The US auto market just got an unexpected vote of confidence

Bank of America Merrill Lynch auto analyst John Murphy is bullish on the US auto market.

After a record-setting 2015, when 17.5 million new cars and trucks were sold, a lot of experts, observers, and pundits are arguing that the market has peaked with either plateau or head toward a decline.

The current US sales pace doesn’t back that up: April was a strong month, and 2016 looks like another 17-18-million year.

Murphy, as the Detroit Free Press (via USA Today) reported, predicts a 20-million sales year by 2018 before the cycle ends and the downturn starts.

“When it comes to total industry sales, Murphy said he is confident the industry will be selling more than 20 million vehicles annually by 2018 — eclipsing the record of 17.5 million last year,” the Freep’s Brent Snavely and Greg Gardner wrote.

Murphy “cited solid, but not great, consumer confidence and strong, steady job growth since the Great Recession of 2008 and 2009, plus a sharp spike in the total miles driven by Americans,” they reported.

“‘When you think about the people who are likely to buy new vehicles in any given year, you’re talking about 5% to 6% of the population,’ Murphy said Thursday when he spoke to the Automotive Press Association in Detroit. ‘They are fairly affluent, well educated and tend to be more confident about the future.'”

Three key factors are driving the US auto market at this juncture: relatively cheap gas, flowing credit, and the record average age of vehicles on US roadways, at 11 years.

Other analysts question whether those factors can hold up. But Murphy’s take matches much of what’s coming out of the automakers, who also see the US market remaining solid. One Fiat Chrysler Automobiles’ CEO Sergio Marchionne appears concerned that his company isn’t prepared when the cycle turns; he’s been actively trying to merge FCA with another major car maker.

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