- GM stock jumped 9% after beating Q4 earnings and raising 2026 guidance.
- Truck and SUV volumes are the new profit engine, outpacing the EV slump.
- Tariff‑mitigation strategies could shave $1‑$1.5B off costs this year.
- EV credit savings may add up to $750M – a hidden upside.
- Competitors are scrambling; Ford’s margin pressure vs. GM’s upside.
Most investors missed GM’s hidden earnings engine – and they’re paying for it.
Why GM’s Truck & SUV Surge Is a Portfolio Catalyst
General Motors reported a Q4 adjusted operating profit of $2.84 billion, a 13% lift year‑over‑year, and EPS of $2.51 versus the consensus $2.21. The headline‑grabbing number isn’t just a statistical win; it’s driven by record‑high volumes of the Chevrolet Silverado and Cadillac Escalade. These high‑margin models pushed average transaction prices to $52,000, well above the industry average, and discounts stayed below the sector mean. The result? A profit cushion that insulated GM from the $6 billion EV‑scale‑back write‑down and the $1‑$1.5 billion hit from raw‑material cost inflation.
For investors, the takeaway is clear: the truck‑SUV segment is now the primary earnings driver for GM, accounting for roughly 45% of operating income. As North American consumers gravitate toward larger, premium‑priced vehicles, GM’s pricing power is expected to stay flat or creep up 0.5% in 2026, delivering incremental margin expansion.
How Tariff Mitigation Reshapes GM’s Cost Base
In 2025, GM neutralized over 40% of its tariff exposure by relocating production and tightening supply‑chain logistics. The company now anticipates $3‑$4 billion in tariff‑related expenses for 2026 but plans to offset a sizable chunk through “duty‑reduction strategies” that have already lowered risk below earlier forecasts. By spreading manufacturing footprints across Mexico and Canada, GM reduces landed‑cost volatility, a tactic that rivals like Ford have only partially replicated.
From a valuation perspective, the $750 million potential savings from avoiding regulatory credit purchases (normally required to meet climate mandates) further tightens the cost structure. This translates to a rough $0.09‑$0.12 lift in EPS, enough to move GM’s forward price‑to‑earnings multiple into a more attractive range versus peers.
EV Write‑Downs vs. Credit Savings – The Real Bottom‑Line Impact
The $6 billion write‑down tied to GM’s electric‑vehicle (EV) scale‑back looks painful, but the net effect is mitigated by two factors: first, the write‑down is a one‑time accounting hit; second, the company’s decision to forgo buying credits from Tesla and other EV makers frees up capital. Assuming the $750 million credit avoidance materializes, GM’s net income for 2026 could improve by roughly 5% relative to the baseline forecast, narrowing the gap between its traditional ICE (internal combustion engine) business and the nascent EV segment.
Investors should weigh the short‑term EV loss against the longer‑term strategic pivot. GM’s EV roadmap still includes the Ultium platform, but the immediate earnings momentum is firmly rooted in trucks and SUVs.
Historical Parallel: 2020 Supply‑Chain Shock and What It Taught Investors
During the COVID‑19 supply‑chain crunch, GM’s earnings dipped sharply, yet the company’s focus on high‑margin trucks helped it rebound faster than the broader auto index. That era showed that a robust truck portfolio can act as a defensive moat during macro disruptions. The current scenario mirrors that pattern: logistics bottlenecks and tariff spikes are the new “shock,” and GM’s proactive cost‑shifting is paying dividends.
Competitor Landscape: Ford, Stellantis, and the EV Race
Ford reported a modest Q4 gain but its F‑Series trucks faced pricing pressure from rising steel costs, compressing margins. Stellantis, meanwhile, is double‑downing on EVs, absorbing higher R&D spend with thinner near‑term earnings. Neither competitor has announced the aggressive tariff‑relief moves GM disclosed, leaving GM with a relative cost advantage of roughly 2‑3% on comparable vehicle lines.
The competitive edge is not just in pricing; it’s in flexibility. GM’s ability to re‑tool plants across the border gives it a faster response window to policy shifts—something rivals with more concentrated U.S. manufacturing bases lack.
Investor Playbook – Bull & Bear Cases
Bull Case: Continued truck/SUV demand fuels EPS growth above $13.5 billion for 2026; tariff mitigation and credit savings lift margins; share price could re‑rate to a 5‑year average P/E of 7‑8x, delivering 20‑30% upside.
Bear Case: A rapid acceleration in EV adoption, coupled with tighter semiconductor supply, erodes ICE volume; tariff costs rise above $4 billion; credit‑avoidance fails, dragging EPS below $13 billion, leading to a 10‑15% downside.
Actionable steps: consider a modest increase to GM exposure if you’re underweight the auto sector, but cap position size at 5% of portfolio until Q2 2026 results confirm the truck‑driven earnings trajectory.