BofA Securities sees lower vehicle volumes through 2026 but remains constructive on auto industry

To account for tariff disruptions, rare earth shortages, and vehicle affordability, BofA Securities has lowered its volume estimates for General Motors (NYSE:GM) and Ford (NYSE:F) for 2025 and 2026, but remains constructive on the auto sector as a whole as “pent-up demand” over the last 4 years could be unleashed over the next 4 to 5 years.

Analyst John Murphy trimmed his estimates for 2025/2026 U.S. vehicle sales to 16.25M and 16.9M, versus prior forecasts of 16.5M and 17.4M, respectively.

But existing headwinds should dissipate in the later part of this year/early 2026 amid expectations that the U.S. will reach trade agreements, resulting in a partial relief from tariff headwinds.

“This, combined with suppliers’ and OEM’s actions to mitigate tariff costs, may result in only a marginal impact on prices, which we believe could rise by 2-3% at most,” BofA’s Murphy said in Monday’s note to investors.

Murphy also lowered his supplier estimates to account for revised volume forecast and tariff impacts on the bottom-line, while auto dealer estimates were left largely unchanged as lower sales volumes in the second half of the year will be offset by higher gross profit per unit, which have trended much stronger than expected for the industry through the first two months of the second quarter.

Accordingly, Murphy tweaked his price targets across the sector for Underperform Adient (NYSE:ADNT) by +17% to $175, Buy-rated Aptiv (NYSE:APTV) by +6.3% to $85, Buy-rated Borg Warner (NYSE:BWA) +17% to $41, Buy-rated Lear (NYSE:LEA) by +4.5% to $115, and Neutral-rated Magna Internation (MG) by +7% to $115.

Murphy also raised his target prices for auto dealers including Asbury Automotive Group (NYSE:ABG) +3.1% to $335), AutoNation (NYSE:AN) by +11% to $335, Sonic Automotive (NYSE:SAH) +17% to $94, and OPENLANE (NYSE:KAR) by +14% to $25.