US autos weathers tariffs as sales hold firm, easing EV rules boost outlook

Barclays has upgraded the U.S. autos and mobility sector to Neutral from Negative, citing the industry's unexpected resilience against tariff pressures, stronger light vehicle sales, and the financial tailwinds from easing electric-vehicle regulations. Consequently, the firm upgraded General Motors and Aptiv to Overweight, with new price targets of $73 and $105 respectively, favoring automakers due to improved profitability prospects from reduced EV-related regulatory burdens and stable production. This re-rating reflects a more optimistic outlook for OEMs, particularly as looser emissions standards are expected to significantly narrow EV losses for companies like GM.

Analysis

Barclays has recalibrated its outlook on the U.S. autos and mobility sector, upgrading its stance to Neutral from Negative. This revision is predicated on three primary factors: the industry's surprising resilience to tariff pressures over the last six months, stronger-than-expected consumer demand, and anticipated regulatory relief. U.S. light vehicle sales have maintained a seasonally adjusted annualized rate (SAAR) of 16.5 million, substantially outpacing Barclays' initial 14.5 million forecast and prompting an upward revision for its 2025 SAAR projection to 16.2 million. The firm identifies a potential easing of emissions standards as a "significant tailwind to OEM profitability," which would reduce the need to sell unprofitable electric vehicles (EVs) and lower regulatory credit costs. Consequently, Barclays now favors automakers over suppliers, upgrading General Motors (GM) to Overweight with a price target increase to $73 from $55, citing that relaxed EV mandates could narrow GM's estimated $4-5 billion annual EV losses by at least $1 billion. Similarly, Aptiv (APTV) was upgraded to Overweight with a new $105 price target, based on improving business trends and value creation anticipated from the planned spin-off of its electrical distribution systems unit.

Key Decisions for Investors

• Investors should consider re-weighting their automotive sector exposure to favor automakers like General Motors over suppliers, reflecting Barclays' view that OEMs are better positioned to benefit from stable production, steady pricing, and potential regulatory easing.
• The upgrades of General Motors (GM) and Aptiv (APTV) to Overweight, with new price targets of $73 and $105 respectively, suggest material upside and may warrant initiating or increasing positions, even after their recent outperformance.
• Monitor U.S. light vehicle SAAR data as a key indicator of consumer health and track political and regulatory developments regarding vehicle emissions standards, as these are the primary catalysts underpinning the revised profitability outlook for automakers.
• For investors in Aptiv, the planned spin-off of its electrical distribution systems unit is a key upcoming event that should be monitored for its potential to unlock shareholder value.