The Bank of America Merrill Lynch conducted a study called Car Wars which is created to analyze the future product plans of automakers over the next four years. This report gives us some interesting projections not only as to how specific automakers will fare during that time but also how the entire market will continue to move. With these projections you can start to understand why some automakers are making dramatic changes to their lineups and why others are putting their investments in specific types of vehicles while deleting other models from their lines entirely.
This report projects the truck, SUV and crossover markets will continue to show strong sales and even grow from where they are now. This makes the fact that GM, FCA and Ford are all planning to launch new pickups during this four year span extremely important to their growth and profitability. FCA will have a new RAM 1500 by 2018, GM will have the new Silverado and Sierra a year later and Ford will launch the new F-150 lineup in 2020. This study actually suggests GM trucks could become the leader in the market over Ford by 2018, which might cause Ford to respond sooner than expected.
In another part of the study we see those brands that don’t have pickups or a strong presence of SUVs will do worse than the brands that do have them. This also leads into the replacement rate of vehicles which the brands that come from Korea and Europe have not announced as many replacements as some of the others and will therefore suffer at a weaker market position unless they find a way to come up with some new vehicles and even create a pickup truck lineup over the next four years, which is highly unlikely.
Because some brands are dedicated to replacing their lineup over the next few years the will continue to show growth and maintain a leading position in the market over those that only offer us updated models. This gives good reason for the replacement rates of 88 percent by GM, 86 percent by Ford, 85 percent by Honda and 84 percent by FCA. With these nearly complete replacement rates of their vehicles these brands will be able to focus on offering us the products we want with the technology we can enjoy in the market. Others that are close in this report are 79 percent by Toyota and 76 percent by Nissan to be two that are close to the industry average of an 81 percent replacement rate.
As for the entire market, the report projects the sales of new vehicles in the US will peak at 20 million in 2018 and then taper off. The expected tapering may result in as much as a 30 percent decrease in the sales of new vehicles by the year 2026. This means only eight years after the peak of sales in this industry we will see sales decline to around fourteen million new vehicles in the US. This is one reason we have already seen some automakers look to other industries to expand their income stream so they won’t face the same issues that plagued the industry in 2008.
Even though this report is only a projection, the basis it has in research and the history of the industry gives a good warning to automakers to listen to and understand. We get to see if this report will come true or if there are ways to change the projections through advanced technology and an increased interest of new vehicle shoppers over the next ten years.