Back in January, General Motors (GM) surprised Wall Street with a fourth-quarter earnings beat. Its stock still dropped more than 8%.
Last month, Ford Motor (F) also beat expectations for Q4. Its stock promptly fell 5% in after-hours trading.
One key difference between the two: GM gave upbeat guidance for 2025, while Ford signaled a tougher year ahead. Investors seem to be siding with Ford’s outlook.
“The auto sector now faces the abyss, and the multiplier impacts on the rest of the economy should not be underestimated,” wrote David Rosenberg, founder and president of Rosenberg Research.
"The return of the tariff man"
Tesla’s (TSLA stock) massive sell-off has largely been pinned on the growing backlash to Elon Musk’s close ties with the Trump administration. But the challenges ahead go far beyond Tesla.
All three major American automakers are facing headwinds in 2025 — which is why solid earnings from GM and Ford weren’t enough to convince investors that momentum will carry over.
According to Rosenberg, the “abyss” facing the auto industry has been created by Trump’s tariff policies. “The auto sector, with its complex supply chain and re-exported inputs, [is] going to simply be devastated,” he said.
Ford CEO Jim Farley agrees.
“Let’s be real honest: Long term, a 25% tariff across the Mexico and Canada borders would blow a hole in the U.S. industry that we’ve never seen,” he said in an interview.
GM CEO Mary Barra was more measured, noting the company has a contingency plan that could mitigate up to 50% of potential North American-related tariffs.
Although Trump has delayed the tariffs for now, he told the Big 3 CEOs this week that they will go into effect on April 2, per the New York Times.
So far in 2025, GM is down 6.85%, Ford is up 1.1%, and Stellantis (STLA stock) — parent of Jeep, Dodge, and Chrysler — has fallen 6.3%. Tesla is down 42.3%.
“The return of the Tariff Man [means] more downside to auto stocks unless tariffs are reversed,” Bernstein analyst Daniel Roeska wrote in a report. “We anticipate severe disruptions in North American supply chains and automotive profit margins.”
He estimates the tariffs would cost the industry $110 million per day — or $40 billion annually.
That’s more than the $34 billion in operating profit GM, Ford, and Stellantis generated in 2024, according to Barron’s.
Is a "tariff winter" coming?
S&P Global analyst Stephanie Brinly lays out three scenarios in her latest research note:
- A “quick resolution” with a one-month delay — 30% probability.
- An “extended disruption” lasting 16–20 weeks — 50% probability.
- A “tariff winter” where 25% tariffs are permanently baked into auto trade structures — 20% probability.
Brinly calls the “winter” scenario the most dire, warning it would lead to deep cuts in product development and long-term damage to U.S. auto sales.
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