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Cool Start, But May Sales Could Still Turn Hot

Is a major recovery in store for 2011?

by on May.21, 2010

Auto dealers are hoping to be busy in the coming weeks, as the traditional spring buying season gets underway over Memorial Day weekend.

The economic uncertainties that have rocked the stock markets may be translating into a slowdown in the U.S. new car market, but things may pick up in the coming days, reports J.D. Power and Associates, as the upcoming Memorial Day holiday normally ushers in the traditional start of the spring buying season.

But a separate report, by consulting firm A.T. Kearney, suggests automakers might be patient for the moment, predicting a huge recovery for the sluggish American auto market in 2011.

Using real-time data from dealers across the country, the California-based research firm says May got off to a “wavering start” on the retail side of the market.  The good news is that sales are likely to come in about 11% ahead of the dismal May 2009.  But volumes will nonetheless be down from April 2010.

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The industry is expected to sell 874,000 cars, trucks and crossovers this month.  On a seasonally-adjusted annual sales rate, or SAAR, that works out to 9.2 million vehicles.  But that’s down from 9.6 million in April.  The industry might have to point the collective finger at itself for the slowdown.

“Compared with April, incentives this month are flat at $2,800, which is contributing to the slower sales pace,” said Jeff Schuster, Power’s executive director of global forecasting. “However, with the unofficial start to summer approaching, consumers are more inclined to consider purchasing a new vehicle, and it’s likely that Memorial Day sales incentives will generate an even stronger close for May.”