Bank of America: The automotive industry is embracing internal combustion engines again. Tesla, Inc. (TSLA.US) still has the potential to expand market share.

The Bank of America report points out that the global automotive industry is facing a double squeeze of powertrain systems and policies, forcing companies to refocus their strategic priorities on the traditional internal combustion engine field. The bank believes that the key factors determining the survival of car companies in the next four years are the speed of new vehicle replacement, the competitiveness of sales channels, and market share. Bank of America emphasizes that the industry is currently experiencing two major shocks: 1) the burst of the electric vehicle bubble, soft consumer demand, and the withdrawal of government subsidies have led to a comprehensive confusion in electrification plans; 2) the escalation of tariff wars has increased uncertainty, blocking new car releases in 2026-2027, and supply chain restructuring is dragging down industry recovery. In this context, Bank of America warns that car companies must rely on internal combustion engine product lines to maintain cash flow in order to cope with the severe fluctuations of the next four years. Based on replacement rates and product portfolio forecasts, Bank of America categorizes companies into three groups: high-risk camp: Nissan faces the risk of market share shrinkage due to low replacement rates and unclear strategies. Companies with the potential to increase market share: Tesla, Inc. and other OEMs (including electric vehicle newcomers Lucid, Rivian, Polestar, as well as Volvo, JLR, Mazda, Subaru, Mitsubishi, etc.) are expected to expand their share by high replacement rates. Companies that can maintain their current market share: Most traditional car companies temporarily hold onto their market share by controlling the pickup truck/SUV product line. The differences in replacement rates among major automakers seem to be narrowing again, mainly due to the timing of product launches and the time window analyzed by Bank of America. This is particularly evident in the range of 2026-2029, although Toyota is at the low end, its performance in 2025 is strong, and is expected to be strong by 2030. However, other OEMs, Tesla, Inc., and Volkswagen are at the high end, while Toyota and Nissan are at the low end. In addition, factors such as product segmentation market portfolios should also be considered. Taking all these factors into consideration, Bank of America believes that the relative differences in replacement rates and other factors may lead to small changes in market share before 2029, but the next two years may be drastically different.