Ford, Tesla, GM to report earnings amid tariffs, other challenges
A worker at Ford’s Kentucky Truck Plant on April 30, 2025.
Michael Wayland | CNBC
DETROIT – “Too much cost and too much chaos.” that’s how Ford Motor CEO Jim Farley described the state of the auto industry earlier this year amid geopolitical tensions, tariffs, inflation and other disruptions.
All of these factors have created great uncertainty for the US automotive industry, leading to a relatively negative outlook for the sector in 2025. Some of these concerns have come to fruition, but the industry has proven to be much more resilient than many expected.
“We are positively surprised that six months after tariffs began, the sector remains in better shape than expected,” Barclays analyst Dan Levy said in an investor note last month that upgraded the U.S. auto/mobility sector from “negative” to “neutral.”
Barclays’ neutral rating speaks volumes about the state of the auto industry right now, according to auto executives, insiders and analysts, who say conditions are not as bad as they once feared, but are still not as positive or certain as they could be.
S&P Global released a new report last week explaining how tariff burdens are easing, but noted that fluctuations in demand continue despite the slowdown. increase in disposable income, consumer pessimism and fluid trade policies. The company stated that the government shutdown also added uncertainty to the economic outlook.
Ford Motor Company President and CEO Jim Farley speaks at the Ford Pro Accelerate event on September 30, 2025 in Detroit, Michigan.
Bill Pugliano | Getty Images
The caution comes after S&P revised its U.S. light vehicle sales forecasts to 16.1 million vehicles for 2025, up about 2%, and 15.3 million in 2026, up 200,000.
Part of the factors that led to unexpected optimism were that the broader macroeconomy, such as consumer spending being relatively stable, as well as industrial sales and production being in much better shape than expected.
” [economic] “The outlook is improving, and part of that is the realization that tariffs are not the end of the world, and that’s true for the auto market as well,” Jonathan Smoke, chief economist at Cox Automotive, told CNBC.
Such optimism will be tested, as will major automakers. General EnginesFord and Tesla’s You will begin reporting third quarter results this week.
American automakers are each expected to report double-digit declines in adjusted earnings per share but remain profitable on an adjusted basis, according to analyst forecasts compiled by LSEG.
“We expect earnings in the 3rd quarter” [are] In general, it is slightly above expectations. Industrial production came in better than expected, Wolfe Research analyst Emmanuel Rosner said in an Oct. 10 investor note. “But as always, there are nuances to consider.”
balancing act
The automotive industry is in a bit of a balancing act.
Meanwhile, there are red flags of stress in auto loans for poor credit buyers, including the recent bankruptcy of subprime auto lender Tricolor; But sales and pricing of new vehicles in the third quarter remained much better than many expected.
“There are some positives for next year, but there could be some really bad negatives if there’s a tariff frenzy or the consumer eventually crashes or something,” Morningstar analyst David Whiston told CNBC. “But no one is calling for a complete collapse.”
Fronts (left to right) of GMC Sierra Denali, Tesla Cybertruck, and Ford F-150 Lightning EVs.
Michael Wayland / CNBC
Whiston, who covers GM, Ford and various auto retailers and suppliers, called his outlook “cautiously optimistic” and said significant concerns in the industry were offset by other bullish conditions.
UBS analyst Joseph Spak acknowledged this in an investor note last month, noting that many challenges for automakers, such as tariffs and losses on electric vehicles, are “already factored into 2025/2026 forecasts.”
In addition to economic and political concerns, the auto industry is facing significant shifts in the adoption of all-electric vehicles, which led GM last week to pre-report $1.6 billion in special charges during the quarter related to the pullback in electric vehicles.
Adding to this year’s “chaos”, especially for Ford, was a fire at aluminum supplier Novelis last month that affected vehicle production. Wall Street analysts estimate the fire will cost Ford $500 million to $1 billion in operating income.
“The industry is in a state of great change. It faces a number of challenges,” said Elaine Buckberg, a senior expert. Harvard University and the former GM chief economist had this to say about tariffs, electric vehicles and other issues. “The level of volatility they’ve encountered over the last seven years is different than anything that’s happened before.”
Suppliers
The broader supplier industry remains a significant potential concern for automakers, as it was at the beginning of the year.
The auto parts industry consists of thousands of companies, from multibillion-dollar publicly traded companies to one- or two-item “mom and pop shops” that industry experts say can’t support many, if any, additional cost increases.
“The market is under pressure. It is fragile,” said Mike Jackson, general manager of strategy and research at vehicle supplier association MEMA. “Suppliers that are flexible and agile have been able to reposition themselves to succeed despite shifts and changes.”
Autolite installs spark plugs at an auto parts store in Provo, Utah, on Monday, Sept. 29, 2025. First Brands Group Holdings has filed for Chapter 11 bankruptcy, capping turmoil sparked by weeks of concern from creditors over auto suppliers’ opaque use of off-balance sheet financing.
George Frey | Bloomberg | Getty Images
Not all of them were able to compete successfully. Bankruptcy of US auto parts manufacturer First Brands Group raised concerns on Wall Street about the health of the private credit market in late September. First Brands had a complex web of debt agreements with numerous lenders and investment funds around the world.
While JPMorgan Chase CEO Jamie Dimon last week called the bankruptcies of First Brands and Tricolor Holdings “the first signs” of corporate lending overhang, some Wall Street analysts dismissed them as idiosyncratic.
Automakers, also known as OEMs or original equipment manufacturers, have so far done what they can to help suppliers when needed and have not passed on additional tariff costs to such companies, executives said, but it’s unclear how long that will take.
“Suppliers are working as hard as they can with their customers to mitigate the impact, underlining that this is an important issue that needs to be addressed,” Jackson said. he said. “However, we have seen a number of different cost pressures that go beyond tariffs. This varies by customer and OEM.”
Shares of many large publicly traded suppliers such as Aptiv, BorgWarner, Calf And AdientIt’s in double digits so far this year. Even based in Canada Magna InternationalShares of the company, which at one point was expected to be one of the companies hardest hit by tariffs, rose nearly 7%.
These gains were achieved in the third quarter even as North American auto supplier executives expressed pessimism for the 14th consecutive quarter, according to MEMA’s latest “Vehicle Supplier Barometer” released earlier this month.
Adding to supplier concerns are ongoing issues with tariffs between the U.S. and Mexico and Canada, as well as the Trump administration’s ongoing trade war with China, where many rare earth materials, some used in vehicles, are processed and supplied.
K-shaped concerns
Concerns also remain that the auto industry is an example of the K-shaped economy in the United States, where the rich continue to profit while low-income earners struggle.
Economists warn the US economy It is becoming increasingly “K-shaped” in the wake of the coronavirus pandemic, with consumers experiencing different realities depending on their income level.
used car retailer CarMax late last month it became the first major automotive company to sound the alarm to consumers.
“The consumer has been distressed for a while. I think there’s some concern,” CarMax CEO Bill Nash told analysts earlier this month, and the used-car retailer’s auto loan executive warned that “cracks” were “an industry problem.”
But this “problem” seems to only apply to low-income consumers or those with subprime loans, which aren’t most new car buyers.
While affluent Americans got a boost from rising home values, lucrative stock market returns and affordable loans, low- and middle-income buyers faced tighter budgets and were hit hard by rising inflation.
Fitch Ratings reported that 6.43% of subprime auto loans were at least 60 days past due in August, in line with the record high of 6.45% reached in January. Default rates for borrowers with higher scores remained relatively stable.
“Obviously there are consumer concerns, because unless you’re in the upper ‘K’, yes, there is stress,” said Cox Automotive’s Smoke. “But this tends to be a demographic story about average and low-income households.”
According to Buckberg, nearly two-thirds of new vehicle purchases are made by people with above-average household incomes. The median income of a U.S. household was $83,730 last year. US Census Bureau estimates
This percentage could continue to rise and impact sales if tariff costs begin to be passed on to new car buyers or if severe regulatory chaos further impacts the auto industry.
“That’s really the big question for 2026. I think everyone in the industry is assuming that consumers are going to start having tariffs passed to them for cars. They haven’t done that yet,” Whiston said. “How do consumers react to this? Will they do it recklessly, pay more and move on? Or will this cause a huge panic? No one knows the answer to that yet.”
