Whether in person or online, sales in March are expected to jump significantly compared to the same period last year due to the pandemic.

Despite shrinking inventories, analysts predict new-vehicle retail sales for the month of March will show substantial growth compared with March 2020 when COVID-19 shut down the industry.

Carmakers are expected to release sale figures later this week both for March and for the first quarter of 2021.

True Car expects total new vehicle sales to reach 1.46 million units in March 2021, up 42% from a year ago and up 13% from February 2021, when adjusted for the same number of selling days, pushing the seasonally adjusted annualized rate or SAAR to 16.4 million units.

Comparing to first month of pandemic and March 2019

“The pandemic’s dramatic impact on the automotive industry and U.S. economy at large began in the last two weeks of March 2020 when dealerships and OEM plants shut down and stay at home mandates rolled out, which gives us our first year-over-year sales compare,” said Nick Woolard, Lead Industry analyst at TrueCar.

When it comes to auto sales, things are slowly getting back to normal.

Woolard recounted automotive sales dropped 38% from 2019 last March. “It’s no surprise that we’re seeing total sales up 42% and retail sales up 53% when compared to March 2020,” he said, adding to get back to a full recovery, the industry still needs to see improvement in fleet sales.

J.D. Power and LMC Automotive estimated total sales in the first quarter to be 3.77 million units, up 8.7% versus the first quarter 2020, but down 4.9% from first quarter of 2019, when 3.97 million sales were counted.

“The very strong demand for new vehicles among U.S. households seen in January and February is continuing in March, meaning that multiple performance records will be broken for the first quarter,” according to Thomas King, J.D. Power president of data and analytics.

“The strong first quarter sales performance is despite lean inventories and ongoing disruption to vehicle production. At an aggregate industry level, first quarter inventories have been sufficient to meet consumer demand and delivered the opportunity for manufacturers and retailers to sell those vehicles with smaller discounts.

Winter car buying

The recent winter storm added to the woes of automakers already dealing with production issues related to semiconductor shortages.

“There is no question that sales of specific models in specific geographies are being disrupted by low inventories, but consumers are nevertheless demonstrating their willingness to buy despite having fewer vehicles to choose from in retailer inventory.”

Pricing and incentives

The average price of a new vehicle is on pace to reach $37,314 in Q1 — the highest ever for the first quarter — nearly $3,000 higher than 2020 and more than $4,000 higher than 2019.

Manufacturer profits from retail sales will also likely set a record for Q1 due to the combination of strong retail sales, higher average prices, and reduced incentives. Q1 incentive spending per unit expressed as a percentage of average vehicle MSRP is trending towards 8.2%, down from 10.4% in the first quarter 2020 and down from 9.8% in the first quarter 2019.

“While the slow recovery of fleet sales, coupled with production disruption due to supply chain issues will be a headwind to overall profitability for some manufacturers, the aggregate industry profit performance will be extremely strong.”

Always popular pickup trucks are still selling strong as automakers struggle to replenish inventory.

Retailers continue to turn inventory quickly as the average number of days a new vehicle sits on a dealer lot before being sold is on pace to fall to 53 days, down 20 days from last year.

For March, the average manufacturer incentive per vehicle is on pace to be $3,527, a decrease of $888 from a year ago. Expressed as a percentage of the average vehicle MSRP, incentives for March 2021 are trending towards 8.2%, down three percentage points from a year ago, and the eighth consecutive month below 10%.

Buyers are actually paying how much?

Average transaction prices are expected reach another monthly high, rising 7.5% to $37,286—the highest ever for the month of March and nearly at the record set in December 2020. For context, average transaction prices are 20% higher in March 2021 than they were in March 2016 at $31,043.

Overall, the retail sales outlook for 2021 remains positive. Healthy sales volumes coupled with strong transaction prices and profitability are expected to persist as the industry demonstrates great resilience despite the residual challenges of the pandemic.

“Spring has absolutely sprung in the last 10 days in the auto market,” according to Cox Automotive Chief Economist Jonathan Smoke. “Comparing to this time last year is too easy. When we look at unique credit applications by DMA, two-thirds of U.S. markets had more retail sales last week than the same week in 2019,” he said.

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