While General Motors is widely recognized as an iconic American car manufacturer with deep roots and substantial manufacturing operations in the United States, the reality is that it operates as a global enterprise with a significant presence outside U.S. borders. One of the most notable aspects of GM’s international strategy is its joint ventures and manufacturing footprint in China. While this global scale brings advantages in terms of market reach and diversification, it also introduces real vulnerabilities—especially in the current economic climate where rising geopolitical tensions and tariff announcements are escalating quickly.
Because of GM’s reliance on global supply chains, especially its entanglement with China, the company finds itself in the direct line of fire of these newly imposed or expanding trade barriers. Tariffs are no longer a theoretical risk—they’re becoming a central economic factor that will materially impact costs, pricing, and demand across the auto sector. For GM shareholders, that means elevated risk in the short- and medium-term. But the key question is this: Despite these growing headwinds, is GM stock a buy at current valuations?
To answer that, I’ll walk through GM’s business fundamentals, explore its recent and historical performance, analyze profitability metrics, and examine the current valuation in light of broader macroeconomic trends.
Long-Term Revenue Trends & Structural Shifts in the Auto Industry
Looking back over the last decade, General Motors has managed to grow revenue steadily, especially in the wake of the COVID-19 pandemic and the subsequent economic reopening. The pandemic was a pivotal moment for the global auto industry. During this time, manufacturers around the world—especially outside of China—dramatically altered their production strategies. They started focusing far more on higher-end, premium models while cutting back on lower-cost, budget-oriented vehicles.
This shift in production philosophy led to a sharp increase in average selling prices across the industry. For GM specifically, trailing 12-month revenue has climbed to around $187 billion, up significantly from about $150 billion in 2015. That’s a material increase, especially considering the cyclical and capital-intensive nature of the auto business.
But it’s important to recognize that this growth has been fueled more by pricing than by unit volume. In other words, car companies have been generating more revenue by selling more expensive cars—not necessarily by selling more cars. That introduces fragility, because any downturn in consumer confidence or purchasing power could sharply impact revenue.
Tariffs & Macroeconomic Headwinds
Looking forward, GM and the broader auto industry face a unique combination of challenges. In the short term, we might actually see a temporary uptick in auto sales as consumers accelerate purchase decisions in anticipation of higher prices driven by tariffs. If you're in the market for a new vehicle and you know prices are about to jump by several thousand dollars, you’re more likely to buy now than later.
But that short-term boost comes at the cost of medium- and long-term headwinds. The reality is that tariffs—especially those on parts and components sourced from China—will raise production costs across the board. Depending on the model and where it's assembled, estimates suggest that average car prices could rise between $3,000 to $5,000 per vehicle. These costs will likely be passed on to consumers, which means affordability becomes a real issue.
Add to that rising interest rates—many of which are already climbing, as we’ve seen recently—and you create a powerful disincentive for consumers to finance large purchases like automobiles. If people are worried about job security, hearing warnings from major banks and employers about preparing for a potential recession, they're much less likely to commit to a new car loan. That spells trouble for future demand.
Capital Intensity & Profitability Challenges
Another major reason I’m cautious on GM—and automakers in general—is the nature of the business itself. Car manufacturing is one of the most capital-intensive industries in existence. Every new vehicle requires massive upfront investment in raw materials, parts, labor, logistics, and R&D. It's not just a matter of building cars—it's about continuously innovating to maintain relevance, meet safety and emissions standards, and respond to evolving consumer preferences.
GM’s cash flow from operations to sales ratio sits around 11%, which is relatively solid when compared to other automakers like Ford. But even that figure underscores how thin the margins are in this business. Once you account for capital expenditures—new factories, equipment upgrades, electric vehicle development—it becomes clear how much cash is being reinvested just to sustain operations.
And when we look at returns on invested capital, the picture becomes even less attractive. The amount of capital required to maintain competitiveness is enormous, and the returns simply don’t justify the risk in many cases. This is an industry plagued by overcapacity, high fixed costs, and razor-thin margins.
Oversupply & The Electric Vehicle Dilemma
One of the biggest structural issues facing the industry is global oversupply. Right now, automakers have the capacity to produce over 100 million vehicles annually, but global demand is closer to 85–90 million. This imbalance has only worsened in recent years due to the rise of electric vehicles (EVs).
And here's the key problem: most automakers didn’t scale down internal combustion engine (ICE) production as they ramped up EV capacity. Instead, they layered EV production on top of existing operations. That means we’re not just transitioning from ICE to EV—we’re doubling production capacity in an already oversupplied market.
On top of that, new EV-only players like Lucid, Rivian, and others have entered the market, adding even more supply without removing any legacy capacity. This glut is putting downward pressure on pricing and margins—particularly for legacy manufacturers like GM that are trying to balance two very different technology stacks.
Valuation: What the Market is Saying
Now, let’s talk about valuation, which is the one area where GM really stands out. The stock is currently trading at a forward price-to-earnings ratio of just 3.7—one of the lowest among the more than 200 companies I actively follow.
That valuation is not a mistake. It reflects the market’s sober assessment of GM’s industry and business model. Investors understand that this is not a high-margin, high-growth enterprise. It’s a mature, cyclical business operating in a brutally competitive space with limited pricing power and significant macroeconomic exposure.
Contrast that with a company like Tesla, which has gone out of its way to convince investors that it’s not merely a car company. Tesla’s CEO routinely emphasizes the company’s potential in AI, robotics, energy storage, and autonomous driving—none of which currently generate meaningful revenue, but all of which support a vastly higher valuation multiple. Whether or not that’s justified is another debate—but the key takeaway is that Tesla’s narrative is carrying the stock, while GM doesn’t have a comparable story.
Conclusion
So, where do I land on GM stock? I’m not recommending it as a buy right now. But I’m also not sounding any alarms.
If you already own GM shares, I don’t think there’s a strong reason to sell. This isn’t a broken business. It’s well-managed, it’s not going bankrupt, and ten years from now, it’s likely that the stock will be higher than it is today. But will it be higher enough to justify the risk, especially compared to more stable investments like U.S. Treasuries? I don’t think so.
You might actually be better off buying a 10-year government bond and holding it to maturity than holding GM stock for the next decade. That’s how weak the risk-adjusted return profile looks to me right now.
Ultimately, my reluctance isn’t rooted in pessimism about GM specifically. It’s a broader issue with the auto industry as a whole—oversupply, intense competition, rising input costs, low margins, high capital requirements, and now escalating geopolitical risk.
For all those reasons, I’m rating General Motors as a HOLD.
Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.
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