Sales in May are outperforming expectations, led in some measure by strong SUV and truck sales.
The economic “showers” that slowed new car sales in April are resulting blooming results in May as new vehicle sales are exceeding expectations thus far this month despite the slow tempo of economic growth in the U.S.
“The industry continues to outperform prior-year levels with respect to retail sales and transaction prices,” said John Humphrey, senior vice president of the global automotive practice at J.D. Power.
Total light-vehicle sales in May 2015 are projected to reach 1,591,100, a 3% increase on a selling-day-adjusted basis compared with May 2014. Fleet volume is expected to hit 290,500 units, accounting for 18.3% of total sales, up from 17.6% a year ago.
Humphrey said the average new-vehicle retail transaction price so far in May is $30,428 and on pace to achieve a new record for the month. The previous record was set in May 2014 when retail transaction prices averaged $29,400.
As gas prices continue to rise, so are hybrid and EV sales. In California, they're back up to nearly 10% of all vehicle sold.
New-vehicle retail sales in May 2015 are also expected to reach their highest levels since August 2014, according to a monthly sales forecast from J.D. Power and LMC Automotive.
The new-vehicle retail seasonally adjusted annualized selling rate (SAAR) in May is expected to be 14.1 million units, on par with the level reached in May 2014 and the first time the retail SAAR has reached 14.1 million units since August 2014.
The sales pace of 50,000 units per day in May 2015 is the strongest daily selling rate in the month of May since 2004 when an average of nearly 53,000 vehicles were sold each day. Retail transactions are the most accurate measure of consumer demand for new vehicles.
The combination of strong sales and high transaction prices positions May to set a new record for the month for consumer spending on new vehicles at approximately $39.6 billion, according to the Power Information Network (PIN) from J.D. Power. It would become the third-highest level of new-vehicle consumer spending in a month following August 2014 when sales reached $40.3 billion and July 2005 when sales totaled $39.7 billion.
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While average gas prices across the nation have slowly climbed from January’s low of $2.12 per gallon to $2.72 per gallon so far in May, refinery constraints in California have driven fuel prices in that state up at a much faster rate. Regular fuel prices in California averaged $3.77 per gallon so far in May—up from $2.55 per gallon in January—their highest level since September 2014.
High gas prices are contributing to increased hybrid and electric vehicle (EV) sales, which have accounted for 9.8% of all retail new-vehicle sales in California in May, their highest level since August 2014. Hybrid and EV sales have also started to recover nationwide, representing 3.5% of all retail sales in May, up from a low of 2.9% in February.
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LMC Automotive is maintaining its total light-vehicle sales forecast for the year at 17 million units.
“May’s selling rate is making up for a slightly weaker April, and keeping the year on track to reach the elusive 17 million unit mark,” said Jeff Schuster, senior vice president of forecasting at LMC Automotive. “Over the next several months, all eyes will be on the timing of the expected increase in interest rates by the Federal Reserve, as the rate increase could have a significant impact on auto sales volume by year-end.”
North American production in April 2015 reached 1.49 million units, which outpaced March and is up 5% from April 2014. As a result, automakers built up some inventory as the industry heads into the summer selling season. May started with a 65-day supply, up from 59 days the previous month, but still below the 69-day supply the industry was at during the same point last year.
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LMC’s production forecast for 2015 also remains at 17.5 million units, a 500,000-unit increase compared with 2014. The continued popularity of SUVs is helping to drive up production numbers through April 2015, with SUV production in North America up 130,000 units, a 6% increase compared with the same period in 2014, with 70% of the increase in the midsize and large SUV segments.