General Motors (GM) is at a pivotal juncture in 2025. Despite a challenging macroeconomic backdrop, including newly imposed tariffs, Morningstar has reaffirmed its BUY call with a fair value estimate of $73 per share, significantly above the current market price of $45.90. The firm’s cost transformation, electric vehicle push, robust North American performance, and aggressive buyback program are seen as key levers for long-term shareholder value. However, uncertainties tied to tariffs, slowing EV demand, and intensified global competition continue to weigh on sentiment.

Valuation Remains Attractive Despite External Pressures

Morningstar values GM at $73, giving the stock a substantial upside of over 58% from current levels. This discount is reinforced by a Price/Fair Value ratio of 0.63, highlighting deep undervaluation.

GM’s market cap currently stands at $45.67 billion, and it trades at a trailing P/E of just 4.53, which is far below industry averages. Such metrics position GM as a value play in the auto sector, especially when considering its profitability metrics and capital discipline.

Tariffs: A Drag, But Not a Deal Breaker

The recent implementation of 25% U.S. tariffs on foreign vehicles and parts, including from Canada and Mexico, presents a near-term headwind. However, Morningstar models this impact to last just nine months, resulting in a reduction of GM’s fair value from $81 to $73.

Despite the noise, GM remains less affected than peers due to its USMCA compliance and established production base in North America. A significant proportion—approximately 54%—of GM’s U.S.-sold vehicles are assembled domestically, helping to shield margins.

GM’s Strategic Pivot: Cost Cuts, EVs, and Capital Return

The automaker is executing a comprehensive transformation. Between 2023 and 2024, GM trimmed operating costs by $2 billion, slashed salaried headcount, and overhauled underperforming vehicle lines. These efforts dropped GMNA’s breakeven point to 10–11 million units in annual U.S. sales.

The company is doubling down on electric vehicles, with $35 billion earmarked through 2025. GM aims to offer 30 BEV models by mid-decade and transition entirely to zero-emission vehicles by 2035. Its current EV lineup includes the Cadillac Lyriq, Chevrolet Equinox EV, and GMC Hummer EV.

Buybacks and Dividend Growth Signal Confidence

GM has embraced aggressive shareholder returns. It completed a $10 billion accelerated share repurchase (ASR) and added another $6 billion in buyback authorization in early 2025.

Simultaneously, GM raised its quarterly dividend to $0.15/share, a 25% increase, reflecting management's confidence in the company’s resilience despite tariff-related uncertainty. The dividend yield now stands at ~1.0%, with room for further increases.

China and Cruise: Mixed Bag of Risks and Rewards

China remains a challenge. While GM took a $4 billion hit in late 2024 due to joint venture restructuring, it expects modest profitability in 2025. Morningstar now models $800 million in equity income over five years, a notable improvement from the previous $1.8 billion loss projection.

The firm also paused its Cruise robotaxi program, shifting focus to Level 3/4 autonomous features for personal vehicles. Some Cruise resources are being integrated into the Super Cruise platform, aligning with GM’s push for monetizable autonomy via consumer features.

Financials: Resilient Despite Volatility

Even in a turbulent 2024, GM delivered double-digit margins and impressive free cash flow, emphasizing its operational efficiency.

Risks: EV Slowdown, Tariff Duration, Global Competition

Morningstar outlines several key risks:

Tariff Duration: If U.S. tariffs persist beyond 2025, GM’s fair value could decline further.

EV Demand: Softening sales in the U.S. and Europe pose a threat to GM’s ambitious electrification goals.

Rising Competition: Hyundai-Kia, Tesla, Rivian, and Chinese EV entrants may challenge GM’s global market share.

Nonetheless, the firm believes GM is adequately hedged with diversification, scale, and North American dominance.

Investor Takeaway: An Undervalued Opportunity in a Restructured Giant

General Motors is no longer the bloated legacy automaker of the past. Through disciplined capital allocation, strategic exits (Russia, India, Australia), and EV reinvention, GM is reengineering itself into a leaner, more competitive entity.

With its stock trading at a steep discount to intrinsic value and management signaling confidence via buybacks and dividends, investors with a medium- to long-term horizon may find compelling value in GM shares. Tariffs may temporarily cloud visibility, but the company’s structural improvements could deliver outsized gains as markets normalize.