May auto sales in the U.S. are expected to remain flat despite plenty of incentives aimed at luring buyers into to showrooms.
New vehicle sales are expected to remain flat year-over-year during May at a total of 1.53 million units in May 2017, resulting in an estimated 16.7 million seasonally adjusted annual rate, according to analysts at Kelley Blue Book.
“We could see a positive month for the industry for the first time this year in May, but Kelley Blue Book expects totals to finish about even year-over-year, despite one extra selling day in 2017,” said Tim Fleming, analyst for Kelley Blue Book.
“Retail numbers for May are expected to finish strong, however they continue to be supported by considerable incentives and lease subvention. In recent months, leasing appears to be reaching its peak, which is expected, given declining residual values, which is contributing to this year’s slowing sales,” he said.
After a record year of sales in 2016 and seven consecutive year-over-year sales increases, Kelley Blue Book’s forecast for 2017 calls for sales in the range of 16.8 million to 17.3 million units, which represents a 1 to 4% decrease from last year.
(Nissan expects profits to fall 7.7% this year. To find out why, Click Here.)
Joe Phillippi of Auto Trends, noted, “I think sales are on a downward trend after one hell of a post-recession recovery and run. While consumers are in good shape financially, trade-in values are easing and we do have an awful lot of long term loans outstanding, 66 months (on) average. I think now, and we have satisfied a great deal of, if not all, pent up demand,” he added.
“And yes, OEM’s will be carefully managing inventory levels and taking out hours/shifts to prevent inventory bloat,” he added.
Retail sales are expected to account for 80.5% of volume in May 2017, slightly up from 78.9% in May 2016.
(US auto sales fall hard in April. Click Here for the story.)
KBB’s analysis also predicted that General Motors is poised to gain market share in May 2017 with growth driven by its SUVs, specifically the new GMC Acadia and Buick Envision. In fact, GM could see its SUV sales volume increase by more than 15%, which would offset any potential declines from its car and pickup truck model sales.
On the other hand, Hyundai and Kia could see one of the largest declines in May, with volume expected to drop more than 4% year-over-year. The company still faces challenges regarding the shifting demand toward SUVs, and compared to the other major manufacturers, Hyundai-Kia has the highest sales mix of cars at 69%, while the industry average sits at 37%.
Fleming said there is a clear divide in the market between cars and light trucks, and in May, Kelley Blue book anticipates the sales mix of cars to reach 38%, down 3% year-over-year. While SUV segments continue to see the most significant gains, full-size trucks are expected to increase market share by 0.5% in May, though deeper discounts and incentives are partially responsible for the growth.
(Toyota earnings tumble 21%. Click Here for the story.)
“Consumers are continuing to defect from the midsize car segment at a rapid pace,” said Fleming. “Most commonly, they are turning to the compact SUV/crossover segment. As such, Kelley Blue Book expects midsize cars to lose more than one point of share in May, while compact SUVs are expected to pick up nearly one point of share.”