DETROIT — John Murphy, a senior auto analyst at Bank of America/Merrill Lynch, presented Car Wars 2019-2022: The U.S. Automotive Product Pipeline at an Automotive Press Association meeting on Thursday afternoon in Detroit. He predicts that General Motors will be the first to mass produce self-driving vehicles.
“There’s a lot of work to do with autonomous,” he said. “2021 is the year companies are targeting for changeover to Level 4. GM’s commitment is a lot greater than they are given credit for. GM is way out in the lead on this. I expect 100,000 EV Cruises next year. They can manufacturer at scale.”
The senior auto analyst said he believes in Waymo. “I think they’re pretty real. Krafcik adds a lot of credibility. They may be one of the first movers along with GM.”
Murphy predicts we’ll see another down year for automotive vehicle sales. People who bought cars last year are not likely to buy for three or more years. He added that automakers are continuing to offer big incentives.
“We’re looking for a trough in 2021 of 13 million vehicles,” the senior auto analyst explained. “We expect a significant recovery thereafter. A big pickup after that. The industry has relied very heavily on leasing. Lease payments roughly consistent just about $400. Loan payments increasing to $450-500. Four million units are coming back in 2019.”
He predicts that gas prices will continue to increase. Keep in mind that the basic vehicle used about 500 gallons per year. That’s a $1,000 hit to consumers’ operating budget. That wipes out the benefit of the recent tax cut.
“President Trump created a lot of volatility,” he said. “Now, we’re on the downside of the cycle.I think investors are hitting the pause button and waiting to execute. Interest rates still historically low. Trade downs to smaller vehicles at lower point or extend their lease. Rising rates are not that scary. Tariffs are very difficult to pass it onto consumer. We don’t have a state of facts or real proposals to work off of. Incremental risk to the industry.”
Other findings from the Bank of America/Merrill Lynch report:
- Miles driven seem to be tapering off. We’re driving 3.2 trillion miles per year.
- Most average vehicles use about $3,000 in raw materials to build.
- Average price of vehicle components for internal combustion engine vehicle: $14,150
- Average price of components for an electric vehicle: $35,005
“Car Wars is reasonably accurate,” Murphy said. “Our best guess as to how things will shake out. We’re seeing a record number of product being launched over the next four years. What looks to be a great thing for the industry could delay product launches. Honda at the low end in the next two years. Volkswagen has a ton of crossovers launching. Most folks are chasing electric vehicles. The Porsche Taycan EV is giving Tesla a run for the money.”
Forty-three percent of new launches will be crossover vehicles. We’ll see a massive surge in the crossover, he predicted. It’s going to be the most crowded segment. Powertrains are a little big tougher to forecast. Only half will be internal combustion engines. The other half will be hybrids/electric/fuel cells.
“Elon Musk constantly chastises the German market,” Murphy explained. “They don’t really appreciate that. There’s an over emphasis by the Germans on electric. The cost basis needs to be worked down for mass market EVs. It becomes very difficult.”
The senior auto analyst said the industry needs to push for a more connected network. It’s necessary to facilitate autonomy. Handicapped and blind people can get in a vehicle and travel anywhere. You can monitor them the whole way with cameras and speakers.
When asked about vehicle subscription programs, Murphy said: “Right now is a dangerous time to start running subscription services. GM’s pricing Cadillac program at $1,800 range. It might make sense in New York. It breaks down. I’m not a huge believer in their success right now.”
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