Morgan Stanley Bluntly Asks GM CEO: How Does It Plan To Profit From EVs When Tesla Struggles?

GM is faced with some tough questions after announcing its quarterly earnings

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As the auto industry shifts into an electrified future, legacy players like General Motors are navigating tough questions about profitability, innovation, and long-term strategy. And while GM’s leadership is hinting at a pivot toward automation, some investors remain skeptical about whether the company can thrive in the electric vehicle era, especially when even Tesla, the segment’s trailblazer, continues to wrestle with margins.

Read: Tesla’s New Budget Car Could Be A Model Y That’s All Y And No Model

While GM recently beat Wall Street’s quarterly earnings expectations, the numbers told a more complicated story. Second-quarter profits fell sharply year-over-year, from $2.9 billion to $1.9 billion. Adding to the pressure, the company took a $1.1 billion hit tied to President Trump’s tariffs, further straining the balance sheet.

If Tesla Can’t, How Can GM?

In light of these headwinds, Morgan Stanley analyst Adam Jonas asked GM boss Mary Barra how GM can expect to build and sell its EVs profitably, without the company following Tesla with massive AI and autonomy investments.

“Elon seems to be also exiting the auto industry, clearly pulling capital out of the business and doubling down on AI, autonomy, and robotaxis,” Jonas said. “So how does GM expect to be profitable with EVs when players like Tesla apparently cannot?”

Automation, But Not the Tesla Kind

According to Barra, there are partnerships GM is “looking at” in the field of automation, Fortune reports. However, she said this is primarily focused on improving efficiency at its car factories, meaning GM has very little interest in becoming a tech-focused company, like Tesla. In other words, GM is interested in smarter factories, not necessarily smarter cars.

“Overall, we’re focused on what’s going to drive manufacturing optimization,” GM’s CEO answered. 

GM’s strategy also came under fire from analysts at Piper Sandler, who don’t expect the automaker to climb out of its relatively modest valuation, currently sitting at about five times next year’s projected earnings. “In our view, if GM and other traditional automakers want to emerge from their multiyear funk, they don’t need smart tactics, they need bold strategic changes,” the firm stated.

Tesla’s Premium Is About More Than Cars

By contrast, Piper Sandler sees Tesla’s valuation at 140 times its estimated 2026 earnings, as justified, thanks largely to its aggressive push into AI and robotics. It’s not just about the cars anymore; it’s about the potential for an entirely new business model. And for now, GM appears to be taking a more cautious road.