Bank of America "Car Wars" Study 2020-2023 Predictions

Autoblog reported that for the past 29 years, Bank of America Merrill Lynch Global Research has published a study called "Car Wars." The study usually takes a four-year look into the near-term future of automakers' product pipelines to make forecasts about market share and profitability.

The new report, covering current and planned product for the 2020-2023 model years, expects OEMs to launch 246 new models or major updates of existing models in that time frame. And with 70 percent of those new and overhauled vehicles being CUVs and light trucks, one of the report's findings is that the glut of people-haulers "will likely pressure the segment's profitability to the low of passenger cars."

On the one hand, introducing new models is — as one would expect — a good thing. The study's premise is that carmakers who have the newest vehicles will attract more customers, because "OEMs with the highest replacement rate and youngest showroom age have generally gained share from model years 2004-19."

The average launch rate of 62 vehicles per year from 2020 to 2023 is 55% higher than the average rate of 40 per year from 2004 to 2019. John Murphy, lead analyst on the report, said it "should be noted that the extreme levels in model years 2019 and 2020 are also a result of nameplates splintering." Nevertheless, "Car Wars" believes CUV launch intensity is overweighted by 45 percent, especially in the hybrid and super-luxury categories. According to Murphy, with 149 crossover nameplates in 2023, "It will be, by definition, the most crowded segment in history."

The beginning of the cautionary tale here has several facets, the first being that crossover profits "will quickly fade and erode to where passenger car profits have been recently. A real significant risk, cycles decline, there's an overcrowding in the market." This isn't new; the Car Wars study from 2016 — when there were fewer crossovers and light trucks and fewer launches — stated, "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."

Three years ago, Murphy said consumer preferences "should support demand," though, and that ""This focus on crossovers and trucks is a great thing for mix and, ultimately, profitability in the industry over the next four years." The coming glut leads this year's report to state, "the CUV segment is becoming increasingly saturated by new product, so little incremental benefit is likely to accrue to the industry as a whole, in our view."

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