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New Vehicle Sales Slump Extends to Summer

Early indicators show SAAR stuck well below 10 million for July.

by on Jul.24, 2009

Retail sales of new vehicles in July are projected to decrease 19% from July 2008, according to preliminary data from J.D. Power and Associates. Based on the first 15 selling days of the month, new vehicle retail sales for the month of July are expected to come in at 780,500 units, which represents a seasonally adjusted annualized rate (SAAR) of 8.2 million units.

Power has a generally good record predicting short term sales trends.

Sales for the first half of 2009 are down about 32% from the same period in 2008.

July’s selling rate is down by 4% compared with June, a pace that remains consistent with the first half of a disastrous 2009 calendar year for automakers, suppliers and U.S. taxpayers.

The estimates are from real-time transaction data from more than 10,000 dealerships across the United States, which Power collects for a variety of automotive clients.

U.S. New Vehicle Sales and SAAR Comparisons, July 2009

July 2009 *

June 2009

July 2008

%

New Retail sales

780,500

730,600

967,500

-19

Total Vehicle sales

905,500

857,952

1.131 m

-20

Retail SAAR

8.2 m

8.5 m

10.2 m

-20
Total SAAR

10 m

9.7 m

12.5 m

-20
* Figures cited for July 2009 are forecasted numbers based on the first 15 selling days of the month.

Source: J.D. Power and Associates

July retail sales have declined compared with June, a bad sign, but one that might be strongly influenced by the nascent “Cash for Clunkers” program that was just getting under way. Not surprisingly, fleet sales have improved slightly after several months of weakness and production cuts, as loss-producing automakers continue to try to boost revenue. As a result, the July SAAR for total vehicle sales increases to 10 million units. Automakers are walking a tightrope trying to balance revenue, production and profitability in the worst market since World War II.

“Retail sales for 2009 are expected to be only incrementally affected by the Cash for Clunkers program, as many consumers don’t understand the specifics of the program, and if they do, they often find they don’t qualify for the incentive,” said Gary Dilts, senior vice president of global automotive operations at J.D. Power and Associates. “However, there is potential for increased sales in the short term as a result of select OEMs boosting incentives to match the program.”

To date in July, the Cash for Clunkers program appears to be affecting segment mix, particularly in an environment with gas prices pulling back from recent increases in June. Retail market share for compact vehicles has increased to 39%, up approximately 2.5 percentage points from June. Market shares for mid-size and large vehicles have decreased, with the exception of large pickups, which are up by 0.5 percentage point. This increase in large-pickup share is attributed by Power to the improved fuel economy of today’s pickups, compared with those being traded in.

Power is maintaining its forecasts for 2009 at 8.3 million units for retail sales and 10.0 million units for total sales.

“Given a sputtering but improving economy, the Cash for Clunkers program and manufacturer incentives, it appears that consumers are taking a wait-and-see approach,” said Jeff Schuster, executive director of global forecasting at J.D. Power and Associates. “Favorable responses from consumers to these factors will be critical to market recovery in the second half of 2009.”

Well, there is always hope among sales executives…

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