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New Car Sales Slide in August

Decline comes as makers are spending big on incentives.

by on Aug.26, 2016

Analysts are expecting August new vehicle sales to dip despite the highest incentives on new cars in a year.

Sales of new vehicles have hit a speed bump during August, even as incentive spending increased, according to a new estimate by analysts.

A monthly sales forecast developed jointly by J.D. Power and LMC Automotive indicates that new-vehicle retail sales in August are expected to drop 6.5% from a year ago, and total new-vehicle sales are expected to slip 5.2%.

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The Seasonally Adjusted Annual Rate of sales or SAAR is also expected to drop to 16.8 million units in August, according to the J.D.Power and LMC Automotive model, which leans heavily on sales data collected from new car dealers around the country.

“Following 66 consecutive months of retail sales growth that began in September 2010, we’ve seen four declines in the past six months, and this much of a pullback in August will be a disappointment for the industry,” noted John Humphrey, senior vice president of global auto practice at J.D. Power.

Incentive spending in August averaged $3,559, the highest ever for the month. The previous high for August was $3,419, set last year. The highest incentive spending for any month is $3,753, set in December 2008.

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“Softening retail sales amid low interest rates, relatively cheap gas and automakers pushing more aggressive incentives may be an indicator that further growth in this cycle will be difficult. There is opportunity for some catch-up in the all-important Labor Day selling period, but as momentum slows, the industry will need to be cautious to balance volume and margin, as incentives are close to record levels,” he added.

Overall, however, consumers are on pace to spend $39.3 billion on new vehicles in August, slightly below the August record of $40.8 billion in 2015, but still the seventh highest for any month. The record for consumer spending on new vehicles in a month is $43.7 billion, set in December 2015.

Retail sales year to date through August are expected to be down 1.2%, compared with the same period in 2015, while total sales are expected to be up 0.5%, he added.

Jeff Schuster, senior vice president of forecasting at LMC Automotive, said: “As we look at the remainder of the year, the industry faces an uphill struggle to match last year’s performance.

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“With mixed economic signals, it certainly looks like U.S. auto sales may have peaked in 2015. However, it is important to focus on the sustainable high level of demand. Peak does not mean doom and gloom, and while the industry faces risk, it is not destined for a pullback,” he said.

LMC Automotive’s forecast for full-year total light-vehicle sales forecast remains at 17.4 million units, 0.3% decline from 2015. The forecast for retail light-vehicle sales remains at 14 million units, down 1.6% from 2015.

Meanwhile, J.D. Power and LMC noted that average for new-vehicle retail transaction prices thus far in August are at $30,942 — a record for the month — surpassing the previous high of $30,061 in August 2015.

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During August, trucks have accounted for 59.6% of new-vehicle retail sales, up from 57.5% in the same month a year ago. Truck share is the highest for the month of August but below the record July 2016 record of 60.6%.

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