Analysts warn that retail sales may be softening, causing them to temper their estimates for 2016 retail sales.
Total light-vehicle sales in April are expected to increase 1% on a selling-day adjusted basis from a year ago, marking the strongest total sales in April on record, according to a new estimate from J.D. Power.
However, based on the modest growth exhibited year-to-date, LMC Automotive and J.D. Power are reducing their retail light-vehicle sales forecast for the year to 14.3 million units from 14.5 million units. The revised full-year outlook is a 1% increase compared with 2015, when retail new-vehicle sales totaled 14,245,231, which made it the best retail sales year since 2001.
While the full-year retail forecast has been revised downward, LMC Automotive expects those retail sales to be recouped through increased fleet sales.
The SAAR for total sales is projected at 17.6 million units in April 2016, up 0.8 million units from 16.7 million a year ago. Fleet sales in April are expected to hit 328,000, a 4.7% increase from 301,684 in April 2015, Power and LMC said.
Consumers are on track to spend more than $36.9 billion on new vehicles in April, surpassing the previous record for the month of $35.3 billion set in April 2015. Through the first two weeks of the month, the average transaction price of $30,902 is the highest level ever for April, surpassing the previous high of $30,716 set in 2015.
“Top-line performance of the industry remains robust — retail demand is strong, transaction prices are at record levels and consumers will spend more on new vehicles than in any other April on record, however, the rate of unit growth is unquestionably slowing,” said John Humphrey, J.D. Power senior vice president of global automotive practice.
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“The slowing rate of growth, shift in consumer demand away from cars and toward SUVs and elevated fleet volumes pose significant challenges to manufacturers as they compete in the marketplace.” he added.
John Mendel, executive vice president of American Honda, told reporters this week while the automaker is holding its own and gaining new customers, the market is becoming more competitive and incentive spending is increasing.
“Despite a market place, increasingly awash in fleet sales, subprime and extended-term loans and other gimmicks, our strategy continues to be based on products sold – one car, one customer at a time in the retail space,” he said.
Mendel also said while it appears the U.S. market is peaking, he isn’t preparing to “hang crepe.”
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“Nobody thinks the market is going to reach 18 million units but it’s on a nice plateau,” said Mendel, noting while the battle market share has intensified, the demand for new vehicles is still very strong. “Seventeen million units is a lot different than a market of 9 or 10 million units.”
LMC and J.D. Power estimated new-vehicle retail sales in April are expected to reach 1,195,000 units, the same level as a year ago on a selling-day adjusted basis, according to a monthly sales forecast developed jointly by J.D. Power and LMC Automotive.
Retail sales through the first four months of 2016 are expected to reach 4.3 million units, a 0.5% increase on a selling-day adjusted basis compared with the same period in 2015.
“We fully expect 2016 auto sales to be another record year in the United States, but there is also no question that we will see a slower rate of growth than in the past few years of recovery,” said Jeff Schuster, LMC senior vice president of forecasting.
(Click Here for more on March U.S. auto sales.)
“Some retail light-vehicle softening in the past couple of months is partially due to comparisons with robust sales last spring. That said, with volatility comes a shift in expectations to more downside risk than upside potential for this year and next,” he said.