Ford, Tesla and General Motors will report earnings amid tariffs and other challenges

DETROIT – “A lot of cost and a lot of chaos.” This is the way ford motor CEO Jim Farley described the state of the auto industry earlier this year amid geopolitical tensions, tariffs, inflation and other turmoil.

All of these factors have created an enormous amount of uncertainty for the U.S. auto industry, leading to a relatively bearish outlook for the sector in 2025. Some of these concerns have come to fruition, but the industry has proven to be far more resilient than many expected.

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

The Neutral rating by Barclays speaks volumes about the state of the auto industry right now, according to auto industry executives, insiders and analysts who say conditions are not as bad as they once feared — but they’re also still not as positive or certain as they could be.

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

This caution came after Standard & Poor’s revised its estimates for light vehicle sales in the United States upward by about 2%, to 16.1 million vehicles for 2025, and to 15.3 million, an increase of 200,000, in 2026.

Part of what has driven this unexpected optimism is that industry sales and production are holding up much better than expected, as well as broader macroeconomics such as consumer spending being relatively stable.

“the [economic] “The outlook is improving, and part of it is the realization that tariffs didn’t end the world, and that goes for the auto market as well. I think we can handle it, and I’m sticking with that optimistic view,” Jonathan Smoak, chief economist at Cox Automotive, told CNBC.

Such optimism will be tested with major automakers such as… GMFord and Tesla Starting to announce third quarter results this week.

Each of the U.S. automakers is expected to report double-digit declines in adjusted earnings per share but remain profitable on an adjusted basis, according to analyst estimates compiled by LSEG.

“We expect that third-quarter earnings [are] Overall it’s a little in line with expectations. “Industrial production came in better than expected,” Emanuel Rosner, an analyst at Wolf Research, said in a note to investors dated Oct. 10. “But as always, there are nuances to take into account.”

The automobile industry is in a state of equilibrium.

The tariffs have cost automakers billions of dollars this year, but a rollback of fuel economy caps, as well as corporate gains under the Trump administration’s “Big Beautiful Bill,” are expected to help offset those costs, Ford’s Farley and others said.

Meanwhile, there are red flags for stress in auto lending to low-credit buyers, including the recent bankruptcy of subprime auto lender Tricolor — but new car sales and pricing during the third quarter remained much better than many expected.

“There are some positives for next year, but there could also be some really bad negatives if there’s a panic about tariffs or the consumer finally collapses or whatever,” Morningstar analyst David Weston told CNBC. “But no one is calling for a complete collapse.”

Weston – who covers General Motors, Ford and several auto retailers and suppliers – called his outlook “cautiously optimistic,” saying the industry’s big concerns are countered by other bullish conditions.

UBS analyst Joseph Spaak agrees, noting that many of the challenges facing automakers such as tariffs and losses on electric vehicles “have already been built into 2025/2026 estimates,” he said in an investment note last month.

In addition to economic and political concerns, the auto industry is facing significant changes in the adoption of all-electric vehicles, prompting GM last week to previously report a $1.6 billion special charge during the quarter related to its rollback of electric vehicles.

Adding to the “chaos” this year, especially for Ford, was the fire that occurred last month at aluminum supplier Novelis, which affected vehicle production. Wall Street analysts estimate that the fire will cost Ford between $500 million to $1 billion in operating income.

“The industry is changing dramatically,” said Ellen Backberg, a senior fellow at Harvard University and former chief economist at General Motors, regarding tariffs, electric vehicles and other issues. “It faces a host of challenges.” “The level of volatility they have faced over the last seven years or so is unlike anything that has come before.”

The broader supplier industry remains a major potential concern for automakers, as it did at the start of the year.

The auto supply industry is made up of thousands of companies — from multibillion-dollar publicly traded companies to “boutique shops” that make one or two parts — that industry experts say can’t support many, if any, incremental cost increases.

“The market is under pressure. It’s fragile,” said Mike Jackson, executive director of strategy and research at the Motor Suppliers Association (MEMA). “These agile and agile suppliers have been able to reposition themselves to be successful despite the changes, despite the transformations.”

Not everyone was able to compete successfully. The bankruptcy of US auto parts maker First Brands Group in late September heightened concerns on Wall Street about the health of the private credit market. First Brands had a network of complex debt agreements with a large number of lenders and investment funds globally.

JPMorgan Chase CEO Jamie Dimon last week described the bankruptcies of First Brands and Tricolor Holdings as “early signs” of excessive corporate lending, while some Wall Street analysts called them bizarre.

Automakers, also known as original equipment manufacturers, or original equipment manufacturers, have so far done their best to help suppliers when needed and have not passed on additional tariff costs to these companies, but it is unclear how long that might last, the executives said.

“It is clear that suppliers are working as hard as they can with their customers to try to mitigate the impact, knowing that it is an important issue to work on,” Jackson said. “However, there have been a number of different cost pressures that we’ve seen that go beyond the tariffs. … And they vary by customer, by manufacturer.”

Shares of many major publicly traded suppliers, such as Aptiv, BorgWarner, Dana and comingby double digits so far this year. Even based in Canada Magna Internationalwhich at one time was expected to be one of the companies most affected by the tariffs, rose nearly 7%.

These gains come even though the third quarter marked the 14th consecutive quarter of heightened pessimism by North American auto supplier executives, according to MEMA’s latest “Vehicle Supplier Barometer” released earlier this month.

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

There are also persistent concerns that the auto industry is an example of a K-shaped economy in the United States, where the wealthy continue to see gains while those with lower incomes suffer.

Economists have warned that the US economy is increasingly “K-shaped” in the wake of the coronavirus pandemic, with consumers facing different realities depending on their income level.

Used car retailer Carmax It was the first major auto-related company to sound the consumer alarm late last month.

“The consumer has been distressed for some time. I think there’s some concern,” CarMax CEO Bill Nash told analysts earlier this month, as an auto lending executive at the used car retailer warned that “cracks” were an “industry problem.”

But this “problem” seems to only concern low-income consumers or those with high-risk credit, many of whom are not new car buyers.

Wealthier Americans were helped by rising home values, lucrative stock market returns and favorable credit, while lower- and middle-income buyers faced tighter budgets and were hit hard by rising inflation.

Fitch Ratings reported that 6.43% of subprime auto loans in August were at least 60 days past due, in line with the record high of 6.45% set in January. Delinquency rates for borrowers with higher scores have remained relatively stable.

“There’s obviously consumer concern, because if you’re not at the top of the K, then yeah, there’s pressure,” Cox Automotive’s Smoke said. “But it tends to be a demographic story about middle- and lower-income families.”

About two-thirds of new car purchases are made by people whose household income is above average, according to Backberg. The median American household income last year was $83,730, according to U.S. Census Bureau estimates

This ratio could continue to grow and impact sales if tariff costs begin to pass through to new car buyers or if overwhelming regulatory chaos spreads through the auto industry.

“That’s the really big question for 2026,” Weston said. “I think everyone in the industry is assuming that consumers are going to start getting the tariffs passed on to them on cars. But that hasn’t happened yet.” “How will the consumer react to that? Will they take it seriously, pay more and move on? Or will it cause massive panic? No one knows the answer to that yet.”