Carmakers Draw on Pickups, Tariff Refunds, and Service Revenue Amid EV Losses

Recent earnings reports from General Motors (GM) and Ford portray a challenging time for Detroit. Both companies are relying more on potential tariff refunds and service-based revenue—not sales—to support profitability, while electric vehicle (EV) losses continue to deplete cash flow.

Management commentary from both firms highlights the pressures facing the sector.

Sales Volume Decline

GM held its April 28 conference call after it released its first-quarter results.

The company opened its presentation by citing a possible $500 million tariff refund following a Supreme Court ruling that President Donald Trump exceeded his authority when imposing tariffs on U.S. trade partners. The federal government launched an online portal called Consolidated Administration and Processing of Entries on April 20, allowing importers to submit claims for tariff refunds.

Overall, GM’s earnings before interest and taxes (EBIT) reached $4.3 billion, supported by approximately $750 million in year-over-year improvements driven by lower EV losses, foreign exchange benefits, reduced warranty expenses, emissions-related regulatory savings, and the tariff adjustment. EV-related charges, meanwhile, totaled $1.1 billion for the quarter.

“We are continuing to execute our plan to return to 8 percent to 10 percent EBIT-adjusted margins in North America for the full year,” Chair and CEO Mary T. Barra said during the earnings call.

EBIT-adjusted margin is a measure of operating profit that excludes one-time or non-core items to better reflect underlying business performance.

Barra said the company achieved a 10.1 percent EBIT-adjusted margin in the first quarter, including a 1.5 percentage point benefit from an accounting adjustment tied to the Supreme Court tariff decision. Excluding the tariff-related benefit, the core margin would be 8.6 percent.

Despite these gains, total revenue declined at an annualized rate of roughly $400 million, reflecting lower EV wholesale volumes and flat internal combustion engine wholesale volumes.

One bright spot in GM’s report was growth in digital services. OnStar revenue exceeded $750 million for the quarter, marking an increase of more than 20 percent from a year earlier. The company also strengthened its position in the crossover market, with sales rising from a little more than 40 percent to more than 46 percent following the 2023 update, gaining 2 percentage points of share in select models.

Ford reported similar dynamics. The company posted $43.3 billion in revenue, reflecting more than 6 percent growth despite a nearly 4 percent decline in volume, largely due to the exit of low-margin products.

Ford reported $3.5 billion in adjusted earnings before interest and taxes and recorded a one-time $1.3 billion tariff benefit, allocating $700 million to Ford Blue and $500 million to Ford Pro.

Recurring revenue streams also contributed to results. Paid software subscriptions under Ford Pro reached 879,000, up by 30 percent year over year. The company’s traditional gasoline-powered and commercial vehicle segments also delivered strong performance.

“Our strong first-quarter results and raised full-year guidance reflect the momentum of the Ford+ plan,” Ford President and CEO Jim Farley said in a statement. “We are well prepared to deliver for our customers and shareholders as we enter one of the most intensive product, software and physical services rollouts in our history.”

Cash Flow Pressure

“The [Supreme Court’s] tariff ruling handed GM and Ford a total of $1.8 billion in windfall, cushioning their 2026 outlooks,” Patrizia Porrini, professor of management at Long Island University, said in a statement to The Epoch Times.

“The EV push is on hold just in time—Ford’s EV sales dropped 70 percent while GM is paying $1.1 [billion] just to exit electric supplier contracts. To clear stagnant lots of cars, Ford is launching cheaper entry-level trims for the Explorer and Bronco.”

Despite these supports, both companies continue to face cash flow pressure. GM’s automotive operating cash flow fell to $533 million from $2.4 billion a year earlier, while Ford reported a $1.9 billion free cash outflow.

Returns on invested capital also remain weak. Ford’s returns on invested capital stand at negative 2.54 percent, below its weighted average cost of capital of 3.53 percent, indicating value destruction. GM’s returns on invested capital, while positive at 1.04 percent, still trail its weighted average cost of capital of 4.42 percent.

These capital allocation challenges are not new. Both companies have recorded low and volatile net profit margins for more than a decade, generally staying in the low single digits.

Industry conditions have further tightened over the past year. The expiration of EV subsidies, the introduction of tariffs, and regulatory changes have reshaped both supply and demand.

Consumers have increasingly shifted away from EVs toward hybrids and traditional internal combustion vehicles, while also favoring domestically produced models.

At the same time, elevated inflation, high long-term interest rates, and signs of a weakening labor market have dampened demand for large discretionary purchases such as automobiles.

U.S. auto sales trended lower following a temporary surge in March 2025 ahead of tariff announcements. Preliminary data from MarkLines showed that vehicle sales declined at an annualized rate of 12.3 percent in March 2026, indicating weakening consumer demand.

Adapting to Market Correction

Meanwhile, hybrid vehicles continue to gain traction. The Energy Information Administration estimates that about 22 percent of light-duty vehicles sold in 2025 were hybrid, battery electric, or plug-in hybrid models, up from 20 percent in 2024.

“Consumers tend to prefer hybrids over EVs for greater affordability, as hybrids can reach cost parity with their internal combustion counterparts much more quickly across vehicle classes than EVs do, when you factor in purchase price, financing options, insurance, fuel, maintenance, repairs, and other factors that affect car ownership,” Steve Christensen, executive director of the Responsible Battery Coalition, told The Epoch Times.

Chris Neiger, a contributing auto analyst at The Motley Fool, said he believes that GM and its peers are in a tough spot.

“They sank billions into EV factories and supply chains, only to watch consumer demand crater as tax credits vanished,” he told The Epoch Times. “Rising gas prices from the Iran conflict are squeezing affordability further.

“The company is expected to reintroduce hybrids soon, but the lag could cost them, as competitors who never ditched hybrids swoop in to meet customer demand.”

Porrini said she believes that Detroit is using truck profits and a surprise tariff windfall to bridge what she calls an “EV demand drought.”

“Carmakers aren’t just building cars; they’re buying time to fix their electric math while monetizing the loyal drivers they already have,” she said.

Christensen said he sees automakers building what consumers want to buy at prices they can afford.

“What we’re seeing now is the auto industry adapting to a market correction following the cutback in federal EV subsidies, which were needed to lower manufacturing costs and incentivize consumers to buy EVs,” he said.