Automakers hope to wrap up the month with strong Memorial Day holiday sales.
There may be all sorts of worrying signs about the economy but you couldn’t tell that by visiting U.S. new car showrooms. Sales in August continued to heat up thanks to strong demand for trucks and crossover vehicles – and the ample availability of financing for even riskier buyers.
New-vehicle sales are expected to increase anywhere from 12 to 14% from August 2012 when August wraps up, according to analysts from Kelley Blue Book, J.D. Power & Associates and LMC Automotive. The result is forecast to be the highest monthly sales volume since 2006 as the seasonally adjusted annualized rate is expected to reach 16 million units.
“The industry as a whole continues to experience a robust improvement in demand, and our forecast for August is looking to be the best month for retail sales that we’ve seen in the past seven years,” said John Humphrey, senior vice president of the global automotive practice at J.D. Power.
“Moreover,” said Humphrey, “this strong selling environment is occurring when consumers are spending more on new vehicles than any month on record, which is a further indication of the underlying strength of the economy.”
One factor that appears to be propping up demand is the availability of ready loans, with lenders opening up the spigot again to even higher-risk buyers. Data from Experian Automotive suggest that shoppers also are stretching out loans in order to purchase more well-optioned vehicles.
“Most automakers are seeing double-digit sales increases compared to last year as retail sales remain a bright spot, even with more new models entering the market,” said Alec Gutierrez, senior analyst at Kelley Blue Book.
Detroit makers have shown a strong rebound this year, Chevrolet noting that its small car sales have surged substantially with the introduction of new models like the Spark minicar and Sonic subcompact. But domestic brands have also been buoyed by booming demand for pickups, the full-size segment having already gained 23% for the first seven months of 2013.
Gutierrez said the growth in the truck segment appears to have no end in sight. In addition to getting a push from the rebounding housing market, the auto industry is heading into the time of year where truck sales normally tend to ramp up. With seasonal demand predicted to increase during the next few months, Kelley Blue Book expects growth in the full-size pickup truck segment to continue unabated.
It’s hard to find any product niche that isn’t doing well but, “The midsize car segment, which had many redesigned models introduced last year, is expected to be down nearly 2% in market share and is being challenged by compact cars for the top segment,” said Tim Fleming, analyst at Kelley Blue Book.
Based on the solid outlook for August, LMC Automotive is holding its 2013 forecast for retail light-vehicle sales at 12.8 million units and total light-vehicle sales at 15.6 million units.
“The U.S. auto recovery seems to be operating on auto pilot, a welcome stage of stability at a higher pace,” said Jeff Schuster, senior vice president of forecasting at LMC Automotive. “We do expect to see a lower selling rate in September as Labor Day is counted in August sales, but upside potential still outweighs downside risk in 2013 and well into 2014.”
North American light-vehicle production for the year-to-date through July was up 4% from the same period in 2012. The industry continues to manage a lean supply-to-demand ratio, with vehicle stock at the beginning of August falling to an average 56-day supply from 61 days in July. The overall inventory level has dropped to 2.9 million units from 3.3 million units in July.
Ford holds on to one of the strongest increases in production from 2012, up 13% due to strong demand for the redesigned Escape and higher Explorer and F-Series volume. “On the other hand, Ford could have been up double digits, but has been hampered with production issues from both the Escape and Fusion,” Kelley’s Gutierrez said.
With Fiat-Chrysler relatively flat and General Motors off 3% year-to-date, the Detroit Three collectively are slightly below the industry year-over-year performance with a 3% increase. However, they do retain a 54% share of light-vehicle production in the region, the same level as in 2012.
Hyundai/Kia’s production growth year-to-date is the highest of the larger manufacturers, up 14%. This comes as inventory for the group falls from a 46-day supply to 41 in August. The volume boost is coming almost exclusively from the Elantra and redesigned Santa Fe. With weaker volume in July, the European brands are down 2% year-to-date.