On July 21, General Motors published its financial results for the second quarter of 2026.

During this period, the company's revenue reached $48 billion, a 1.9% increase year-over-year. Driven by high-margin pickup trucks and SUVs in North America, adjusted earnings before interest and taxes (EBIT) hit $3.9 billion, up 29.8% from a year ago, with adjusted automotive free cash flow standing at $5 billion.

Supported by this core business performance, General Motors raised its full-year profit guidance for the second time this year.

However, the growth in adjusted profit was not reflected in the net income on the books. In the second quarter, net profit attributable to shareholders was $1.3 billion, a sharp decline of 31.1% year-over-year.

The primary factor affecting book profit was a $2.3 billion charge recognized in the period related to restructuring of electric vehicle (EV) capacity and manufacturing layout. This expense mainly stems from commercial negotiations with suppliers and joint venture partners, losses from contract supply agreements, and asset adjustments tied to compliance, and is not related to restructuring costs in the Chinese market.

Another set of data revealed pressure on General Motors' business in China: based on total sales volume disclosed in its 10-Q filing, General Motors and its Chinese joint ventures sold approximately 706,000 vehicles in the first half of 2026, a 20.7% decrease year-over-year, with market share dropping from 7.2% to 6.8%.

The North American market contributed roughly 87% of General Motors' adjusted EBIT in the first half; while sales and share declined in China, equity income from the joint venture business recovered after restructuring.

This "two-sided earnings report" shows General Motors relying on high-margin fuel vehicles, SUVs, and pickups in North America for cash flow, while simultaneously adjusting capacity and product mix in China to address the sales decline. The Chinese joint venture has returned to profitability, but whether this profit recovery can lead to a rebound in sales remains to be seen.

For General Motors, the core issue of competition in China has shifted from short-term sales growth to whether it can maintain joint venture profitability and regain market share after scaling down operations.

North American Market Provides a Safety Net

The most notable feature of General Motors' second-quarter report is the simultaneous occurrence of profit growth in North American operations and a decline in the company's book net income.

Looking at segment data, General Motors' North American operations reported adjusted EBIT of $3.446 billion in the second quarter, a 42.7% increase year-over-year, forming the primary source of the overall adjusted EBIT of $3.943 billion.

Despite wholesale sales in North America remaining largely flat in the quarter, profit growth came primarily from product mix, pricing, and cost control.

From a financial structure perspective, full-size pickup trucks and large SUVs remain the profit pillars for General Motors in the North American market. While the U.S. auto industry saw sales decline by 3.4% year-over-year in the first half, General Motors' North American adjusted EBIT reached $7.107 billion, accounting for about 87% of the company's total. The company attributed this in its 10-Q filing to product portfolio and cost discipline.

This means that despite contracting sales in the U.S. market, General Motors is still generating cash flow from high-margin fuel vehicles and cost control. The second-quarter adjusted automotive free cash flow of $5 billion also supported management's decision to raise full-year profit guidance for the second time this year.

However, the other side of the earnings report shows a 31.1% year-over-year decline in net profit attributable to shareholders.

General Motors' second-quarter adjusted EBIT was $3.943 billion, while net profit attributable to shareholders was $1.305 billion. These two figures are not on the same basis; the former excludes special items. The $2.3 billion net charge related to the EV strategy restructuring was included in the book profit for the period.

This charge reflects General Motors' reassessment of its EV capacity and manufacturing layout but cannot be simply equated to the company abandoning electrification.

In 2025, General Motors recorded a $7.9 billion charge for EV strategy restructuring; in the first half of 2026, it recognized another $3.4 billion in net charges. These costs have weighed on book profits for several consecutive quarters.

Of the $2.3 billion net charge in the second quarter of 2026, approximately $1.3 billion came from commercial negotiations with suppliers and joint venture partners, about $1.1 billion from losses on contract supply agreements, and roughly $0.5 billion related to compliance-related assets, offset by approximately $0.66 billion in cost allocation recoveries.

This charge does not represent all cash outflows for the period. General Motors disclosed that about $1.6 billion of it will impact cash flow when paid, and the company expects additional charges may still occur in 2026.

But General Motors also stated that it believes the major cash expenses related to the EV strategy restructuring have been largely recognized, and the current retail portfolio of Chevrolet, GMC, and Cadillac EV models is not affected by this restructuring.

From an operational perspective, General Motors is using periodic charges to clean up the legacy of its previous EV capacity and supply chain contracts. This will depress current book profits, but it should not be directly interpreted as the core North American business losing its cash-generating ability.

The issue is that this profit structure is heavily dependent on the North American product mix. Any changes in the pricing and demand for pickup trucks and large SUVs will reduce General Motors' buffer room.

The real question General Motors needs to answer is: can it generate stable commercial returns from its EV business before the cash flow from fuel vehicles is exhausted?

Chinese Market Showing Gradual Recovery

Compared to profit growth in North America, the situation in the Chinese market is more complex: sales and market share are declining, yet profits have been recovering sequentially.

In the second quarter, General Motors delivered approximately 357,000 vehicles in China, bringing the first-half total to 706,000, a 20.7% decrease year-over-year. This decline is several percentage points larger than the overall 16.5% drop in China's passenger car market. General Motors' market share in China fell from about 7.2% to roughly 6.8%.

Data from SAIC-GM provides more specific details. Its cumulative sales in the first half were 231,200 vehicles, with approximately 108,000 sold in the second quarter, down nearly 20% year-over-year.

It is understood that by the end of 2025, SAIC-GM's design capacity was 1.452 million vehicles, a reduction of 456,000 vehicles, or about 24%, from 1.908 million vehicles a year earlier. Rough calculations suggest that SAIC-GM's capacity utilization rate in the first half was about 32%, meaning roughly two-thirds of its capacity was idle.

Brand-level differentiation is also quite clear.

Buick remains the sales pillar for SAIC-GM, accounting for about 70% of the total, but sales of its main models are far from their peak. The Envision had retail sales of around 6,550 units in June, while the GL8 fluctuated around 3,000 units monthly, a vehicle that was once a top-selling MPV with monthly sales exceeding 10,000 units. However, since last year, Buick's high-end new energy brand, Zhijing, has launched several models and is becoming an important anchor for Buick's transformation in the new energy sector.

As for Chevrolet, industry estimates suggest its first-half sales were so low that even public data is lacking. According to data from Dongchedi, its first-half sales were merely 36 units, making it very marginal. Additionally, Cadillac's EV models, such as the IQ Lyriq, are selling in the low hundreds per month.

In the quarterly report and earnings call, management's discussion of the Chinese market no longer focused on "growth" and "expansion" but instead mentioned "business restructuring" and "optimizing cost structure." In the second-quarter report, General Motors recorded a restructuring charge of approximately $177 million related to China, involving impairment of joint venture equity investments and related expenses.

There is a timeline behind this. The joint venture agreement between SAIC-GM and SAIC expires in June 2027, and how to renew it is a current major issue.

At the SAIC-GM dealer partner summit in March this year, SAIC-GM General Manager Lu Xiao disclosed the latest progress in cooperation between the shareholders. He stated: "The shareholders have approved a series of subsequent investment plans, expressing unwavering and full support for SAIC-GM's medium-to-long-term strategic development, focusing on the Buick and Cadillac brands, continuously increasing resource investment, supporting the rapid implementation of competitive products and technologies, and jointly helping SAIC-GM achieve high-quality, sustainable, long-term development."

However, with significant capacity currently idle and market share shrinking, these factors are redefining the value of this joint venture.

General Motors' new approach may be manufacturing in China for global export.

Starting in 2025, General Motors has gradually begun incorporating vehicles produced by its Chinese joint ventures into its global export network. The Wuling Bingo, rebadged as a Chevrolet, is being sold in Brazil, Mexico, Latin America, and parts of Africa.

The supply chain foundation supporting this strategy is already in place. During the 2025 Shanghai Auto Show, Lu Xiao noted that the localization rate for SAIC-GM parts has reached 95%.

Furthermore, the "Xiaoyao" architecture released by SAIC-GM in 2025 can simultaneously support three technical routes: pure electric, plug-in hybrid, and range-extended electric.

At the end of 2025, General Motors created the position of Senior Vice President of Global Exports and Retail Innovation, appointing He Siwen, previously responsible for China operations, to the role. This personnel arrangement is also seen by outsiders as a signal that China is transitioning from a sales market to a node in the global supply chain.

A former employee of a joint venture automaker analyzed for Wall Street CN that General Motors is currently in a structural predicament in China. Regaining market share in a market with the highest competitive intensity globally and a new energy vehicle penetration rate exceeding 60% requires substantial capital and resources, inevitably impacting finances.

The A and B sides of General Motors' second-quarter earnings report represent a typical microcosm of the global automotive industry as it navigates a technological chasm. In the global market, fuel vehicles still have some market space; but in the highly competitive Chinese market, the market has undergone a structural shift.

With the joint venture agreement approaching expiration and both products and capacity being adjusted, the key to determining the long-term fate of this century-old automaker in China will be whether General Motors can convert the profit recovery of its Chinese joint venture business into a rebound in sales and market share.