General Motors (GM - Get Report) is poised to replace its model lineup in the U.S. faster than any of its global competitors, putting the automaker in good position to increase its share of a robust vehicle market over the next three years, according to an influential study.
John Murphy, auto analyst for Bank of America's (BAC - Get Report) Merrill Lynch unit, presented his upbeat Car Wars study in Detroit, outlining global automakers' future product plans. The report says a cash-rich industry will introduce, on average, 58 new car and truck models a year for the next four years, up from 38 new models a year.
Unlike several other analysts who have warned against a downturn in vehicle sales after six straight years of increases, Murphy is forecasting 20 million sales in 2018, which would be an all-time record.
"In total, we expect product activity to support market share and pricing, proving the skeptics wrong," Murphy told the Automotive News.
GM headed the list of automakers with an 88% replacement rate of models for the three-year period through the 2020 model year, which would start in 2019. Ford Motor (F - Get Report) was second with an 86% rate and Honda Motor (HMC - Get Report) was third with an 85% rate. The industry average was an 81% replacement rate.
Although GM's balance sheet is strong and the reviews of its new models are positive, investors remain wary of the stock, which sells at a 9% discount to its initial offering price of six years ago. Analysts have said that GM, which was reorganized with government financing following its 2009 bankruptcy, must weather the next industry downturn in good order before investors are likely to bid its price higher.
The premise of the study's conclusions is consumers tend to favor and to buy newer models; thus, those automakers with that can replace models most often will gain market share against the rest. But the study's predictions sometimes go awry, especially when new models flounder and older ones endure. For the past several years the Merrill Lynch study has predicted Honda would gain share and Nissan (NSANY) to lose or stay put. In fact, Nissan has passed Honda.
Murphy's research suggests the buying trend away from sedans and toward crossovers and SUVs will continue, with about 31% of launches between 2017 and 2020 to be crossovers, compared with 28% between 2007 and 2026. Light truck launches should total about 27%, compared with 21%.
"This focus on crossovers and trucks is a great thing for mix (optional equipment) and, ultimately, profitability in the industry over the next four years," Murphy said.
GM this week showed its new GMC Acadia, set to debut this summer, the second model built on a new crossover architecture. The first was the Cadillac XT5. The report said product introductions will slow for the remainder of the year and then resume with introductions of the Chevrolet Traverse and Equinox midsize and small crossovers.