June 20, 2019—Analysts from Bank of America Merrill Lynch predict the U.S. auto industry will face a 30 percent drop by 2022, according to reports from The Detroit News.
Softening vehicle sales since 2016 will continue as cyclical demand softens, which will challenge automakers as they balance their core market of traditional vehicle sales with investments into the auto industry's autonomous, connected and electric future, said John Murphy, a senior analyst.
Despite pressures of lower volume down to approximately 14 million vehicles sold in 2022, Murphy predicted, automakers must resist temptations to lower prices as they had during the economic downturn in 2007, 2008 and 2009. Keeping vehicles at profitable margins will help investments in new technology —or else risk putting automakers behind their competitors that now include Silicon Valley tech companies with millions in their coffers.
Automakers are also facing headwinds related to a trade war with China and threats of further tariffs up to 25 percent that could be implemented in November. The Chinese market also is facing oversaturation with predictions of a 7.5 percent decrease in sales this year after it began to shrink at the end of 2018.
