With the ongoing shortage of semiconductors and other key materials, U.S. car sales have slipped to their lowest levels since the end of the Great Recession — but that’s created a major backlog of demand likely to result in a sales boom over the next few years, something even a recession won’t slow down, according to a new study.

Once supply line issues are resolved, that will “unleash the upside,” forecast John Murphy, the lead auto analyst with Bank of America Securities during a presentation Thursday to the Automotive Press Association in Detroit.

“We have about 6 million units of pent-up demand,” he said, referring to the annual “Car Wars” study put together by the financial institution. And that should yield sales volumes “significantly higher” than what the industry has seen since COVID struck,” likely topping 16 million annual sales in the coming years.

An uncertain future

That are plenty of uncertainties facing the industry. It’s unclear when supply lines will return to normal — some experts warning it could take until late next year or even 2024. And it will be a challenge, Murphy said, for automakers to restock depleted dealer inventories — which have slipped to barely 1 million vehicles, less than a third of what’s considered normal this time of year.

There’s also the question of what happens with the U.S. economy. Interest rates are heading up and there’s growing concern of a recession.

But, said the analyst, “We’re at a point where we’re scraping along at the bottom in terms of volume.” So, looking forward, there is “probably only an upside.”

Whether the industry settles into the 16 million range or tops 17 million, approaching a new sales record, could also depend on new vehicle pricing, said Murphy.

Pricing problems

On the plus side, automakers have been able to maintain strong earnings during the current downturn, largely by slashing incentives and raising prices. But with the typical new vehicles buyer now spending more than $43,000, that could limit the market.

“You wouldn’t be able to sell 17 million or 18 million vehicles at $43,000,” cautioned Murphy. “So, we will probably see prices gravitate back to pre-COVID levels in the mid-$30,000 range,” though not quickly.

And automakers could see a return of incentives, especially if companies facing the loss of market share decide to get aggressive. Murphy pointed to Stellantis and Nissan in particular.

The rise of the EV

The type of vehicles Americans will be buying should be quite different by 2026, however. Automakers have begun to disinvest from their conventional, gas- and diesel-powered models, shifting focus to hybrids and all-electric vehicles.

During the next four years, nearly 250 new or completely redesigned models will be introduced, according to the study, with hybrids, plug-in hybrids and battery-electric vehicles accounting for 60% of them.

“The advent of alternative powertrain vehicles, most notably battery-electric, is here,” Murphy said.

But even as electrified technology becomes commonplace, it’s yet to be seen how consumers will embrace it — especially those BEVs. The big problem is pricing.

Tesla trouble

Currently, the Car Wars study shows it costs about $42,000 to produce the average all-electric model, about $10,000 more than a comparable vehicle with an internal combustion engine. And though manufacturers had hoped to narrow the gap, it’s widening. That’s because of a surge in the cost of components and critical raw materials. The price of lithium, for example, is up sevenfold this year.

The general industry consensus has been that BEVs alone could take 20% of the U.S. new vehicle market by 2025, up from 5% this year and just 1% in 2019. But Murphy said the more likely mid-decade figure will be 10% unless BEV prices start to fall.

Either way, the flood of new electrified vehicles could change the competitive landscape. And that’s likely to be especially apparent in the all-electric segment where today Tesla holds a roughly 75% share. By 2025, said Murphy, that could slip as low as 11%, with Tesla being leapfrogged by both General Motors and Ford, each expected to capture a 15% share of the all-electric segment.