Although inflation continues to loom, JD Power reports that retail sales of new vehicles are expected to increase by the end of the month compared to September 2021 sales, but the annualized sales rate remains “well below norms historical”.
According to a joint forecast by JD Power and LMC Automotive, retail sales of new vehicles should reach 958,948 units, up 5.4% from last September. Nearly 3 million sales are forecast for the third quarter, down 4.2% from the third quarter of 2021. Non-commercial transactions for this month are expected to reach 161,331. The combined retail and non-retail projections total an increase of 11.8% compared to September 2021.
“September has traditionally been a month of high-volume sales as manufacturers implement Labor Day promotions to phase out older model year vehicles and begin sales of new model year products,” JD Power Data and Analytics Division President Thomas King said in a press release. “Last September, when holiday promotions were almost non-existent, modest improvements in vehicle production allowed automakers to tap into pent-up consumer demand.
“The result is a retail pace that shows a modest increase from a year ago, but remains below potential due to low vehicle availability. affordability pressure, transaction prices still rose and consumers spent more money on new vehicles this month than any previous September on record.
He added that a “deeper dive” into the month’s results “shows that while demand continues to outstrip supply, several key financial results are showing slower growth or have plateaued.”
For example, transaction prices rose 6% year-over-year, which King called an “impressive increase” but noted that growth had increased 10% earlier this year.
“Dealer profits fell slightly from their peak – down just over $300 from three months ago – while trade-in equity stabilized at just under $10,000. dollars over the past two months,” he said. “Overall, this points to some deterioration in unit price and profitability over the coming quarters as rising interest rates and economic conditions affect demand, coupled with a likely gradual improvement in the availability of That said, future improvements in vehicle availability will increase future sales volumes, offsetting the deterioration in unit prices and earnings.”
In CCC Intelligent Solutions’ latest “CCC Trends” report, released in August, Senior Director of Insights & Analytics, Susanna Gotsch, wrote that at the height of the COVID-19 pandemic, dealers and consumers are are rushed to the used car market. This was due to a decline in the production of new cars, which led to price inflation for new and used cars, she said.
“New vehicle sales fell in 2020 with the pandemic, but not as much as initially feared. Sales actually fell further in 2021 due to low inventories due to shortages of semiconductor chips, reaching only 15 million in 2021, and 2022 sales are forecast at 14.4 million.Tight inventories and automakers focused on using semiconductor chips on their most profitable vehicles have driven up the average MSRP of vehicles new at over $45,000 Higher commodity prices are also driving up the cost of electric vehicles, which are being increasingly adopted in the face of high gas prices.
“… Used vehicle sales, on the other hand, hit an all-time high in 2021 of 40.9 million, up 10% from 2020. But forecasts for used sales in 2022 suggest that they will also fall, to about 37.1 million, as prices are high and falling inventories keep more consumers on the sidelines.
JD Power and LMC Automotive found that September is on track to be the 16th consecutive month that retail inventory closes below 1 million units. “Dealers continue to pre-sell vehicles in their delivery pipeline. This month, 53% of vehicles will be sold within 10 days of arriving at a dealership, while the average number of days a new vehicle is in a dealer’s possession before being sold is set to drop. be 20 days, compared to 23 days per year. from.”
“Lack of inventory, coupled with strong demand, continues to allow manufacturers to maintain low discount levels,” King said. “…Higher prices coupled with a rising interest rate environment are increasing monthly loan payments.”
He added that production constraints are expected to continue into October and “could lead to a somewhat lumpy fourth quarter as partially built vehicles in storage are completed and delivered in batches to the retail channel.”
Elizabeth Krear, vice president of JD Power Electric Vehicle Practice, said consideration for electric vehicles is wavering as gasoline prices continue to fall and interest rates rise.
“The percentage of buyers who are ‘very likely’ to consider buying or leasing an electric vehicle in the next 12 months is 26.3%, down 1.7 percentage points from July Although these buyers are slowing the pedal down a bit, the percentage of buyers who are “somewhat likely” to buy an EV in the next 12 months increased by 2.5 percentage points in August.
She noted that the continued increase in the number of new electric vehicles coming to market means that “more customers are finding electric vehicles that meet their needs, leading to greater competition between brands and within segments. on the road to greater adoption of electric vehicles”.
Featured image credit: praetorianphoto/iStock