AUTONEWS

Prices to rise, electric cars to struggle

Vehicle prices will continue to rise due to tariffs and trade wars, while demand for electric vehicles is declining, according to an auto industry analyst at Bank of America Securities.

“Costs are going up and prices are going to have to go up for consumers,” analyst John Murphy said at an Automotive Press Association event at BofA’s regional office in Farmington Hills, Michigan. The presentation was part of the company’s annual report, Car Wars.

The auto industry is grappling with a trade war that President Donald Trump has started, slapping tariffs on countries in various industries. Tariffs are paid by companies that import goods, and the cost is usually passed on to consumers.

Vehicle prices remain “pretty high,” Murphy said, and tariffs will push them up even further. Trump has imposed a 25 percent tariff on imported vehicles and parts.

Lower demand for electric vehicles...Murphy said his “gut estimate” that tariffs on vehicles could end up being between 5 percent and 10 percent. “There’s a lot of competition between the U.S. and other countries,” the analyst said.

In addition to higher prices, automakers are facing weaker-than-expected demand for electric vehicles. Companies like General Motors and Ford have invested heavily in electric vehicles, but those investments show no sign of paying off. The shift toward more electric vehicle production came during the Biden administration, which promoted electric vehicles as a way to reduce greenhouse gas emissions. The Trump administration has not been a proponent of electric vehicle development.

Murphy predicts that the number of electric vehicle models expected to hit the market will halve in the next four years. “It’s pretty shocking to see,” he said.

“The money is spent,” Murphy added of EV investments. “You can’t get it back.” Automakers may have to take “multi-billion dollar losses” on their EV investments.

“The unprecedented EV false start has wreaked havoc on product plans,” BofA’s Car Wars report said. “It’s been driven by consumer apathy and changes in regulations and incentives. In addition, the recent trade war has further complicated the situation.”

As a result, “overall manufacturing activity is moving very slowly,” the report said. “Manufacturers are grappling with powertrain issues, a new regulatory and incentive regime, and uncertainty around tariffs.”

Bottom line…BofA expects manufacturers like GM, Ford, and Stellantis to stick with traditional internal combustion engines (ICE) for a long time.

“We believe manufacturers need to lean heavily on their core ICE products to generate capital to fund an uncertain future.”

Other findings from the report include:

* Demand for crossover vehicles, which has been growing since the late 1990s, is peaking. That “boom” is over, the report says.

* China’s auto market is in trouble and could see “massive consolidation,” Murphy said. “American companies need to get out of China.”

Autonews