Sales of new vehicles during the first half of April remained in a healthy holding pattern as buyers continued to replace aging vehicles, according to the updated monthly sales forecast developed by J.D. Power and Associates’ Power and Associates and LMC Automotive.
That could be good news for analysts fretting about other weakening signs in the U.S. economy. The auto industry was one of the strongest sectors of the economy coming out of the last recession and could help maintain that pace in the months ahead.
“The irrepressible buying behavior of consumers is driving auto sales growth in 2013, as consumer spending remains remarkably stronger than the economy suggests it should be,” said Jeff Schuster, senior vice president of forecasting at LMC Automotive.
Total light-vehicle sales in April 2013 are projected to reach 1,312,100 units, a 7% increase from April 2012. The annualized selling rate is expected to remain above 15 million units for the sixth consecutive month. The forecast for fleet sales is 282,000 units, which is slightly stronger than in April 2012, representing a 22% share of total sales.
Power expects retail sales of new vehicles in April to come in at 1.029 million vehicles, which represents a seasonally adjusted annualized rate, or SAAR, of 12.1 million units. That would keep the retail rate stable at or above 12 million units for a third consecutive month.
Strong sales are being complemented by increasing prices, according to J.D. Power and Associates PIN data. When comparing year-to-date data for 2013 with the same period last year, retail transaction prices are up 3.1%, which would equate to an extra $13.2 billion spent on new vehicles through the first four months of the year. The average price of used vehicles sold at franchised dealerships has also risen 3.8% so far this year.
“The strong used-vehicle prices we’re seeing are supporting new-vehicle demand and are reflective of the general pricing discipline being exhibited by new-vehicle manufacturers,” said John Humphrey, senior vice president of the global automotive practice at J.D. Power and Associates.
The outlook for vehicle sales in 2013 continues to improve. LMC Automotive is raising its 2013 U.S. forecast for total light-vehicle sales to 15.4 million units from 15.3 million units. The retail light-vehicle forecast continues to round to 12.5 million units, although the majority of the increase in the forecast is on the retail side of the market.
Analysts point to a variety of factors driving automotive sales, with pent-up demand one of the major ones. The last recession was so severe that the overall U.S. vehicle fleet is the oldest it has been since records were first kept – averaging about 11 years. Many of those vehicles now simply need to be retired.
There is also the fact that a post-recession bubble in lease activity means “Industry sales are also benefiting from an increase in the number of maturing vehicle leases, a trend that will continue throughout 2013,” added LMC’s Schuster.
Meanwhile, despite some recent caution flags – such as the low number of jobs being created – there are also some positive indicators, according to Power analyst Humphrey.
“If the current favorable trend in the stock markets and housing continues throughout the year, the automotive market may be poised for a breakthrough performance,” he suggested.
North American light-vehicle production in the first quarter of 2013 is up just 1%, compared with the same period in 2012.
Year-over-year production in the United States leads the region, with a 3%% increase on strong gains from Ford, Nissan and Volkswagen. Production volume in Mexico is up 2%, while Canadian vehicle production in the first quarter is down by 9%, as all manufacturers, with the exception of Ford, had lower production volume in the first quarter of 2013 than in the same period of 2012.
Vehicle inventory levels are also dropping, falling back to a 60-day supply, compared with 64 days in March 2013. Overall, there are nearly 3.2 million units currently in inventory, as the market heads into the peak spring/summer selling months. Car inventory began the month with a 56-day supply and trucks with a 64-day supply.
There are only two major industries in the U.S. doing well and none in Europe. Europe depends on healthy U.S. demand for their products and that isn’t happening because the U.S. is bleeding red ink and unemployment. In addition Asia depends primarily on the U.S. for it’s major sales so new car sales in the U.S. along with aircraft are not going to bail out the countries most impacted by the economic meltdown caused by bad government and illegal business activities such as what has existed on Wall Street.