The EV Head Fake: How Regulatory Push and Wasted Capital Transform the Industry

How did the industry's push toward EVs reshape product development, and what are the long-term consequences?

In this special episode of The Auto Market Brief, host Erin Keating is joined by John Murphy, founder of Murphy Automotive Partners, to discuss findings from his newly released automotive product pipeline analysis and the concept he calls the "EV head fake".

How EV investments disrupted the industry's product pipeline:
Murphy explains how regulatory pressure, capital allocation decisions, and shifting market expectations led automakers to redirect resources toward EV programs, resulting in delayed or canceled vehicle programs and the lowest vehicle redesign rates seen in decades.

Why product cadence still matters:
As vehicle ownership cycles lengthen and affordability remains a challenge, automakers are facing a growing disconnect between aging product portfolios and rising vehicle prices, creating headwinds for sales growth and customer retention.

Why hybrids may be a more permanent solution than many expected:
The conversation explores the growing role of hybrids in the U.S. market, how they compare with EV adoption trends, and what increasing powertrain fragmentation means for automakers, suppliers, and dealers.

The discussion also examines dealer profitability, brand survival, supplier relationships, and the importance of understanding the automotive industry as an interconnected ecosystem.

The Auto Market Brief delivers timely data, clear context, and practical insight to help industry leaders make smarter decisions—what’s happening now, and what’s coming next.

The Auto Market Brief is powered by Cox Automotive. For more industry insights and expert perspectives, visit our Insights Hub at https://www.coxautoinc.com/insights.

Creators and Guests

Host

Erin Keating

Erin Keating is an Executive Analyst and Senior Director of Economic and Industry Insights at Cox Automotive. She brings 30 years of professional experience, including 14 years in the automotive industry, providing analysis on market conditions, automaker performance, and consumer demand shaping the economics of the new-vehicle market. Erin spent 10 years with Audi of America, including leading Audi Motorsport North America, informing her perspective on both commercial strategy and competitive dynamics.

Guest

John Murphy

John Murphy has built his career analyzing the global automotive industry and advising manufacturers, suppliers, dealers, and investors. His deep background in equity research and capital markets enables him to provide clients with unbiased – and now fully independent – strategic advice across the value chain. John spent more than 26 years as the senior North American automotive equity research analyst at Bank of America (previously Merrill Lynch), beginning his coverage in 1999. He played an integral role in advising investors during the landmark IPOs of General Motors, Rivian, Ferrari, and Delphi, alongside many other major capital raises, and provided strategic counsel to boards and management teams across the value chain. Key pillars of his research portfolio included Car Wars, a benchmark for OEM product pipeline competitiveness; The Dealer Manual, a comprehensive review of the dealer channel; and Who Makes the Car, an in-depth analysis of parts systems and electrification. John also founded and hosted Bank of America’s annual New York Auto Summit for 17 years, bringing together investors and executives to foster strategic discussions on capital allocation and industry direction. He is frequently cited across the financial and automotive press, appearing on CNBC, Bloomberg TV, and Yahoo Finance, and is a regular presenter at industry events around the world.

What is The Auto Market Brief?

The Auto Market Brief, powered by Cox Automotive, breaks down the latest trends and forecasts shaping the automotive industry. The show is hosted by Cox Automotive Executive Analyst Erin Keating, coupling years of experience translating data and trends with the data and industry insights of the largest automotive services and technology provider.

Joined by other Cox Automotive experts and outside guests, you’ll get data-driven insights and industry outlooks from some of the industry’s leading voices.​

Erin Keating: 00:02

Welcome to The Auto Market Brief from Cox Automotive. Each episode, our experts and special guests break down the latest trends, insights, and news shaping the automotive market. We'll give you the information that truly matters so you can make smarter decisions and drive your business forward. Hello, and welcome back to the Auto Market Brief. I am Erin Keating, executive analyst at Cox Automotive and your host for this show.

Erin Keating: 00:31

I am so excited to be joined today by I think our first external visitor, Mr. John Murphy, the one and only, who has just founded Murphy Automotive Partners, formerly led the automotive practice at Bank of America. So I know a lot of you know him very well for all of his really astute analysis of the business. And actually just recently in Detroit revealed his latest project MAPP, the Murphy Automotive Product Pipeline. Had to get that all things out, which was a really it's a mouthful, which was a really interesting conversation.

Erin Keating: 01:06

But welcome, John. Thanks for being here with me.

John Murphy: 01:08

Well, Erin. Thanks so much for having me. It's always great spending the time with you, I look forward to the conversation.

Erin Keating: 01:13

Absolutely. So, know, we a lot of people in the industry knew that you were very famous for the Car Wars document, and this is sort of your take now on looking at what's happening in product replacement and for the industry as a whole. And I found it really interesting when you went through a lot of work with with a room full of media. So I just congratulate you alone on on having to field quite a lot of conversation because I was certainly there for it and listening to all the different questions that people had. So I kind of wanted to just wrap it up from my perspective.

Erin Keating: 01:41

There are a few things, you know, we have a lot of dealers that listen in on this conversation, automakers, clients, media, etcetera, etcetera. So let's kick off. The first thing that I think everyone would notice, it is uniquely John Murphy way of saying things, the EV head fake. Tell us a little bit about the EV head fake. What does it mean and how did it really reshape the plans for the decade?

John Murphy: 02:00

Well, know, going through this work in a really deep dive always is very interesting because you try to do it, you have thousands of, you know, of products that you're looking at. And I built this database all the way back to to 1970. So it's it's far more robust than what I've had before, and we've put this new very detailed layer of powertrain into it. And, you know, I I think as as you look at this, you always come up with these these patterns, and you see things in the industry in in a different way when when you when you put all this data together, and and it's really quite, you know, amazing. What became, you know, very apparent over the past couple years, but is really wild to see right now, is how disruptive the EV programs have been to the industry.

John Murphy: 02:51

And a lot of this was driven by free capital that was afforded to to Tesla, or close to free capital, I should say, close to free capital that's being afforded to the Chinese, and their industrial logic of pushing EVs has a lot more to do with driving their national champions than it does the environment. And then you look at what happened in Europe with Dieselgate, and they're having a knee jerk reaction to that, which, you know, I don't really trust the European regulatory regime on on on where powertrains really should go at this point, given how bad they failed with Dieselgate. And you look at those three, you know, forces together, and it really drove The US regulatory regime to push EVs and the automakers to follow along because they had to, and it resulted in massive amounts of wasted capital. And the fallout is cancellation of programs like we've never seen before. We've seen programs canceled really at the last minute.

John Murphy: 03:47

The most recent one, I think, was a feel up, but there might be another one today. We'll see. And there's well north of $70,000,000,000 of write downs that have gone on 'll probably be well north of a 100,000,000,000 when all when all is said and done. And the reality is, it's not only just the EVs that have been the casualties of this, it's the entire product pipeline, and what we're seeing in model year '26, '27, and '28 is the lowest vehicle redesign rate or introduction rate, if you will, that we've seen in in history. So when you think about this, it has huge implications, not just for what went on with EVs, but what's going on with the lack of ICE and hybrid hybrid product in the in these three years.

John Murphy: 04:28

And it means that, you know, that automakers and dealers are working in an environment where they sold vehicles to consumers two, three, four, five years ago. Those consumers are coming back to the showroom to buy a new vehicle, and it looks pretty similar or almost exactly the same to what they're driving right now, and somebody's asking them to pay 30% more or maybe even more for the same vehicle, and the consumer is having a, you know, negative logical reflexive reaction to that and saying, like, listen, I'm just gonna hold off. So I think, you know, this has major implications for for for the industry, and it is a hole in in the product pipeline that we've never seen in Right. You know, modern times. Right?

John Murphy: 05:12

At least since 1970 through the back to the database. So it's a pretty wild impact.

Erin Keating: 05:17

Yeah. And you mentioned Tesla, I mean, because when we when we look at one of their challenges even now, I mean, first of all, as you looked at them coming through the industry, one of the things that everyone could point to was, yep, same three models, same four models, you know, now they've dropped two off. But it's like vanilla. Right? Like, on some level, just no hardware updates, really.

Erin Keating: 05:34

It was all software updates and such and and living by the brand of Tesla. Now he's you know, Tesla or Elon Musk is having a real challenge because their newest vehicles look just like their used vehicles, and they're having to really figure out how to price as appropriately. And that now seems to be multiplying out to the whole industry. It's a it's a significant problem when you don't have updated hardware essentially, at least in The US. Right?

Erin Keating: 05:54

We're a hardware nation.

John Murphy: 05:55

Yeah. You know, I I always fall back on on the on the on the silly on the silly comment there, and it's like, you know, when you when you talk about these things, which are the the black, you know, bricks. Right? When Apple's coming out with a new one, they make it thinner, different. They put more cameras on it.

John Murphy: 06:09

They do, you know, silly little things with it to make it look different to convince the consumer to buy one. And in a retail industry, which this is the biggest retail industry in the planet Right. It matters that something looks a little bit different or is a little bit different physically and aesthetically. And and to a consumer, if it's not, it's not. And it, you know, you could you could change the the interior or the guts of it to some degree, but that doesn't really elicit the same consumer demands that an all new product does.

Erin Keating: 06:34

Right. So one thing that I know that I pressed you on when we were talking about this on Thursday at your event that is, I think, still like this conundrum for the industry is that, yes, the typical life cycle is three to five years, but we've had less leasing, which is where really that pipeline gets pushed to three year. We've seen people keep cars for much longer. So in theory, a lot of people are actually coming back to the market. And, yes, it's more expensive, but they may very well be seeing much more improved vehicles if they haven't bought one in eight years, call it, or, you know, now the average life of a vehicle is twelve years.

Erin Keating: 07:03

So the vehicles own are longer in the tooth. Leasing's not necessarily they're pushing people back into the showroom as often as we thought. How important and and where do you see product cadence going? Like, you're I think your message is strongly situated in this that product's cadence is important. Tell me a little bit more about that in the frame of affordability.

John Murphy: 07:19

Well, it's it's the industry's gotten lucky in a in a lot of ways post post COVID, and the supply chain shock forced the industry into, you know, discipline of producing, the higher end vehicles that they can charge for, consumers really want, so you get the pricing. At the same time, as ownership cycle through, you know, some of the dynamics you you mentioned have have extended to some degree, which has allowed them to to work through this period, and probably will work through this period in an okay manner over the next, you know, two years if we still work through this this product this product desert. But the reality is it's gonna keep, in many ways, a lid on the industry getting significantly above 16,000,000 units over the next few years, and that's, you know, that's actually the worst thing, but it means you're you're not in an industry that is is is going to grow going forward. But when you think about this, I mean, typical ownership cycle, as you mentioned, is three to five years. That's good.

John Murphy: 08:07

Right? And and that's good because in a in a product cycle, that means that you can, you know, work through the machinations of an all new product, and when the consumer comes back, they're they're getting a new one. You could charge more for it. That means residual values, you know, hold up for, you know, for better better over time, and the whole just the whole value chain just just works better. I think there's a there's a lot of folks that are that are pushing, you know, these eighteen to twenty four month cycles that the Chinese theoretically are on.

John Murphy: 08:33

I think there's some definitional issues with what an all new product is in in in that in that cycle time. And the reality is that's probably too fast. So something around, you know, four to five years is a sweet spot. But what we're looking at, Erin, is is the average product age as we measured it, you know, that's vacillating around two and a half to three years approaching four point eight years.

Erin Keating: 08:54

Right.

John Murphy: 08:55

About year '28 and '27. I mean, this is crazy town stuff. I mean, this is, you know, this is, you know, this is really significantly age of pride. That's volume weighted. Right?

John Murphy: 09:03

So so so some of the longer dated truck programs, you know, that are, you know, the longer life cycle truck programs are really weighing that up, and it'll come down to about three point two years as we end end the decade. But, you know, that's still, you know, on the high side. So I I think it it still matters, and like I said before with the iPhone example, this new fresh product is what brings consumers to the showrooms, a lot and allows the automakers to price up for product. We are still working through the machinations of the COVID supply chain shock

Erin Keating: 09:31

Right.

John Murphy: 09:31

And some of these lease extensions and other things. So the industry is really getting a mulligan here, but you also have automakers that are on top of this are doing a very good job of not overproducing.

Erin Keating: 09:41

And Right.

John Murphy: 09:42

You know, that that historical issue in the industry is reasonably done for now. Right? Stellantis makes me very nervous with their aspirations of regaining market share, But, you know, for now, the industry is gonna, I think, fight through this in an okay fashion for the next couple of years.

Erin Keating: 09:56

So, you know, knowing that a lot of our audience are dealers, how does this how do you see products mix really, you know, manifesting itself at the dealers from pricing power, profitability, etcetera, etcetera? And what advice would you give a dealer in this market right now knowing what the product cadence looks look like?

John Murphy: 10:10

Yeah. So I I think the the the key is to mind the right customers. So I mean, looking at your, you know, your your customer base, your loyal customer base, and understand who are the folks that are owning the older, you know, versions of what you have on the lot. So, you know, making sure that you're you're you're mining those those old those people who have extended the ownership cycle and have an older version of the products on your lot. So that takes a lot of specificity.

John Murphy: 10:31

I'm sure at Cox, you guys have metrics to help people figure figure that out, and that's gonna be vitally important. But at the same time, you know, there's the age old question of getting deeper into into fixed ops and the used the used vehicle business and really growing those structurally over time. So that's gonna be as important, if not more important, than ever before. And once again, that allows people to extend the the relationship with the customer, the vehicle, and then mine those service lanes to drive new customers over time. So make money off them, serve them well, make them real happy, and then eventually get them a new vehicle.

John Murphy: 11:04

Right? So I think that's the the name of the game, and that's always the name of the game. And I'm sure you guys have metrics to help people with that Yeah. That stuff because it's mission critical, and you guys know that as well as anybody.

Erin Keating: 11:13

Absolutely. So, you know, we talked about a little bit about the EV head fake, but then obviously, hybrids are like the name of the game. And and I think you and I shared the same belief. Look. Fuel prices certainly brought a lot of attention to hybrids, but I know with Cox Automotive, we had already expected a hybrid surge this year before gas prices were ever even mentioned.

Erin Keating: 11:31

You talked a lot about hybrids being, you know, no longer really just simply a bridge, but rather this is, you know, are we potentially on our way to the hybrid being ubiquitous engine powertrain that people drive? Or what are your thoughts there? And and if that's specific to The US market, what does that do for the brands that sell heavily in The US market that still need to meet sort of global needs where EVs seem to ish have more popularity?

John Murphy: 11:56

Well, I think for The US, hybrids are are probably gonna be a more permanent solution that than folk that folks realize. One of the bet two of the best selling vehicles in the country, the the RAV four and the Camry, just are hybrids. Right? I mean, that's just what they are. I mean, there's there's no there's there's no option to have an ICE.

John Murphy: 12:12

I think there are some plug in, you know, versions of those, but, on the on the RAV four side. But the consumer doesn't even have an option. They don't even know. And, you know, all they know is they got a great vehicle with great fuel economy at a fair price, and that's what the industry is all about, providing that transportation, you know, high quality and reliable at a good price. So I think that that's the direction we're heading in.

John Murphy: 12:33

When we look at sort of the specifics of the study, it looks like we'll we'll end the the decade at exactly 27%. It'll be close to 30% plus or plus or plus or minus. And that used to be where everybody thought EVs were gonna were gonna head. I think EVs are probably gonna be well south of 8% that we saw last year, sort of that surge in in in buying ahead of the the cancellation of the the EV tax credits. And I think that is really, you know, a level that might be sustainable in The or sustained in The United States, and that, you know, third of the market that is hybrids will go will go go up over time as automakers start to understand that that'll be a good solution.

John Murphy: 13:08

Hopefully, the next administration really understands that as a much more practical solution for the use case in in The US market for the majority of the market. Other markets where EVs are are more prevalent and being pushed by a regulatory regime that is ill informed and made major mistakes in the past, like Europe, they'll probably be higher because they'll be forced. In China, it is a industrial policy that is driving their national champion, so it'll be significantly higher. It'll mean that the automakers in the most expensive part of the vehicle being the powertrain are dealing with a fragmentation in in in that, which is creates this kind of scale and means that their profits and returns structurally will be lower unless they can charge higher prices to their consumers, which is, you know, the the the boogeyman here and real the real problem for either the consumer or the companies or the the industry at large, and that's gonna be a real challenge. And it it it's, you know, it's gonna create create pressure.

John Murphy: 14:06

And it's really funny, Erin. I was going back, you know, and you just look at data, you we all know these things. But you go back, you know, twelve, thirteen years ago before the Model y really, you know, had had really kinda hit pay dirt, And the industry had this, you know, great homogeneous market, particularly thinking about The United States, where, you know, the vehicle that was sold in Vermont and Houston and, you know, San Francisco and, you know, in Miami were all the same, you know, vehicles, reasonably similar, has different mix shifts in different climates and in different, you know, regions, but with the same powertrain. As you pull, rip that that, you know, that economies of scale out of the system, it's just gonna be it's gonna be a huge challenge, but the industry is gonna have to deal with it because even if I think, you know, EVs are only gonna be, you know, less than 8%, they're still there. Right?

John Murphy: 14:50

And then hybrids that if they're a third, you know, they're still there, and they're probably growing over time, and ICE is still there. So the automaker is gonna have to really lean, I think, on their on their supplier partners in a pretty significant way for that technology. And if you're an ICE supplier of, turbochargers or dual clutches or transmissions there, you thought you were dead five years ago, you're now hitting pay dirt, the automakers need you more than ever for that technology. So there's a real opportunity for some of these suppliers.

Erin Keating: 15:15

Yeah. And I really like that. I remember you speaking about at the beginning of your presentation just how you specifically with this new venture want to focus on the holistic industry. You know, you wanna talk about suppliers. You wanna talk with the automakers.

Erin Keating: 15:27

You wanna talk about the dealers. And I love that because I think it's really important that people understand the symbiotic and also not so symbiotic relationship between them. The incentives between each of those partners is is often not aligned. So there's a lot of challenges in our inner party, if you will, that they have to work through. The supplier and the OEM don't necessarily always have aligned incentives, we certainly know the dealer and the OEM don't always have aligned incentives.

Erin Keating: 15:51

So just curious, will this map sort of sit as a centerpiece to looking at all three of those spheres of the industry, if you will? Or how are you thinking forward looking at at really taking it down to the supplier and dealer level?

John Murphy: 16:06

Well, it's great it's a great question. I mean, the map kinda sits as a as an umbrella and that, you know, has implications for the automakers, the suppliers, the dealers, and understanding what's coming in the market. But then we'll have two other products, main products, who's behind the wheel, which will kind of be a successor to, who makes the car, where we, you know, do a teardown, a virtual teardown of a vehicle, though might work with some good folks at CareSoft to do some of this stuff as well, and really kind of tear down the entire, you know, supplier industry because it's critically important to understand what's going on there and what's coming. And there there are simple things, if you think about it, like the, you know, the fire in the the aluminum plants in Upstate New York, and that being an alarm bell to the the the F Series, particularly the f one fifty production that dealers, you know, needed to pay attention to long before. I mean, I kinda picked up on that when was at conference, and we're kinda talking to that with a lot a lot of folks.

John Murphy: 16:56

That connective tissue, just short term, but then also long term and understanding what's possible in the product pipeline coming from the suppliers, is a connection that never gets never never gets made between suppliers, you know, and dealers. You know, likewise, you know, dealers to the automakers and automakers to dealers have as you connect your tissues. So, I mean, putting all three of them together creates a view that is I mean, listen, I you know, you see things differently. It's not that, you know, you know, that you're you're creating some, you know, super magical, you know, machine, but it's, you know, having that perspective to see, you know, three sixty, through the value chain really creates, you know, opportunities for for everybody. And there are all these choke points, you know, all over the place, and there's all these issues that hopefully, you know, being, you know, friends with everybody in the industry and and and knowing them, you know, I can help try to solve because, you know, it's really important, at least to me, when I think to the country that this industry and this domestic industry succeed and succeed in a in a really big way.

John Murphy: 17:48

So there's, you know, there's many motivations of what I'm trying to get done on that connective tissue, that starts with the map and then goes to dealer doctrine and and and who's behind the wheel. And those three, you know, pieces, I hope, hopefully, everybody will find helpful, and I can help the industry really thrive going forward. Because there's a lot of challenges, as we all know. I

Erin Keating: 18:05

know. I know.

John Murphy: 18:06

A couple of you and A of questions about how this is all gonna shake out, and, you know, I'm I'm personally vested in in trying to make everybody, you know, more successful and and survive and thrive. Right? It's important for the country.

Erin Keating: 18:18

Right. Well, I mean, I know you and I sing from the same song sheet there, and and making sure people have the context of the whole industry is really important. So I think we'll end on this last question because you sort of you you poked at it here a little bit in your presentation, that brand survival index that you're not, publishing yet. I'm not asking for any trade secrets here, but what are some of the things that you're looking at at least from a broader, you know, characteristic perspective of future winners and losers in the industry?

John Murphy: 18:43

Sure. Well, I mean, the the the basic stats or calculations that we do, in in the map, the vehicle redesign rate, the average product age, new model mix or NMM, new product launches. So there's there's all these metrics that will feed into it on the product and the, you know, the pipeline side, and we're pretty fully baked on understanding and setting up the side of the commitment of the parents to the brand. Right? So if

Erin Keating: 19:08

the

John Murphy: 19:09

product pipeline is not very good, but the parent is still committed to the brand, the brand could survive. But, and if product pipeline is really great, and the parent is not committed to the brand, the brand dies, right? So, there's kind of the two sides, and they both have to be well above zero to create a high brand survival or BSI, you know, measurement. So I think that's kind of, you know, it's kind of the, you know, both sides. But also, you know, very importantly to a lot of folks that are listening, it's really the, you know, the health of of of the network, and that, you know, has huge implications for the success of a brand.

John Murphy: 19:39

And I think we all know dealership throughput on a very simple basis has huge implications for the brand, and, you know, you get back to, you know, the idea that Toyota dealerships are some of the most, if not the most profitable dealerships out there, and their relationship with the automaker or Toyota is is very strong, and that, you know, that constant contact and understanding in a in a friendly manner or collaborative manner, right, not even, like, know, always friendly. I'm sure he's always you know, even a little bit of friction there, but a collaborative manner and understanding they need to work together, resulted in Toyota figuring out the one six ninety rule and leaning heavy into hybrids, realizing the consumer was not really excited or really demanding EVs, and that that kind of, you know, tight relationship is incredibly, you know, important. So, know, I think, know, as you think about it, there's there's a lot of things that will go into to the the BSI that we're still, you know, fully baking, but it's, you know, it's the stats from from the map, it's a brand commitment from from the automaker, then ultimately, it will be the the network effect that will be, you know, positive or negative for it.

John Murphy: 20:36

So there's a lot to figure out there.

Erin Keating: 20:38

Yes.

John Murphy: 20:38

And, you know, when you looked at this before, in The United States, only 15% of the brands that ever existed in The United States are survive right now. There's 350 brands in the world right now. Only 15% of them are gonna make it through the next, you know, twenty, thirty, forty years. So there are gonna be casualties.

Erin Keating: 20:53

Yeah. Well, I can't wait to see what you come out with on the other end for that BSI. I would love to talk to you when that comes back out again. But as always, really enjoy talking to you, John. I'm so excited for your new venture and to keep seeing everything that you're pulling out of it.

Erin Keating: 21:05

Appreciate that, you came on to talk to us just as it's released.

John Murphy: 21:10

Well, I appreciate the opportunity coming on. It's always great hanging out with Erin. I appreciate the time. Thank you.

Erin Keating: 21:14

Of course. And for all those out there listening to Auto Market Brief, please share and subscribe to our episodes. And for all the insights that typically come out, from this podcast but also from our organization, you can always find us at Cox Auto Inc dot com and go head over to the insights section, and you will find all your latest data and expert perspectives from us as well as podcast episodes. So thanks so much for being here, and we will see you next time. Thanks for joining us on this episode of the Auto Market Brief.

Erin Keating: 21:45

To stay up to date with all the latest news and perspectives from our team of experts, be sure to visit our insights hub at coxautoinc.com.