GM vs. TSLA: Which Auto Giant is a Better Investment Option Now?

Industry Overview - A new wave of auto tariffs is impacting the U.S. auto industry, specifically targeting imported parts rather than fully assembled vehicles, affecting nearly every vehicle produced in the U.S. [1] - The implementation of these tariffs could lead to tens of billions in additional costs for manufacturers, likely resulting in higher prices for consumers [1][2]. General Motors (GM) - GM is the top-selling automaker in the U.S., with strong demand for its pickups and SUVs, and has consistently beaten earnings expectations [3]. - Due to the new tariffs, GM has lowered its full-year guidance, expecting adjusted EBIT between $10 billion and$12.5 billion, down from $13.7 billion to$15.7 billion, and net income forecasts have been trimmed to $8.2 billion–$10.1 billion from $11.2 billion–$12.5 billion [4]. - GM's long-term strategy remains intact, particularly its shift towards electric vehicles (EVs), where it was the second-largest EV seller in the U.S. last reported quarter [7]. - The company has achieved "variable profit positive" status for its EV lineup, meaning it now covers production costs, and aims to further reduce losses [7]. - Strategic partnerships with companies like Vianode, LG Chemical, and Lithium Americas have strengthened GM's EV supply chain, and the company has met its $2 billion cost reduction target in 2024 [8]. - GM ended the first quarter with$20.7 billion in cash and is making progress in restructuring its operations in China [8]. Tesla (TSLA) - Tesla is currently facing challenges, including falling deliveries and increased competition from legacy automakers and new entrants in the EV market [10]. - The company missed its earnings expectations in the first quarter of 2025, and CEO Elon Musk's political involvement has distracted from core operations [10][11]. - Tesla has been offering steep discounts to maintain sales, which is pressuring its automotive profit margins [11]. - Despite challenges in its core EV business, Tesla's energy generation and storage segment is growing rapidly and is more profitable [14]. - Tesla has $37 billion in cash as of March 31, 2025, and a low debt-to-capital ratio of 7, providing flexibility for new investments [14]. - The company is betting on self-driving technology and plans to launch robotaxi services and develop a humanoid robot, but these projects are still in early stages and carry execution risks [15][16]. Investment Comparison - Tesla is trading at a forward sales multiple of 8.75X, above its five-year median of 7.72X, and has a Value Score of F, indicating it may be overvalued [17]. - In contrast, GM has a Value Score of A, with a forward sales multiple of 0.25X, below its five-year average of 0.32, suggesting it may be undervalued [17]. - Both companies are navigating economic uncertainty, but GM may be a better investment option due to its stability and grounded execution strategy compared to Tesla's current challenges [20].