New car sales are expected to flatten out in June, but makers are earning more on each sale.
With retail sales showing signs of faltering, new vehicle sales are expected to flatten out in June.
New-vehicle retail sales in June are expected to drop 0.5% from a year ago on a selling-day adjusted basis, according to a monthly sales forecast developed jointly by J.D. Power and LMC Automotive.
Mike Manley, president and CEO of the Jeep brand, said sales so far in June remain healthy, but the year-over-year comparisons have come becoming more difficult to match or surpass.
However, increased fleet sales are expected to off-set slower retail sales, increasing total light-vehicle sales by 0.8% on a selling-day adjusted basis from 1,475,062 a year ago. Fleet sales are expected to hit 340,000, a 5.9% increase from 308,640 in June 2015 on a selling-day adjusted basis.
Edmunds estimates forecasts that 1,528,812 new cars and trucks will be sold in the U.S. in June for an estimated Seasonally Adjusted Annual Rate or SAAR of 16.9 million, reflecting a 0.2% decrease from May 2016, but a 3.8% increase from June 2015. The forecast anticipates that it will be the best for the month of June since 1.67 million sales were registered in June 2005.
Edmunds also projects that 8,656,267 new cars and trucks will be sold this year in the U.S. through the end of June, up 1.6% from the 8,518,550 sales recorded through the first six months of 2015’s record-breaking year.
“The industry may not be growing as fast as in recent years but, at the halfway point of 2016, it’s still on pace to set another annual sales record,” said Edmunds.com Director of Industry Analysis Jessica Caldwell. “As long as economic conditions – like low unemployment and easy access to credit – continue, the industry will be in a strong position through the busy summer sales months.”
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TrueCar Inc. projects total new vehicle sales, including fleet deliveries, will reach 1,556,844 units in June, up 5.4% from a year ago, as consumers return to dealer lots this month after disappointing industrywide volume in May.
The seasonally adjusted annualized rate or SAAR for total light vehicle sales in June is an estimated 17.2 million units, up from 17 million units a year ago. On a daily selling rate basis, overall sales may expand by 1.4% when adjusting for one additional sales day versus June 2015. Excluding sales to daily rental, commercial and government fleets, retail deliveries of new cars and light trucks will likely rise by 6.4% to 1,292,670 units.
“It’s clear that the industry shortfall in May was a case of demand deferred to June,” said Eric Lyman, TrueCar’s vice president of industry insights. “July should also get off to a good start as Independence Day weekend typically sees aggressive sales promotions. The fact that new car and truck deliveries, after six consecutive years of growth, continue to rise half-way to seven years underscores the strength of retail demand.”
Subaru may lead gains for the month with a 15% year-over-year rise in deliveries of its all-wheel-drive cars, wagons and crossovers, followed by Kia Motors with an 11% increase. FCA is estimated to rank third with a 9.7% increase for the month, followed by an 8.8% gain for Honda Motor, which is benefitting from demand for its revamped Civic compact car line.
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Volume for non-luxury, mass-market brands will likely rise by 5.6% versus the year-ago month, and sales of luxury models may expand by 4.7%.
Incentive spending by automakers averaged an estimated $3,116 per vehicle in June, up 8.6% from a year ago, but down 0.9% from May 2016.
“There may be exceptions, but it’s reassuring that automakers as a group are keeping incentive spending within a reasonable range,” said Oliver Strauss, vice president of forecasting for TrueCar’s ALG unit. “The U.S. economic expansion has cooled, but we’re optimistic that it can reaccelerate in the second half of the year – particularly with regard to the labor market.”
New-vehicle retail transaction prices thus far in June are at an all-time high for the month at $31,089. The previous record was $30,202, set in June 2015. Incentives are also at a record high for the month of June at $3,278 per vehicle, $119 per vehicle more than the previous high in June 2015, according to LMC and J.D. Power.
With record transaction prices, consumers are on pace to spend $37.5 billion on new vehicles in June, surpassing the record high of $35.2 billion for the month of June, set in 2015.
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Overall, the lower level of retail sales has had an impact on the total light-vehicle market. LMC Automotive is maintaining its full-year forecast at 17.7 million, but cautions that volume may be at risk, as rising fleet sales may not be enough to maintain total volume.