Analyst Optimistic about Auto Sales, EVs, Average Transaction Prices

• John Murphy’s EV projection of 29% market share by 2030 is a point of optimism at a time when the zero-emissions powertrain segment has reached a plateau.

• While automakers like Toyota, Nissan, and Honda are falling back on their strengths with recent concentration on hybrids and plug-in hybrids, by 2026 and ’27, BofA’s Car Wars sees EVs beginning to outpace hybrids for development and market share growth.

• New vehicle prices are expected to fall. The average new vehicle gross profit per unit for a vehicle on a dealer’s lot peaked at $6,000 by 2023, the study says. It has since come down to about $4,000 per vehicle.

“Car Wars” is Bank of America analyst John Murphy’s annual survey of upcoming new models, which feeds Wall Street with forecasts on which automakers are good investments. Murphy tends to be an optimist. Back in 2015, for example, he predicted a 20-million-unit year by 2018.

Give him this much: Auto sales hovered around 17.5 million units for a few years in a row, leading up to the pandemic’s supply chain-driven sales plummet.

Though most of us have long-since removed our face masks, the auto industry is still in recovery mode, so Murphy’s 2025-2028 Car Wars report has mostly upside to predict. Murphy outlined his latest report at a meeting of the Automotive Press Association in Metro Detroit this week (we watched via webinar).

According to the study, electric vehicles will take about 29% of the US market in 2030, which is a point of optimism at a time when diehard enthusiasts of the internal-combustion engine consider the recent burp in the zero-emissions powertrain segment a sign that EVs will be relegated to niche status for most of our lifetimes.

Murphy does acknowledge that hiccup in EV demand; last year’s Car Wars study had predicted 36% EV market share in the US by ’30.

Tesla will have the freshest portfolio based on two-year cumulative replacement rates of model lineups from calendar year 2023, by volume, at 54%. General Motors (at 19%), Honda (at 10%), and Ford (at 9%) are at the bottom, according to Car Wars.

What Tesla considers a redesign or “all-new” isn’t necessarily what traditional auto consumers consider new, however. Tesla CEO Elon Musk has promised a new, more cost-effective architecture for its Models 3 and Y—whether they get any new sheetmetal is unknown.

Even as its sales grow, Tesla has given up 20% EV market share to new models, mostly from old automakers, Murphy said. “Tesla is set to cede share of the EV market, while GM, Stellantis, and Honda are set to gain the most.”

While automakers like Toyota, Nissan, and Honda are falling back on their strengths with recent concentration on hybrids and plug-in hybrids, by 2026 and ’27, BofA’s Car Wars sees EVs beginning to outpace hybrids for development and market share growth.

Most competitors will have to overcome Tesla’s advantage in component costs for every part of the vehicle except the battery pack, Murphy said.

Tesla has a $17,000 advantage in such component costs, and GM is making good progress with its Ultium platform, while Ford will have to finish its second-generation EV platform before it can see significant savings with its third-generation architecture, he said.

Teslas are not known for their ride-and-handling quality and have pretty basic interiors, Murphy conceded. Other automakers’ EVs might have to give up features and fit-and-finish dear to enthusiasts, that average electric-vehicles customers do not care about.

“There’s a tremendous amount of work to do on what matters and does not matter,” he said, though it’s hard to think of Cadillac or Lincoln EVs winning market share with Tesla-quality interiors.

EVs will have to become not just cost-competitive, but also profit-margin competitive with traditional ICE models for EV sales to significantly grow, he said.

Meanwhile, new vehicle prices will start to come down, Murphy said. As the pandemic began, the average new vehicle gross profit per unit for a vehicle on a dealer’s lot was $1,500 to $2,000. At its peak in 2022 and 2023, that gross profit was up to $6,000. It has since come down to about $4,000 per vehicle.

“There is still a lot of room on pricing at dealers’ lots before it would hit the automaker,” Murphy said.

Used cars and trucks are unlikely to lose much more value due to “structural supply,” or the percentage of vehicles in an age bracket. The percentage of used vehicles in the important zero-to-seven-year-old bracket is shrinking, going into model years 2025 and ’26, he said.

All this adds up to Murphy’s projection for new US auto sales in 2028: It will reach 18 million, he said. His projection for 2023 was spot-on at 15.5 million, but so far this year sales are falling slightly behind his prediction of 16.1 million in sales.

“We do expect price points to come down,” Murphy said, to about $40,000 by 2028 from the $47,000 to $48,000 range now. That ought to help.

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