Ford, Tesla, GM announce earnings amid tariffs and other challenges

DETROIT — “A lot of money and a lot of disruption.” That way ford motor CEO Jim Farley addressed the current state of the auto industry earlier this year amid geopolitical tensions, tariffs, inflation and other disruptions.

All these factors have created significant uncertainty in the U.S. auto industry, leading to a relatively bearish outlook for the sector in 2025. Although some of these fears came true, the industry has proven far more resilient than many expected.

“Six months into tariffs, we are positively surprised by how the industry has held up better than expected,” Barclays analyst Dan Levy said in a note to investors last month, upgrading the U.S. auto and mobility sector from negative to neutral.

Auto industry executives, insiders and analysts say Barclays’ Neutral rating speaks volumes about the current state of the auto industry, saying that while the situation is not as bad as once feared, it is still not as positive or certain as expected.

S&P Global released a new report last week explaining how tariff burdens have eased, but noted demand headwinds persist amid slowing disposable income growth, consumer pessimism and fluid trade policy. The government shutdown also adds uncertainty to the economic outlook, the company said.

The company took a cautious stance after S&P revised its U.S. light vehicle sales forecast upward by approximately 2% to 16.1 million units in 2025 and 200,000 units more to 15.3 million units in 2026.

One factor contributing to the unexpected optimism was broader macroeconomic conditions, including relatively stable consumer spending, as well as much stronger than expected industry sales and production.

“The (economic) outlook is improving, but it’s also because we’re learning that tariffs aren’t the end of the world, and that applies to the auto market as well,” Jonathan Smoak, chief economist at Cox Automotive, told CNBC. “I think we can get through it, and I continue to have that optimistic outlook.”

That optimism will be put to the test at major automakers, including: general motorswith Ford tesla The announcement of third quarter financial results will begin this week.

Analyst forecasts compiled by LSEG predict that U.S. automakers will continue to be profitable on an adjusted basis, despite a double-digit decline in adjusted earnings per share.

“We generally expect third-quarter earnings to be slightly above expectations. Industrial production was better than expected,” Wolf Research analyst Emmanuel Rosner said in an Oct. 10 note to investors. “But, as always, there are nuances to consider.”

The auto industry is going through a bit of a balancing act.

Tariffs are costing automakers billions of dollars this year, but deregulation of fuel economy penalties and corporate benefits under the Trump administration’s One Big Beautiful Bill Act are expected to help offset those costs, Ford’s Farley and his colleagues said.

Meanwhile, new car sales and pricing remained much better than most expected through the third quarter, despite some red flags of stress in auto financing for buyers with poor credit, such as the recent bankruptcy of subprime auto lender Tricolor.

“There’s some upside for next year, but there could also be some very negative downside if there’s confusion over tariffs or if consumers finally break down,” Morningstar analyst David Whiston told CNBC. “But no one is calling for complete collapse.”

Whiston, who covers GM, Ford and several auto retailers and auto suppliers, characterized his outlook as “cautiously optimistic,” saying the industry’s significant concerns are offset by other bullish conditions.

UBS analyst Joseph Spak agreed, writing in a note to investors last month that many of the challenges for automakers, such as electric vehicle tariffs and losses, “are already factored into our 2025/2026 forecasts.”

In addition to economic and political concerns, the auto industry is facing a major shift in the adoption of all-electric vehicles, a shift that led GM last week to pre-report $1.6 billion in special charges during the quarter related to EV exits.

Compounding this year’s turmoil, especially for Ford, was a fire last month at aluminum supplier Novelis that affected auto production. Wall Street analysts estimate that the fire will reduce Ford’s operating income by $500 million to $1 billion.

“It’s a very fluid industry. We’re facing a lot of different challenges,” said Elaine Buckberg, a senior fellow at Harvard University and former GM chief economist, regarding issues such as tariffs and EVs. “The level of volatility they’ve faced over the last seven years or so is unlike anything they’ve seen before.”

As at the beginning of the year, the broader potential concerns of the supplier industry remain significant for automakers.

The auto supplier industry is made up of thousands of companies, ranging from multibillion-dollar publicly traded companies to “mom and pop shops” that make one or two parts, and industry experts say the additional cost increases are too much for many companies to handle.

“The market is under pressure. It’s fragile,” said Mike Jackson, executive director of strategy and research at automotive supplier association MEMA. “Flexible and agile suppliers have been able to reposition themselves to succeed despite change.”

Not everyone competed well. The bankruptcy of U.S. auto parts maker First Brands Group in late September heightened concerns on Wall Street about the health of private credit markets. First Brands had complex debt agreements with numerous lenders and investment funds around the world.

JP Morgan Chase CEO Jamie Dimon last week called the First Brands and Tricolor Holdings bankruptcies “early signs” of corporate lending glut, but some Wall Street analysts dismissed them as isolated incidents.

Executives said automakers, also known as original equipment manufacturers (OEMs), have so far done their best to support suppliers as needed and have not passed on additional tariff costs to them, but it is unclear how long that will continue.

“Suppliers are clearly working as hard as they can with their customers to reduce the impact and are modest in saying that this is an important issue to resolve,” Jackson said. “That being said, we’ve seen a lot of different cost pressures beyond tariffs. … It varies by customer and OEM.”

Stocks in many large publicly traded suppliers such as Aptiv borg warner, Dana and adienta double-digit increase so far this year. Even if you are based in Canada magna internationalwhich was once expected to be one of the companies most affected by tariffs, has risen by about 7%.

These gains come even as North American auto supplier executives’ pessimism increased for the 14th straight quarter in the third quarter, according to MEMA’s latest Auto Supplier Barometer released earlier this month.

Adding to supplier concerns are continuing tariff issues between the United States and Mexico and Canada, as well as the Trump administration’s ongoing trade war with China, where many rare earth materials, some used in cars, are processed and sourced.

There are also continuing concerns that the auto industry is an example of America’s “K-shaped” economy, in which the wealthy continue to reap profits while lower-income earners struggle.

Economists are warning that the U.S. economy will become increasingly K-shaped after the coronavirus pandemic, with consumers experiencing different realities depending on their income level.

used car dealership carmax Late last month, it became the first major auto-related company to sound a warning to consumers.

“Consumers have been hurting for some time. I think there’s some anxiety,” CarMax CEO Bill Nash told analysts earlier this month, while an auto financing executive at the used car retailer warned that “cracks” were an “industry problem.”

But that “problem” appears to only target low-income consumers and those with subprime credit, many of whom are not new car buyers.

While wealthy Americans have been helped by rising home prices, favorable stock market returns and favorable credit, low- and moderate-income buyers are facing strained budgets and have been hit hard by rising inflation.

Fitch Ratings reported that the percentage of subprime auto loans that were at least 60 days past due in August was 6.43%, matching January’s record high of 6.45%. Delinquency rates for high-scoring borrowers are relatively stable.

“Obviously there’s a concern for the consumer, because if you’re not at the top of ‘K,’ there’s certainly stress,” said Cox Automotive’s Smoak. “But it tends to be a demographic story about households with below-average incomes.”

About two-thirds of new car purchases are made by people with household incomes above the median income, Buckberg said. The median income for U.S. households last year was $83,730, according to U.S. Census Bureau estimates.

That share could further increase, impacting sales if tariff costs begin to be passed on to new car buyers or the whiplash regulation turmoil permeates the auto industry further.

“That’s really the big question going into 2026. I think everyone in the industry is assuming that consumers are going to start passing on the tariffs on their cars. They haven’t really done that yet,” Whiston said. “How will consumers react to it? Will they just accept it and pay more to keep using it? Or will it just cause a fuss? No one knows the answer yet.”