Bernstein warns tariff costs to dominate U.S. auto Q2 earnings

Bernstein cautions that U.S. automakers face significant headwinds in H2 2025, primarily driven by escalating tariff costs and weakening consumer demand, despite Q2 volumes benefiting from unsustainable pull-forward. The firm projects a sales slowdown, with Q4 2025 as the low point, anticipating Ford and General Motors will struggle to offset these pressures and potentially miss guidance. Concurrently, Polestar reported strong Q2 delivery growth but faces financial scrutiny from Cantor Fitzgerald due to paused guidance, substantial capital needs, and tariff exposure from its China manufacturing base.

Analysis

The U.S. automotive sector faces a challenging outlook for the second half of 2025, with Bernstein highlighting that risks from tariff pressures and weakening consumer demand are outweighing opportunities. While Q2 sales volumes appear resilient for manufacturers like Ford, this strength is largely attributed to an unsustainable, tariff-related demand pull-forward. Analysts project a sales slowdown culminating in a low point in Q4 2025, a view supported by manufacturer production cuts and industry-wide data showing weak financial health and negative EBITDA margins. Specifically for General Motors, Bernstein anticipates the company will be unable to fully offset these headwinds, placing its fiscal year 2025 guidance at risk. Broader macroeconomic factors, including the Q3 expiration of key EV tax credits (30D, 45W) and eroding consumer purchasing power, are expected to further curb discretionary spending on vehicles. In contrast, Polestar reported strong operational growth, with vehicle deliveries increasing 51% in the first half of 2025. However, this performance is tempered by significant concerns noted by Cantor Fitzgerald, which maintains a Neutral rating due to Polestar's paused 2025 guidance, substantial capital requirements exceeding $2 billion through 2028, and geopolitical risk from its China-based manufacturing. A recent $200 million equity investment provides some liquidity but also underscores the company's ongoing need for capital.

Key Decisions for Investors

• Investors should view the recent strong sales from U.S. automakers like Ford and GM with caution, as these are likely driven by a temporary pull-forward effect and mask significant risks to revenue and earnings in the second half of 2025.
• Monitor General Motors closely for potential downward revisions to its fiscal year 2025 guidance, as analysts have flagged that mounting tariff costs and consumer weakness may be difficult for the company to offset.
• For Polestar, the strong delivery growth is a positive operational signal, but this must be weighed against considerable risks including paused guidance, high future capital needs, and geopolitical exposure, justifying a cautious investment approach.
• Pay close attention to macroeconomic indicators such as consumer purchasing power and the expiration of federal EV tax credits at the end of Q3, as these factors are poised to directly impact auto demand and sector-wide performance.