MW GM and Ford will be hurt by tariffs, but here's why the stocks are still a buy

By Tomi Kilgore

GM's stock leads the S&P 500 decliners given tariff exposure, even as J.P. Morgan reiterates bullish calls. Meanwhile, Tesla shares rise.

Carmakers can't avoid the billions of dollars in pain they'll feel from tariffs, but J.P. Morgan said that doesn't mean investors should avoid their stocks.

In fact, even though General Motors Co. $(GM)$ is likely to be hurt the most in a world of tariffs, analyst Ryan Brinkman still recommends investors buy the stock. He's also still bullish on shares of Ford Motor Co. $(F)$, as he believes U.S.-based carmakers can beat their international rivals in a price war.

GM's stock sank 7% in morning trading on Thursday, enough to pace the S&P 500 index's SPX decliners. That added to the previous session's 3.1% selloff in anticipation of the tariff announcement.

Ford shares dropped 3.4%, after ticking up 0.1% the day before.

Shares of Netherlands-based Stellantis N.V. $(STLA)$, which is the parent of brands including Chrysler, Jeep and Dodge, were losing 2.8% toward a three-year closing low.

Meanwhile, Tesla Inc.'s stock $(TSLA)$ climbed 2.4% and Rivian Automotive Inc. shares $(RIVN)$ tacked on 2.2%. Brinkman believes the electric-vehicle makers will feel the least pain from tariffs.

Read: Trump announces 25% tariffs on finished cars and some parts. That's tough for the auto industry.

Brinkman said the new tariffs announced by President Donald Trump on Wednesday are different from those previously proposed, given that the finished product is treated differently than automobile parts. So he believes that the new tariffs will "materially lessen the burden" for U.S.-based carmakers, and that the burden will decline over the longer term.

Brinkman now estimates that the cost of tariffs for GM will be about $13 billion over time, down from his estimate of $14 billion based on the previous tariff proposals. GM's 2025 guidance for earnings before interest and taxes was in the $13.7 billion to $15.7 billion range.

For Ford, Brinkman now expects the cost of tariffs to be about $4.5 billion, down from a previous estimate of $6 billion. Ford had said in February that it expects 2025 EBIT of $7 billion to $8.5 billion.

While GM and Ford import many of the parts that go into their cars, most of those vehicles are assembled in the United States.

Of the 17 GM models listed by the National Highway Traffic Safety Administration, the final assembly of 12 models are in the U.S., while four of the models are assembled in Korea and one is finished in Mexico.

Related: This is why Trump's tariff plan has upended the car industry, and it's not over yet

Of the 19 Ford models listed, the final assembly of 14 takes place in the U.S., while three are finished in Mexico, one in Canada and one in China.

The final assembly of all nine Tesla models on the NHTSA list is done in the U.S.

Brinkman reiterated his long-held overweight ratings on the stocks of both GM and Ford. He believes the "key factor" in the more detailed tariffs announced Wednesday will likely be "greater pricing power for domestic automakers ... given their worldwide applicability."

The new tariffs offer a "significant reprieve" for American carmakers, which source a greater proportion of finished vehicles and parts for U.S.-built vehicles from Canada and Mexico than their foreign-based competitors do.

That's because under the new policy, "virtually all automakers will face significant pressure to raise prices, making it more likely domestic automakers will be able to effect price increases to better offset tariff costs without the risk of material market share loss," Brinkman wrote.

He's also upbeat about GM's plan to boost shareholder returns, including raising its dividend and more aggressively using cash for share repurchases. And strong sales, particularly for the company's recently refreshed full-size trucks and sport-utility vehicles, should also boost the stock.

For Ford, he's bullish about the "refreshed" vehicle lineup and the moves to reduce international operations.

Brinkman believes valuations for both GM and Ford shares support his view, as they are both roughly at or slightly below historical ranges, despite the potential positives and his bullish outlooks.

-Tomi Kilgore

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March 27, 2025 10:41 ET (14:41 GMT)

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