The surge in truck demand should be especially good for GM as it launches the new Chevy Silverado.
Sales of new vehicles appear to be holding steady during May with strong demand for pickup trucks helping set the pace, analysts are reporting.
Just how much the market will be up for the month is a matter of debate, with forecasts ranging from 6% to 9%. Significantly, consumers are driving much of the growing demand, though fleets are also increasing sales which could be a sign of a recovering economy.
“We’re in a nice place in terms of retail sales,” said Mike VanNieuwkyuk of global vehicle research at J.D. Power & Associates. Car sales have recovered nicely from the recession and have maintained their recent momentum, VanNieuwkyk noted during a panel discussion at the Wards Auto Interiors
As of the middle of May, it doesn’t look like the month is going to be a barn-burner, however sales are maintaining a steady upward pace.. The retail side of the market should see deliveries up about 6 percent for an annualized rate of about 15 million. But that’s an improvement over the 14.86 in April, analyst Art Spinella noted in his monthly newsletter.
(Detroit maker curb summer shutdowns to keep up with growing sales. Click Here for that story.)
The forecast by TrueCar.com is a bit more upbeat, forecasting the Seasonally Adjusted Annual Rate, or SAAR, will be closer to 15.2 million for May. A key reason, said analyst Jesse Toprak, is a surge on the large end of the market.
“Full size truck sales continue to gain momentum in May and we expect the segment to post a 22% increase compared to the nearly nine percent industry increase,” said Toprak, senior analyst for TrueCar.com. “Stability in the industry is now the norm, which is a positive for automakers as it results in the ability to optimize production levels, therefore improving profitability.”
Another factor working in the industry’s favor is the increasing availability of financing, especially for those who don’t have the best credit records.
“On a year-over-year basis, the sub-prime approvals continue to increase in double digits primarily because the base was so low in 2012,” said analyst Spinella, of CNW Marketing, adding the value of trade-ins are falling because consumers are trading in older, worn-out models.
Spinella also said for the first time in quite awhile, consumers are dickering more. The closing ratios are off nearly 10.5% compared to last month. Alone that wouldn’t be worrisome if it weren’t for the fact that floor traffic is similarly down a touch. This is the widest disparity between the two in more than a year and should be watched closely to see if this is a trend or a one-time blip, he warned.
Rod Lache, the Deutsche Bank automotive analyst, also said May sales appear headed for a solid year-over-year increase in May. “Based on mid-month channel checks, we estimate May SAAR is at 15.2 million units.” and up from April’s 14.9 million.
Despite the fact that consumers seem to be bargaining more, prices have been stable — something generally considered a sign of healthy demand.
“Nissan’s (price cuts) last month are clearly being balanced out with lower incentives. However this could prove short lived if the strategy proves ineffectual over time,” Lache said.
(Click Here for more on the Nissan price cuts.)
In fact, Nissan’s incentives are down by more than a third from May 2012, and by 16% from April of this year, before the price cuts. Givebacks were down 3% for the industry overall, year-over-year. The only exceptions were Chrysler, Ford, Hyundai and Kia among major manufacturers.
GM appears to have cut incentives notably versus April, which is likely to impact share negatively, Lache cautioned. But he believes the maker will still see strong gains, especially in the pickup market.
“With truck demand consistently outpacing a strong overall industry and capacity relatively constrained, this appears to be an optimal environment for truck volume and pricing,” he said. “We believe this is particularly the case for GM,” he said, noting the upcoming launch of the maker’s new Chevrolet Silverado and GMC Sierra models.
(Take a first drive in the new 2014 Chevrolet Silverado. Click Here for the review.)
Paul A. Eisenstein contributed to this report.