Bernstein downgrades General Motors on tariff impact

Investing.com -- Bernstein downgraded General Motors (NYSE:GM) to Underperform from Market Perform, warning that new vehicle tariffs and a likely decline in consumer sentiment will significantly pressure the automaker’s earnings and free cash flow.

The firm cut its price target to $35, down from its previous estimate, and slashed its 2026 earnings per share forecast by more than 50%, citing the start of vehicle tariffs and the expectation that parts tariffs will follow within a month.

“Tariffs bite, just as consumers blink,” Bernstein wrote.

“Even under modest assumptions, the impact on GM is severe.” The firm estimates that GM’s free cash flow will drop by $6 billion between 2025 and 2027.

Bernstein noted that while it had been cautious on GM for months amid rising policy uncertainty, the recent clarity on tariffs forces a reassessment.

The firm now believes GM’s earnings have peaked this cycle, with few near-term catalysts for recovery.

“It is time to confront some hard truths: vehicle tariffs have commenced, and parts tariffs are likely to follow within a month,” analyst said as it downgraded the stock

The note also flagged the potential for GM to pause share buybacks and cut guidance in an effort to conserve cash.

Bernstein expects earnings to remain under pressure through the first half of 2026, before potential recovery from mitigation measures and improving consumer trends.

Risks to the downside include a broader recession or stricter tariff enforcement, while the main upside would be a rollback of trade policy.

Bernstein lowered its near-term EPS forecast by 45% to $5.50, adding that “in the near term, it’s hard to see a path out of this.”