Headed in the right direction? Demand for new models, such as this Jeep Cherokee, is helping the auto industry boost sales after a slow winter.
Sales of new cars, trucks and crossovers are showing signs of coming back to life after hibernating during the bleak winter months of January and February.
After an unexpectedly strong surge in demand last year, sales started to slide as winter storms appeared to keep many potential buyers away from showrooms. But industry analysts are hoping that this only delayed another uptick in demand for 2014, and could actually lead to an especially strong spring buying season.
Preliminary figures for March are already showing signs of a thaw, according to the monthly sales forecast from J.D. Power and LMC Automotive.
Total light-vehicle sales in March 2014 are expected to rise 6%, to nearly 1.5 million units, according to the Power-LMC forecast. Fleet sales as a percentage of total sales remain low, with March expected at 20%, which is 1 percentage point below March 2013. Fleet sales for the full year are projected to reach 17.3%, which would be near the record low of 17.1% in 2009.
(Click Herefor a look at how winter storms hammered the auto industry.)
However, the modest fleet mix combined with the weather-impacted sales pace in January and February has led to a slight downward revision in the outlook for all of 2014. LMC Automotive has cut its forecast for total light-vehicle sales for the year to 16.1 million units from 16.2 million. The retail light-vehicle sales forecast remains steady at 13.3 million units.
“The selling pace for the year was slow out of the gate, but the industry remains poised for stable growth in the near- to mid-term,” said Jeff Schuster, senior vice president of forecasting at LMC Automotive. “Modest improvements are expected as 2014 progresses, the recovery from the deep recession nears an end and the market transitions to a post-recovery stage,” he said.
John Humphrey, senior vice president of the global automotive practice at J.D. Power, said, “The severe weather had an impact on retail sales in January and February, but as the weather has improved, so have sales.”
Stronger pricing coupled with lower reliance on fleet continues to bode well for the overall health of the automotive sector.
The average new-vehicle retail transaction price in March—as it has been for seven consecutive months—remains above $29,300, a nearly $700 increase from March 2013 and the highest level ever recorded for the month as manufacturers have refrained from increasing incentives despite the slow start to the year.
Rising costs have raised some concerns, however, that many potential buyers are being priced out of the market. A recent survey by Interest.com found that the typical household in only one of the nation’s 25 largest metro areas – Washington, D.C. – could afford the average price of a new car today.
(For more on the auto affordability survey, Click Here.)
North American vehicle output in February 2014 finished at 1.4 million units, a 4% increase from February 2013. Inventory levels on a days’ supply basis are still hovering at nearly 80 days, which is 20 days higher than ideal levels.
However, LMC Automotive is predicting an increase in the pace of sales will reduce inventory levels by the end of the month.
“In spite of flat January numbers and higher-than-normal inventory levels, output for the first quarter is expected to exceed 4 million units and to top first quarter 2013 levels by 3 percent,” said Bill Rinna, senior manager of forecasting at LMC Automotive.
“Although demand is starting to pick up, production growth is also being helped by new models, most notably the Jeep Cherokee, Nissan Rogue, and the Nissan Versa Note,” he said.
The North American production forecast for 2014 prepared by LMC remains 16.5 million units, with U.S. volume of 11.1 million units, a 3% increase over 2013. Production in Mexico is expected to increase 7% to 3.1 million units, while Canada volume is expected to drop nearly 5%, to 2.3 million units.
(Toyota to pay $1.2 bil to settle Justice Dept. criminal probe. Click Here for the full story.)