Five auto insights investors should know of the best Bofa analyst

DETROIT – The automotive industry has unprecedented disturbances and uncertainty with regard to regulations, electric vehicles, software innovations and competition from China.

Such disruptions have been in manufacturing years, but many of the problems arise as soon as possible, causing chaos for car manufacturers and their plans for new vehicles.

“The unprecedented head of the head EV has wreaked havoc on product plans,” said the Top Bank of America Securities Analyst John Murphy in the company's “Car Wars” annual report. “The next four years + will be the most uncertain and volatile time of the product strategy.”

The exclusive “Car Wars” report predicts future products and plans in the coming years. The report thesis is that the replacement rate (or the percentage of vehicles that should be replaced by more recent models) lead the age of the showroom, which leads to a market share, which stimulates the benefits and the share prices.

Automobile manufacturers higher at an average replacement rate in the industry of 16% in the next four years include Tesla (22.4%), Honda Motor (16.9%), Hyundai Motor / Kia (16.5%) and Ford engine (16.1%), according to Car Wars. At the bottom of the analysis are Nissan engine (12.3%), Toyota Motor (13.7%) and traditional European car manufacturers (15.2%). General Motors is 15.7%, while Stelllantis is 15.4%.

Aside from the replacement rates, Murphy made several predictions on the automotive industry on Wednesday. Here are five investors who should know:

Murphy expects the expenses and depreciations of around 1.9 billion dollars that Ford announced last year due to the cessation of an entirely electric SUV will be the first of many losses for car manufacturers concerning electric vehicles.

“There are a lot of difficult decisions that will have to be made,” he said on Wednesday during an event of the Automobile Press Association in the suburbs of Detroit. “Based on [‘Car Wars’] Study, I think we are going to see scriptures of several billion dollars that flood the headlines for the next few years. “”

Car manufacturers have rushed to spend billions of dollars in recent years for electric vehicles in anticipation of a market that has not developed as quickly as expected.

In the midst of EV uncertainty, many car manufacturers have pivoted “customer choice”, which means significant investments in other technologies such as hybrid rechargeable hybrids and vehicles, as well as in traditional vehicles with internal combustion engines (ICE).

Due to this volatility and this uncertainty, Murphy said that car manufacturers should strongly look into their main products, including internal combustion engines, to generate capital.

“Really, everyone looks back in their hearts in the next four years in very uncertain times,” said Murphy, noting that money “will be extremely important” for car manufacturers in the years to come.

This year's “Car Wars” Investors' Note from this year highlights this change: “The ice period presents itself as EV Greeze plans.”

The uncertainty of the industry is not exclusive in the United States, the Chinese automotive industry – the world's largest market for car sales – is in the midst of the prize war and blocking sales.

“What you see in China is a little disturbing because there is a lack of demand; there is a drop in extreme prices, and there is a lot of export that has increased, especially in the last four or five years. Essentially neutral to more than 7 million units last year,” said Murphy.

The best Bofa analyst has described it as the Chinese market starting to “implode on itself” because of the price war, which should cause mass consolidation of hundreds of automotive brands in China.

In China, the average retail price of cars has dropped by around 19% in the past two years for around 165,000 yuan ($ 22,900), according to a nomi -week report this week, citing data from the AutoHome Research Institute industry.

The price reductions have been much stronger for hybrid or range vehicles, 27% in the past two years, while battery cars have seen the prices reduced by 21%, according to the report. He noted that traditional cars fueled by fuel experienced a price drop of 18% lower than average.

While very little exports come to the United States, Murphy said that Chinese brands were finally expecting competition on the market. However, he warned that it might be preferable to protect the American market from Chinese brands in the short term to avoid such problems at the national level.

“I don't just think about technology or geopolitical technology, whether you really want to move away from the United States of China. It can simply be the massive excess capacity from which you want to protect the American market until it works itself and we see massive consolidation on the Chinese market,” he said, adding that there is a good reason for massive prices on imports of Chinese cars.

“Because Wars” predicts that there will be a change in the introductions of new vehicles during the second half of this decade, while car manufacturers refocuses products from products and short -term replacement rates.

A major change is in cross vehicles – which have a combination of characteristics of the SUV and the car – which have grown considerably in popularity in recent decades.

Bofa reports that the crossover “overvoltage is over”. For the first time almost 20 years, Murphy said that under-represented crossroads against launching gains in the past 10 to 20 years.

“What is wild this year is that we expect 159 models to be launched over the next four years. Last year was more than 200; traditionally, it is more than 200,” said Murphy. “We have never seen this kind of change before.”

Part of the quarter occurs while the automakers of Detroit – the main producers of these vehicles – focused on the update or overhaul of their full size vans.

Japanese car manufacturers have also had a rate of unusually volatile products, emphasizing cars, according to the report.

Investors have been skeptical of many automotive actions in recent years, as expected from the expected growth areas.

But Murphy thinks that there is still a notable potential for car manufacturers as well as their retailers in software – an area of ​​intervention for companies recently that has not grown up than expected either.

“In the short term, he takes advantage of connectivity, to continue what we know is a very lucrative part of the value chain,” said Murphy. “They have been somewhat extinct from the lack of attention to the consumer and a concessionaire body which must be reworked to a certain extent significantly, will create a real opportunity.”

The secondary market and business industry with dealers, including sales and services, represents 2.4 billions of dollars in income, said Murphy. Of these $ 1.2 billions of dollars captured by dealers, they generate approximately $ 53 billion in profits. He maintains that there are 1.2 billion of additional dollars who escape car manufacturers, with $ 133 billion in profitability that could be won thanks to vehicle connectivity.

“It is essential to the vision that you get the dealerships on board with it and that you are driving this,” Murphy said about bringing customers into dealerships instead of unanteen repair workshops.