Cadillac’s all-electric 2025 Escalade IQ luxury SUV will be on display at the North American International Auto Show Press Day on September 14, 2023 in Detroit, Michigan.
Rebecca Cook | Reuters
Detroit — general motors said on Tuesday that the Iran war is driving up costs for its business, but rising consumer spending, including soaring gas prices, is not deterring buyers from spending on expensive cars.
GM CEO Mary Barra said the Detroit automaker continues to monitor changes in customer spending, but so far the company’s fleet mix remains healthy.
GM said the average vehicle transaction price in the first quarter was $52,000, about the same as a year ago. The industry-wide average new car transaction price in March, the most recent data available, was $49,275, according to Cox Automotive.
“I think the biggest variables that we’re looking at are how long the dispute lasts, what happens in terms of logistics and overall supply chain costs, and whether it ends up having any impact on the mix, and so far we haven’t really seen that,” Barra said during the company’s first-quarter earnings call with investors on Tuesday.
Barra’s comments come after consumer confidence fell to an all-time low in April amid rising concerns about rising energy prices and the wider impact of the Iran war, according to a University of Michigan survey earlier this month.
The announcement also comes after GM reported that first-quarter sales were down 9.7% compared to March 2025, which was an unseasonably high level. GM also said that inventory is particularly tight, especially for full-size pickup trucks, as it rebuilds its system to update its fleet for the second half of this year.
Barra said he feels the company is well-positioned to respond to any major changes, such as cheaper vehicles or a clear shift to fully electric vehicles.
GM Chief Financial Officer Paul Jacobson and Barra said the Detroit automaker continues to offset higher costs as much as possible through improved warranties, increased cost efficiencies and, in some cases, postponed some hiring.
“While our operating results continue to be strong, as reflected in our excellent first quarter results, the Iran war has increased our costs and the period remains uncertain,” Barra said. “We are working to offset these cost pressures by reducing spending in other areas and continuing to pursue efficiencies across our business.”
GM executives specifically cited rising energy and logistics costs due to the Iran war and its impact on oil as factors pushing up costs, but did not reveal the exact amount of the impact.
More broadly, GM said Tuesday that its first-quarter results are expected to offset a gradual increase of $1.5 billion to $2 billion annually in logistics and goods and transportation costs, including higher-performance DRAM chips.
Dynamic random access memory (DRAM) chips are essential semiconductors for powering vehicle infotainment, digital clusters, advanced driver assistance systems, and EV systems.
However, the cost of DRAM has nothing to do with the Iran war. Industry experts at S&P Global Mobility say the price hikes are due to increased demand for chips, including from outside the auto industry.
According to a Feb. 26 post in S&P Global Mobility, “The auto industry is not the only one vying for DRAM. The current supply shortage is driven by the AI explosion, and high-bandwidth memory (HBM) DRAM is in high demand, especially in data centers. As a result, major DRAM manufacturers are reallocating wafer production capacity to serve this more lucrative market.”
Jacobson said Tuesday that the company has “no real concerns” at this time about supply chain shortages related to the Iran war, particularly regarding raw materials.
“We are not predicting or worrying about any shortages at this time. We believe our supply chain teams continue to prove their resolve through further challenges, as we have seen over the past few years,” he said.
GM said Tuesday it has and will continue to divert shipments of vehicles, including lucrative full-size pickups and SUVs, to the United States rather than the warring Middle East.
“Normally this is a very strong market. So I think there is room for upside after this conflict is over,” Barra said.
