September Sales Outlook Remains Stable Despite Cracks

Average transaction prices at all-time high.

by on Sep.27, 2016

A new sales forecast shows September auto sales expecting to be down slightly, but stable for the remainder of 2016.

Sales of new vehicles are expected to decline in September, raising the specter of a cyclical decline in new car and truck sales, according to a new analysis by J.D. Power & Associates and LMC Automotive.

“For the fifth time in the past seven months, U.S. new-vehicle retail sales are expected to drop in September, falling 1.4% from a year ago,” the updated version of the monthly analysis by the two firms noted.

Sales News!

Labor Day weekend is typically one of the highest volume sales weekends in the year.

But Labor Day sales this September totaled 199,493 units, a 1% decrease compared with 2015. This decline occurred despite elevated incentive programs from manufacturers. In fact, incentive spending thus far in September is at a record level of $3,923 per unit, surpassing the previous high of $3,753 set in December 2008.

“The industry can be viewed through two competing perspectives. The first is that in absolute terms, the industry is performing at an exceptional level,” noted Deirdre Borrego, senior vice president and general manager of automotive data and analytics at J.D. Power.

“While sales have fallen slightly, they are at near-record levels and transaction prices are at all-time highs. The second is less positive. With the rate of growth slowing, leading indicators are pointing to challenges ahead. Specifically in September, incentive spending is at an all-time high.”

Retail sales are on pace to reach 1,185,500 units in September, while total sales are projected to fall 0.8% to 1,429,100. The Seasonally Adjusted Annual Rate or SAAR of total sales is projected at 17.7 million units in September 2016, down from 18 million units a year ago.

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Fleet sales are expected to reach 243,600 units in September, a 2.1% increase from September 2015, and account for 17% of total light-vehicle sales, according to the J.D. Power and LMC forecast.

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

Meanwhile, the average new-vehicle retail transaction price thus far in September is $30,665, a record for the month — surpassing the previous high of $30,473 in September 2015. Trucks now account for 60.8% of new-vehicle retail sales so far in September, poised to match the record for any month set in July 2016. Pickups account for 15.9% of sales in the month.

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Jeff Schuster, senior vice president of forecasting at LMC Automotive, said, “The U.S. automotive market continues to show signs of little growth, yet in our opinion the numbers do not reflect a significant weakness or risk.

“The expectation remains for steady volume levels at the topline, despite a pullback in the retail market and increased monthly performance volatility. However, group and brand performance is beginning to diverge as competitive pressure is at an all-time high,” he said.

With the exception of Ford, carmakers also remain optimistic. General Motors, for example, remains has remained bullish on the outlook despite modest declines in sales number.

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Bill Fay, Group vice president of Toyota Motor Sales, also said last week that while the industry might not see big growth in sales in the months to come, sales at current levels appear quite stable. Toyota, however, has not prepared its 2017 forecast, he added.

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