{"id":227513,"date":"2022-07-01T11:05:53","date_gmt":"2022-07-01T15:05:53","guid":{"rendered":"https:\/\/www.thedetroitbureau.com\/?p=227513"},"modified":"2022-07-01T11:06:02","modified_gmt":"2022-07-01T15:06:02","slug":"recession-or-not-u-s-car-market-is-in-for-a-big-boom","status":"publish","type":"post","link":"https:\/\/thedetroitbureau.com\/2022\/07\/recession-or-not-u-s-car-market-is-in-for-a-big-boom\/","title":{"rendered":"Recession or Not, U.S. Car Market is in For a Big Boom"},"content":{"rendered":"\n

With the ongoing shortage of semiconductors and other key materials, U.S. car sales have slipped to their lowest levels since the end of the Great Recession \u2014 but that\u2019s created a major backlog of demand likely to result in a sales boom over the next few years, something even a recession won\u2019t slow down, according to a new study.<\/p>\n\n\n\n

\"New
Bank of America analyst John Murphy predicts auto sales will remain strong, even if a recession hits.<\/figcaption><\/figure><\/div>\n\n\n\n

Once supply line issues are resolved, that will \u201cunleash the upside,\u201d forecast John Murphy, the lead auto analyst with Bank of America Securities during a presentation Thursday to the Automotive Press Association in Detroit.<\/p>\n\n\n\n

\u201cWe have about 6 million units of pent-up demand,\u201d he said, referring to the annual \u201cCar Wars\u201d study put together by the financial institution. And that should yield sales volumes \u201csignificantly higher\u201d than what the industry has seen since COVID struck,\u201d likely topping 16 million annual sales in the coming years.<\/p>\n\n\n\n

An uncertain future<\/h2>\n\n\n\n

That are plenty of uncertainties facing the industry. It\u2019s unclear when supply lines will return to normal \u2014 some experts warning it could take until late next year or even 2024. And it will be a challenge, Murphy said, for automakers to restock depleted dealer inventories \u2014 which have slipped to barely 1 million vehicles, less than a third of what\u2019s considered normal this time of year.<\/p>\n\n\n\n

\"Visiting
BofA’s Murphy says this picture is going to be more and more common during the next few years.<\/figcaption><\/figure><\/div>\n\n\n\n

There\u2019s also the question of what happens with the U.S. economy. Interest rates are heading up and there\u2019s growing concern of a recession.<\/p>\n\n\n\n

But, said the analyst, \u201cWe\u2019re at a point where we\u2019re scraping along at the bottom in terms of volume.\u201d So, looking forward, there is \u201cprobably only an upside.\u201d<\/p>\n\n\n\n

Whether the industry settles into the 16 million range or tops 17 million, approaching a new sales record, could also depend on new vehicle pricing, said Murphy.<\/p>\n\n\n\n

Pricing problems<\/h2>\n\n\n\n

On the plus side, automakers have been able to maintain strong earnings during the current downturn, largely by slashing incentives and raising prices. But with the typical new vehicles buyer now spending more than $43,000, that could limit the market.<\/p>\n\n\n\n

\u201cYou wouldn’t be able to sell 17 million or 18 million vehicles at $43,000,\u201d cautioned Murphy. \u201cSo, we will probably see prices gravitate back to pre-COVID levels in the mid-$30,000 range,\u201d though not quickly.<\/p>\n\n\n\n

\"2023
Murphy tempered expectations about EV sales, saying the would likely account for about 10% of the market by mid-decade.<\/figcaption><\/figure><\/div>\n\n\n\n

And automakers could see a return of incentives, especially if companies facing the loss of market share decide to get aggressive. Murphy pointed to Stellantis and Nissan in particular.<\/p>\n\n\n\n

The rise of the EV<\/h2>\n\n\n\n

The type of vehicles Americans will be buying should be quite different by 2026, however. Automakers have begun to disinvest from their conventional, gas- and diesel-powered models, shifting focus to hybrids and all-electric vehicles.<\/p>\n\n\n\n

During the next four years, nearly 250 new or completely redesigned models will be introduced, according to the study, with hybrids, plug-in hybrids and battery-electric vehicles accounting for 60% of them.<\/p>\n\n\n\n

\u201cThe advent of alternative powertrain vehicles, most notably battery-electric, is here,\u201d Murphy said.<\/p>\n\n\n\n

But even as electrified technology becomes commonplace, it\u2019s yet to be seen how consumers will embrace it \u2014 especially those BEVs. The big problem is pricing.<\/p>\n\n\n\n

Tesla trouble<\/h2>\n\n\n\n

Currently, the Car Wars study shows it costs about $42,000 to produce the average all-electric model, about $10,000 more than a comparable vehicle with an internal combustion engine. And though manufacturers had hoped to narrow the gap, it\u2019s widening. That\u2019s because of a surge in the cost of components and critical raw materials. The price of lithium, for example, is up sevenfold this year.<\/p>\n\n\n\n

The general industry consensus has been that BEVs alone could take 20% of the U.S. new vehicle market by 2025, up from 5% this year and just 1% in 2019. But Murphy said the more likely mid-decade figure will be 10% unless BEV prices start to fall.<\/p>\n\n\n\n

Either way, the flood of new electrified vehicles could change the competitive landscape. And that\u2019s likely to be especially apparent in the all-electric segment where today Tesla holds a roughly 75% share. By 2025, said Murphy, that could slip as low as 11%<\/a><\/span><\/strong>, with Tesla being leapfrogged by both General Motors and Ford, each expected to capture a 15% share of the all-electric segment.<\/p>\n","protected":false},"excerpt":{"rendered":"

With the ongoing shortage of semiconductors and other key materials, U.S. car sales have slipped to their lowest levels since the end of the Great Recession \u2014 but that\u2019s created a major backlog of demand likely to result in a sales boom over the next few years, something even a recession won\u2019t slow down. Find out more at TheDetroitBureau.com.<\/p>\n","protected":false},"author":2,"featured_media":215984,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","footnotes":""},"categories":[7,8,5,1347,3332],"tags":[1094,4619,1017,6712,6713,417],"make":[],"post-state":[],"category_old":[],"acf":[],"_links":{"self":[{"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/posts\/227513"}],"collection":[{"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/comments?post=227513"}],"version-history":[{"count":3,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/posts\/227513\/revisions"}],"predecessor-version":[{"id":227518,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/posts\/227513\/revisions\/227518"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/media\/215984"}],"wp:attachment":[{"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/media?parent=227513"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/categories?post=227513"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/tags?post=227513"},{"taxonomy":"make","embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/make?post=227513"},{"taxonomy":"post-state","embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/post-state?post=227513"},{"taxonomy":"category_old","embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/category_old?post=227513"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}