Automakers have been suffering through a tough year in terms of new vehicle sales. However, the tide began turning a bit in August, completes the transition to a year-over-year increase of 5.4% for retail sales, according to a new prediction.
The analysts at J.D. Power and LMC Automotive released their monthly sales forecast Wednesday, which predicts the uptick in sales for automakers in September. Overall sales are expected to jump 11.8% to a total of 1.12 million vehicles.
The seasonally adjusted annualized rate for total new-vehicle sales is expected to be 13.6 million units, up 1.5 million units from 2021.
“Traditionally, September is a high-volume sales month as manufacturers implement promotions for Labor Day to clear out old model-year vehicles and start sales of the new model-year products,” said Thomas King, president of the data and analytics division at J.D. Power. “This September, while holiday promotions were nearly nonexistent, modest improvements in vehicle production allowed manufacturers to tap pent-up consumer demand.
“The result is a retail sales pace that shows a modest increase from a year ago but still falls below its potential due to tight vehicle availability. Although rising interest rates are putting pressure on affordability, transaction prices still rose and consumers spent more money on new vehicles this month than any previous September on record.”
Strong finish helps quarterly numbers
Depending upon which numbers you’re using, automakers are going to have encouraging news to share for the entire quarter. However, the retail side isn’t going to be the happy part of the report for car companies in the third quarter.
New-vehicle retail sales for Q3 2022 are projected to reach 2,900,300 units, a 4.2% decrease from Q3 2021 when adjusted for selling days. Retail sales for year-to-date Q3 2022 are projected to reach 8,710,600 units, a 14.9% decrease from year-to-date Q3 2021 when adjusted for selling days.
However, if the measurement is just amount of metal moved, things get a little rosier as overall new-vehicle total sales for Q3 2022 are projected to reach 3,374,500 units, just a 0.2% increase from Q3 2021. New-vehicle total sales for year-to-date Q3 2022 are projected to reach 10,156,000 units, a 13.3% decrease from year-to-date Q3 2021.
Still short on vehicles
While sales are up, the number of vehicles available for purchase are expected to remain well below the norm, coming in below 1 million units. This marks the 16th consecutive month that’s happened and with Ford and Toyota recently revealing they’re unable to produce completed vehicles at a regular rate, expect more of the same going forward.
According to Power and LMC, 53% of vehicles will be sold within 10 days of arriving at a dealership, while the average number of days a new vehicle is in a dealer’s possession before being sold is on pace to be 20 days — down from 23 days a year ago.
The two also noted September 2021 was the second month where inventory shortages had a significant influence on new-vehicle sales. Hence, while sales this month will increase compared to prior year levels, the annualized sales rate remains well below historical norms.
Fewer vehicles means more money
However, the upside is that the law of supply and demand appear to be working their magic on what consumers are paying for new vehicles. In September the average transaction price will set a new record, coming in at $45,622.
The increase in sales volume, coupled with the near record level transaction prices, is resulting in consumers being on track to spend nearly $43.7 billion on new vehicles this month—the highest level ever for the month of September and a 12% increase from September 2021.
For Q3 2022, average transaction prices are expected to reach $45,971, a 10.3% increase from Q3 2021 and the highest for any quarter on record. This increase in pricing was more than enough to offset the 4.2% decline in sales volume as retail consumers are on track to spend $133.3 billion on new vehicles in Q3 2022, a 5.6% increase from Q3 2021.
“The lack of inventory, coupled with strong demand, continues to allow manufacturers to maintain a low level of discounting,” King said in a statement. “The average incentive spend per vehicle is tracking toward $936, a decrease of 47.8% from a year ago. This will mark the fifth consecutive month under $1,000.”