Iran war drives up costs, but expensive vehicles continue to sell

DETROIT — General engines said Tuesday that the war in Iran was driving up the costs of its business, but that inflated consumer spending, such as rising gasoline prices, has not deterred buyers from buying expensive vehicles.

GM CEO Mary Barra said the Detroit automaker continues to monitor any changes in customer spending, but so far the company’s vehicle lineup has remained healthy.

GM said it recorded an average transaction price of $52,000 for vehicles in the first quarter, which was in line with last year. The industry average new vehicle transaction price for March, the most recent data available, was $49,275, according to Cox Automotive.

“I think the biggest variable we look at is how long the conflict lasts and what it does from a cost perspective in logistics, supply chain, and whether that ends up impacting a mix change, but, to date, we haven’t really seen that,” Barra said during the company’s first-quarter earnings conference call Tuesday with investors.

Barra’s comments follow consumer confidence falling to a record low in April as fears grew over rising energy prices and the broader impact of the war in Iran, according to a University of Michigan survey earlier this month.

They also come after the company reported a 9.7% drop in first-quarter sales from the unusually high level in March 2025. GM also said it was facing tighter inventories, particularly on its full-size pickup trucks, as the company reorganized to update vehicles for later this year.

Barra said that if there were any major changes, including a more apparent shift to cheaper or fully electric vehicles, the company also felt well-positioned to meet those needs.

GM Chief Financial Officer Paul Jacobson and Barra said the Detroit automaker continues to offset rising costs as best it can by improving warranties, cutting costs and potentially delaying some hiring.

“Although our operational performance remains strong, as evidenced by our excellent first quarter results, the war in Iran has increased our costs and its duration remains uncertain,” Barra said. “We are working to offset these cost pressures by reducing spending in other areas and continuing to achieve efficiencies across the business.”

GM executives specifically pointed to rising energy and logistics costs due to the war in Iran and its impact on oil, but they declined to disclose the exact amount of that impact.

On a broader basis, GM said Tuesday that its first-quarter performance is expected to offset incremental increases in raw material and freight costs — including those related to logistics and higher DRAM chips — by $1.5 billion to $2 billion for the year.

Dynamic random access memory, or DRAM, chips are essential semiconductors for powering infotainment, digital clusters, advanced driver assistance systems and EV systems in vehicles.

But DRAM costs are not linked to the war in Iran. These price increases come from growing demand for the chips, including outside the automotive industry, according to industry experts at S&P Global Mobility.

“Automotive is not the only industry vying for DRAM. The current supply crisis is driven by the explosion of AI, particularly in data centers, where high-bandwidth DRAM (HBM) is in high demand. As a result, major DRAM makers are reallocating wafer capacity to serve this more lucrative market,” according to a Feb. 26 article from S&P Global Mobility.

Jacobson said Tuesday that the company has “no real concerns” about supply chain shortages related to the war in Iran, particularly regarding raw materials, at this time.

“We do not anticipate or worry about any shortages at this time, and I believe the supply chain team has continued to prove its resolve by taking on a new challenge, as we have seen them do in years past,” he said.

GM said Tuesday that it has and will continue to divert its vehicle shipments, including its highly profitable full-size pickup trucks and SUVs, to the United States rather than the war-torn Middle East.

“Usually it’s a very strong market. So once this conflict ends, I think there will be potential,” Barra said.