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Auto Industry Outlook Forecasts 30 Percent Drop By 2022

The auto industry has enjoyed record sales years for much of this decade, but the party is expected to come to a close next decade.

Bank of America Merrill Lynch’s senior auto industry analyst John Murphy said the industry will likely face a 30 percent decline come 2022, The Detroit News reported last Wednesday. The drop won’t be a sudden one, but demand will continue to soften. The auto industry, like almost every other industry, is a cyclical one.

“The industry is going through this process of what it is, what it should do and how it should operate, and what its current business strategy should be, and it’s a challenge,” Murphy said.

Chevrolet Silverado at dealer

He added automakers are working to get their “core business” in good shape ahead of a downturn, which will leave automakers in better shape to continue investing in future technologies. Namely, those are autonomous cars and more electric vehicles.

This is the exact reason why GM said it executed a restructuring plan now, rather than waiting until things dip. It avoids the surprise factor ahead of time and saves money for when the automaker will likely need it most. The good news, Murphy said, is that the industry is expected to rebound later next decade and provide healthy growth again.

GM Renaissance Center Night Time - GM Ren Cen - Winter 2016 003

What remains unknown is the future of crossovers. The analyst said there’s a very good risk of overcrowding the market with crossovers to a point where they don’t pull profits as the vehicles do now. They could become the very thing they set out to replace: passenger cars. Especially smaller crossovers.

He also didn’t paint a blooming future for electric cars and autonomous vehicles just yet. Come 2025, market penetration for electric cars is expected to only be 5 percent of the market. While that’s up from the blip of sales they make up now, it’s hardly a revolution. Of course, other factors could change that along the way.

2018 Chevrolet Bolt EV

As for self-driving cars, they’ll need to operate for less than $1 per mile before automakers and companies can really start pushing them into the mainstream for ride-hailing services.

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Source: The Detroit News

Former GM Authority staff writer.

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Comments

  1. This is why controlling cost and raising ATP was such priorities. GM stated so all along.

    A 30% decline will be fatal to some of the weaker companies.

    This is also why FCA needs a partner so badly.

    Reply
  2. GM is on good way to loose evrything. It production becomes so mediocre. Look at actual Silverado/Sierra, Cadillac portfolio… Zero hybrids, EV technology after 2023… Europe is lost and now problems in China, U.S. market. New GM is more arrogant and gready than old one. We don´t care about your taste, We just wants your money.

    Reply
  3. The problem is the world automobile manufacturing production is over capacity. Too many companies, too many vehicles all trying to grab the market share. It might seem good for the consumer but as the article stated, it could leave a lot of companies too weak to survive. It’ll mean layoffs and less buying power for everyone, then less sales. Next, it will be higher prices.
    In part automobiles are higher quality and with synthetic lubricants, most vehicles are lasting longer than ever and being too costly to replace them, most people are holding on much longer. When the auto loans are now six years or longer, It’s very hard to trade in for a new vehicle with an outstanding loan. Monthly payments always go up and for many it is a hard pill to swallow.

    Reply
  4. I am a near future 2020 Denali truck buyer. I am concerned as GM has stated they are increasing cost as ” They can afford” to drive market prices up. One train of thought is drive prices up but there is a major drawback, it is also projected that fall of 2020 and a great possibility spring 2020 a financial market slide very hard downward. Now GM better think twice I say. Keep prices close and go with thoughts of numbers sold at bottom prices. It also appears that tarrifs will also generate increase materials cost. IF GM keeps raising prices you WILL drive new AND repeat buyers out of the precious and tight market. Already those competitors are marketing customer wants and needs vs what went out your door. GM wake up, sell units at lower prices and get market share. The brand numbers will dictate profits not just a couple of units. Jus sayn

    Chuck

    Reply
    1. I work at a Dealership I Northern CO (Weld County Garage) and I am witnessing GM raising prices on most of its models. I have received 2 customer retail orders on the new 2020 Sierra 3500 HD Denali. $79,655 msrp compared to average going rate of a $72,500 msrp on our 2019 Sierra 2500 and 3500 models. Perfect example here at an increase of about 8% compared to the previous generation models.

      Reply
      1. Actually an expensive hit of 10%, by your numbers and application.

        Reply
  5. A 30% drop seems reasonable to me given the product mix being offered. They need to stop restructuring and start building cars that people want to buy and can afford.

    Reply
    1. Bill, “Want to buy and can afford”! That means building vehicles with low labor cost like those of China and Mexico.

      Reply
  6. Clearly, the ‘analyst(s)’ are not factoring in the rapidly accelerating global environmental crisis and how that will affect the economy.

    Engaging the environmental crisis head on, now, could greatly help the economy, produce good paying jobs and dramatically increase EV sales.

    Reply

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