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Hey everyone,
A few from our crew will be at Digital Dealer this week.
We’re even hosting a dealer breakfast at 7:30 a.m. Wednesday with Steve Greenfield from Automotive Ventures.
Thanks to The Shop and Podium for generously sponsoring the event.
— CDG
Big week for auto: Longtime Wall Street analyst John Murphy has released his full inaugural Murphy Automotive Product Pipeline (MAPP) report.
Some context: Murphy, founder and managing partner of Murphy Automotive Partners, shared a preview of his report in June, marking the start of his first solo release after more than 25 years writing an industry benchmark.
It maps what’s coming for the U.S. auto industry, including hybrids, product shortages, and dwindling brand numbers.
And, while some themes feel pretty familiar, the MAPP clearly outlines new, forward-thinking takes for dealers to consider, which we love.
We spoke with Murphy about his findings. (The full 280-page report is available to licensed subscribers.)
Which brings us to today’s newsletter, where we dig into the product drought dealers are navigating, hybrid expectations for the rest of the decade, and findings from Murphy’s new Brand Survival Index.
Dealers are selling into the longest product drought on record.
Murphy’s report says that the "EV head-fake" of recent years will leave a lasting headache by way of a "product desert" through MY2028, with the projected Average Product Age (APA) hitting a record 4.8 years by then.
According to the report, the retreat has already cost automakers more than $70 billion in EV write-downs and program cancellations.
Meaning: The retreat stalled more than EV plans.
It also left automakers without enough new product across the board, regardless of powertrain. Now, dealers are asking customers to pay 30% or more for a vehicle, of any kind, that looks nearly identical to the one they already own.
Murphy told us that it’s a challenging equation to sell somebody the same product at a higher price.
"The pent-up demand will not necessarily be fulfilled because consumers will continue to hit pause," Murphy said. "Getting a sales rate significantly above 16 million units for the next couple years is going to be difficult."
John Murphy
Murphy
Automotive Partners
Murphy says he's never seen anything like it in 30 years covering the industry.
He used Honda's late-stage cancellation of its Zero series as an example of just how severe the fallout has been, calling the resulting three-year product gap, spanning model years '26 through '28, worse than even the GM and Chrysler bankruptcies of the Great Financial Crisis. (Stay tuned: More brands hit the killing-room floor in Section 3.)
Still, relief is coming (eventually): "Once we get out to model year ‘29, ‘30, and ‘31, which will be the latter start in the latter part of calendar year ‘28, there will be more good product and new product coming to the showrooms, and that should make life a lot easier as far as converting that natural pent-up demand,” Murphy said.
In the meantime, Murphy noted that automakers have held pricing discipline.
"It is wildly impressive... maintaining a balance between production supply and demand," Murphy said. "Which is allowing the industry, even though you don't have a lot of great product, to hold onto pricing in a fairly material way."
The risk, he added, is if one automaker breaks ranks and starts "weaponizing pricing" for share.
Murphy's advice for the gap:
Ease up on facility and image-program spending when possible, especially when an OEM's pipeline for the brand sits empty.
And, use the lull to button up customer relationships through service and used inventory.
“When the new product comes back, there is this great opportunity to sell out of service lanes and potentially to upsell some of your recent used-car buyers into new vehicles, as they become more and more available and are newer product,” Murphy said.
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Automakers are betting the decade on hybrids.
Adding to the well-known hybrid story, Murphy told us he expects hybrids to reach about 34% of the market by MY2031, up from 14% in 2025.
According to the report, that growth will come almost entirely out of ICE, not EVs, whose share will only recover to about its 2025 level by then.
"Our hybrid forecast has gone from 27% to 34% in just the last few months, and the bias is still to the upside,” Murphy said.
A few examples of automakers wagering the hybrid bet differently:
Toyota: Expected to be about two-thirds hybrid by decade's end.
Honda: Catching up, finally, projected to hit closer to 90%.
GM: Still believes in EVs mid-to-long term, with hybrid penetration expected to sit around 9% by decade's end.
Murphy said that divergence is worth watching closely: A gap in hybrid offerings relative to a nearby competitor is a conquest risk worth getting ahead of.
Part of the reason hybrids have caught on so smoothly, he added, is that most buyers don't even realize they're driving one since regular parallel hybrids look and feel like a normal vehicle to the average customer (just one with better fuel economy and lower costs.)
"The precise mix remains uncertain, but what is increasingly clear is that the answer is not 100% EV," Murphy said.
Possible wild card: A 2029 administration change could shift incentives back toward EVs, though it’s a scenario Murphy called "an extreme mistake" for the industry, adding uncertainty around how far any automaker should commit.
More brands than ever are staring down extinction.
About 290 automotive brands have sold in the U.S. the past 100 years, the report says, and fewer than 15% survived.
CDG has covered recent brand casualties as they've happened, including Polestar exiting the U.S. and Stellantis trimming its Jeep, Ram, Peugeot and Fiat brands.
But Murphy predicts more to come. (Dun dun dun).
His reasoning: The MAPP scores all 38 brands in the U.S. using a new metric called the Brand Survival Index (BSI), sorting them into four tiers—Entrenched, Secure, Watch, and At-Risk—to assess the odds of surviving the next decade. (Murphy points out Scout could make that number 39).
The BSI draws on Murphy's “decades of experience” and other proprietary metrics, including APA and Vehicle Redesign Rate (VRR), to generate the scores.
According to the report, no brand qualifies as “Entrenched.”
Honda, Ford, Toyota, Hyundai, and Lexus lead the “Secure” group.
Meanwhile, Polestar, Maserati, Alfa Romeo, Jaguar, and Fiat sit at the bottom of “At-Risk.”
Most other brands land somewhere in between, with 19 in the "Watch" category.
Murphy again referenced the struggled years of 2007-08 as the last time he saw rationalization risk like this.
"I almost feel like... we're at another critical point that, in some ways, has very different drivers to what was going on in '07, '08, but has similar dynamics as to a need to rationalize the business," he said.
The numbers:
A base-case scenario sees the brand count settling in the mid-30s within five to 10 years.
In the most aggressive scenario, reduction hits 20%, landing closer to 30 brands.
"I would say, almost definitively, we're going to see about 10% of the brands canceled and worked out by the automakers,” Murphy said. “And there is the potential that if they get more serious about running their businesses optimally, there could be as much as 20% of the brands cut in the U.S. market."
A big driver: Chinese automakers gaining global share, squeezing profit even without entering the U.S. market directly.
The report says Chinese vehicle exports jumped from about 1 million units in 2020 to more than 7 million in 2025, making China the world's largest auto exporter in about five years.
"The indirect impact is still pretty extreme for most manufacturers," Murphy said, which is pressure that pushes OEMs to rationalize brands at home.
Murphy touted Toyota's dealer network as a model that's empowered to push back on product and powertrain decisions because the OEM listens collaboratively, rather than confrontationally.
"Dealers should... try to be as vocal as they can be and try to be collaborative with their automaker partner to get the right product for the market," Murphy said. "Because it's not just good for the dealer; it's really good for that automaker and that brand as well."
Bottom line: While product droughts and brand casualties may not inspire a ton of joy, use this knowledge to map a way through it, prepared.
"This industry has so many factors influencing it,” Murphy said. “It's almost like playing whack-a-mole: Something is always going to pop up. So the more you can see the broader picture and the context, and how it will influence your micro situation, is critically important."
