in 2027, as the current environment does not support large price increases for new models.
Q:How is the company balancing EV and ICE production in light of changing demand?
A:The company is monitoring EV demand and maximizing ICE production where possible. Inventory levels are being managed to meet demand, and the team is prepared to adjust production as needed.
Q:What is driving the expected year-over-year improvement in guidance?
A:Improvements are driven by reduced net tariff exposure, regulatory cost savings, and better EV profitability. Fixed cost relief and margin improvements on vehicles also contribute to the positive outlook.
Q:What is the company's approach to emissions regulation compliance?
A:The company expects savings from reduced compliance credit purchases due to changes in CAFE and GHG regulations. However, some compliance costs will continue due to state, federal, and international requirements.
Q:What is the outlook for international operations, particularly in light of competition from Chinese automakers?
A:The company is seeing improvements in South America and other international markets, driven by strong brands and competitive vehicles. Management is confident in their ability to compete despite challenges from Chinese automakers.
Q:What is driving the growth in Super Cruise revenue?
A:Growth is driven by increased sales of vehicles equipped with Super Cruise and high renewal rates (around 40%) for the service after the initial three-year period.
Q:How is the company addressing warranty costs?
A:The company is seeing early signs of improvement in warranty costs due to better fixes for issues like the V8 engine problem and efforts to manage dealership charges. These efforts are expected to result in significant savings in 2026 and beyond.
Q:What is the company's strategy for the China market?
A:The company is focusing on a strong product portfolio tailored for the Chinese market, including new energy vehicles. Improved dealer profitability and disciplined inventory management are also contributing to stability in the region.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on certain topics, such as the exact segments for hybrid introduction, the regulatory specifics for Super Cruise expansion, and the steady-state EV demand in the new regulatory environment. Additionally, they did not break down the $1 billion to $1.5 billion headwind from commodities, DRAM, and FX, or provide a detailed roadmap for Super Cruise feature enhancements.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI machine
AI work
America South
Ashish dealer
Assembly plan
Blackwing size
Blazer Tennessee
CT Blackwing
Car Driver
Cells Lansing
Chevrolet Corvette
Chevrolet Equinox
China price
Corvette Cadillac
Cruise North
ICE vehicle
LMR
OnStar
Orion Assembly
Super Cruise
architecture
commitment
core
crossover
dollar
eye
hand
installation
learning
million
robot
robotics
safety
size SUVs
size pickup
solution
speed
subscriber
system
upgrade
vehicle EVs
vehicle technology
weld
GM Transcript
General Motors Company (GM) Q4 2025 Earnings Call Transcript
Positive1-27
The earnings call summary suggests a positive outlook with raised guidance, improved tariff exposure, and strategies for EV profitability. Despite some uncertainties in hybrid strategy and Super Cruise expansion, the overall sentiment is bolstered by strong financial metrics, optimistic guidance, and strategic plans for software and autonomous vehicle growth. The Q&A session highlights management's confidence in addressing potential risks, further supporting a positive sentiment. However, the lack of specific details on certain topics slightly tempers the overall positivity.
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Neutral12-3
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Neutral11-19
General Motors Company (GM) Q3 2025 Earnings Call Transcript
Unknown10-21
The earnings call summary shows a balanced outlook: strong financial metrics with stable revenue expectations, yet cautious guidance. Positive elements include investments in EV profitability and tariff mitigation strategies. However, uncertainties in demand and competitive dynamics for 2026, along with unclear management responses, create a neutral sentiment. No record high revenue or strong guidance adjustments were announced, and the lack of specific guidance for 2026 further tempers optimism. The absence of market cap data limits the ability to predict a stronger reaction.
GM Report
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