'Rush' into new segments
The new product acceleration is due to a “rush” among automakers to enter more crossover, hybrid and ultraluxury segments, as well as the health of the U.S. market, Murphy wrote.
U.S. light-vehicle deliveries are forecast to rise in 2016, the seventh straight year -- they hit 17.47 million in 2015 -- and many analysts see volume remaining above 16 million a year through 2021.
Bank of America expects U.S. car and light-truck demand to peak in 2018 at around 20 million vehicles before declining to about 14 million in 2026, Murphy said at the APA luncheon.
The average age of all cars and light trucks in a typical showroom is forecast to decline from 3.3 years in 2017 to 1.9 years by 2020, a forecast Bank of America attributed to increased competition and “solid” product activity that is “consistent with the later stages of a cyclical recovery.”
“Intensified competition and the resulting new products are, of course, beneficial for consumers, who will enjoy the choice of new cars and trucks,” Murphy wrote. “However, this new product comes at a high cost to [automakers], which will need to increasingly leverage global platforms and simplify product offerings to remain efficient and competitive.”
While automakers might struggle to differentiate themselves from competitors over the next four years, suppliers and dealers could benefit, Murphy said. He said automakers are likely to turn to suppliers for parts that will make new and redesigned models stand out and because new product is crucial to drawing consumers into showrooms.
About 31 percent of new launches are expected to be crossovers between 2017 and 2020, up from 28 percent between 2007 and 2016. Light trucks are expected to make up 27 percent of launches, up from 21 percent.
"This focus on crossovers and trucks is a great thing for mix and, ultimately, profitability in the industry over the next four years," Murphy said.
GM, Ford Motor Co., American Honda and Fiat Chrysler are all projected to outpace the industry’s average replacement rate between 2017 and 2020, while Toyota Motor Corp. and Nissan Motor Co. are expected to lag.
GM product redesigns and launches are set to be slow through the 2017 model year but are expected to pick up when it introduces redesigned versions of the Chevrolet Traverse and Equinox crossovers for the 2018 model year.
Ford, FCA plans
Ford, driven by redesigns in the 2019 and 2020 model years, should have a replacement rate of 86 percent through 2020, good for second industrywide. While that would normally mean a larger market share for Ford, Murphy said management “remains focused on maximizing profit” and could instead trade market share for higher prices or profits.
FCA has “relatively successfully worked through a lull in its product cadence,” the report found, meaning the automaker should be able to maintain its 12.8 percent market share moving forward as its launches a mix of crossovers and light trucks over the next four years, especially the 2018 model year and beyond.
Honda, whose replacement rate in 2017 and 2018 is well above the industry average at 54 percent, should “at least support market share” moving forward as the company’s product cycle remains in a “sweet spot,” the study said.
“Honda’s consistent focus on a well-planned-out, 4-5 year product redesign cycle on a simplified two-brand lineup sets it apart from most automakers,” Murphy said in the report.
Murphy said that while Toyota and Nissan will lag behind the industry when it comes to launches and redesigns, it is “unlikely” that they will cede market share.
European and Korean automakers are at risk of losing market share, the report says. Volkswagen, Hyundai and Kia are focused heavily on cars, creating risk in a market that‘s increasingly favoring crossovers and trucks.
During a question-and-answer session with reporters after the presentation, Murphy said he’s skeptical of Tesla Motors Inc.’s ambitious plan to produce 500,000 vehicles a year by 2018, saying 300,000 by 2020 is a more realistic figure.
Tesla CEO Elon Musk “has an interesting thing going on,” Murphy said. “I don’t think it’s going to be all that successful.”
Still, Murphy said Musk and Tesla are doing “some really good things” that benefit the industry as a whole.
“He may ultimately not be successful in his own venture -- he might be -- but the idea that he’s pushing the powertrain discussion forward, the electrification … it’s helpful for the industry,” Murphy said.
He also touched on the impact of autonomous vehicles, saying they could allow for faster speed limits on roadways since the need to slow down because safety concerns could be eliminated. He said that could save consumers a significant amount of time each day to be productive in other ways, making autonomous vehicles more appealing to potential customers and providing a boost to the economy.
“That’s real utility, and that’s a stimulus to the economy that is major,” Murphy said. “Because all of a sudden, you start changing the dynamics of where people live.”
He said he sees three levels of car ownership developing in the future as car-sharing services and autonomous technology gather momentum. Murphy said urban drivers will see car-sharing and ride-sharing as appealing options, while dense suburban areas could see a mixture of ownership and sharing, with less dense areas opting mostly for ownership.