The latest vehicle sales forecast from J.D. Power and LMC Automotive shows a new-car market challenged by “rising inventories of unsold vehicles.”
But some dealers are getting a shot in the arm from their used-car sales, which for franchised dealers have grown nearly 6% month-to-date, according to J.D. Power — though other analyses show mixed results for the overall used retail market.
Starting with the new-car side, J.D. Power and LMC are predicting 1,226,800 retail new-car sales for May, which would be a 3.1% year-over-year dip and the fifth straight month of softer sales.
The resulting seasonally adjusted annualized rate for new-car retail sales would be 13.5 million, which is about 200,000 units lower than the year-ago rate.
The companies are projecting the year-to-date tally by the end of May to be 5.2% lower than the prior-year period.
Total new-vehicle sales, which includes fleet, are expected at 1,558,800 for May, down 2.1% year-over-year, with a SAAR of 17.0 million, down from 17.2 million in May 2018.
“May is one of the highest volume months of the year and its performance typically indicates how the year will play out. The expected sales decline in May, coupled with weak sales year-to-date has left the industry with rising inventories of unsold vehicles,” said Thomas King, senior vice president of J.D. Power’s data and analytics division, in a news release.
“Manufacturers are responding with larger discounts to take advantage of the Memorial Day weekend which is one of the busiest car-buying periods of the year,” King said.
Days-to-sell for new vehicles averaged 74 in May, the highest for this month in a decade, J.D. Power said. Close to a third (29%) of the month’s new-car sales have taken at least 90 days, compared to about a quarter in May 2018.
Meanwhile, franchised dealers have lifted their used-car sales 5.9% month-to-date compared to 2018, according to the J.D. Power analysis, which said “robust profits from used-vehicle operations are more than offsetting the challenges in new-vehicle operations” at many stores.
"May reflects a mixed performance for the industry," King said. "For manufacturers, despite lower volumes, higher prices are delivering an increase in net revenue. For dealers, strength in the used market is offsetting weakness in new. Looking forward, elevated inventory levels remain an issue that will only be corrected through production cuts or higher incentives. As the industry starts its transition to sales of 2020 model-year vehicles, pressure to increase discounts on 2019 model-year vehicles will rise considerably.”
TrueCar’s ALG subsidiary is calling for total new-car sales of 1,548,322 this month (down 2.9% year-over-year) with a SAAR of 16.9 million. Taking out fleet sales, ALG projects 1,234,218 new-car sales for May, which is down 3.4%.
“Despite a 50-year low in the unemployment rate and a 15-year high in consumer sentiment, the auto industry continues to face weakening in year-over-year sales,” ALG chief economist Oliver Strauss said in a news release.
“From a historical perspective, however, 16.9 million SAAR is strong, especially considering a declining incentive and rising average transaction price environment,” Strauss said.
ALG is forecasting 3,402,980 used-car retail sales for the month, which would be a 1.5% year-over-year dip and a 2.3% month-over-month increase.
Over at Edmunds, analysts are calling for 1,551,643 total new-car sales for May, beating April figures by 15.9% but trailing year-ago figures by 2.2%.
The overall SAAR, according to Edmunds, was 17.0 million, with the retail new-car SAAR of 13.8 million.
The month was a good sign for new cars — to be taken with a grain of salt, Edmunds said.
“Dealers piled on the incentives and rolled out the barbecue grills this Memorial Day weekend to lure in shoppers and it looks like it did the trick,” said Jeremy Acevedo, Edmunds’ manager of industry analysis, said in a news release. “Good deals have been tougher to come by this year due to higher interest rates and rising prices, so it makes sense that shoppers would pounce on the chance for a steal.”
He added: “It’s going to be an up and down year. Automakers are still figuring out how to balance supply with declining demand, but incentive budgets aren’t big enough for dealers to offer deep discounts on a consistent basis. And when those bargains go away, so do the shoppers.”
As for the used-car market, Edmunds predicts 3.4 million sales this month, down from 3.5 million in April. The resulting SAAR for used cars would be 39.2 million, up from 39.1 million last month.