Halfway through 2016, U.S. new-vehicle sales remain on pace to set a second consecutive annual record, but analysts say they’re increasingly concerned about slowing retail demand and rising incentives.
June sales are expected to rise about 5 percent from a year ago, according to analysts at TrueCar, LMC Automotive and Kelley Blue Book. Edmunds.com projects a smaller increase of 3.8 percent.
“It’s clear that the industry shortfall in May was a case of demand deferred to June,” Eric Lyman, TrueCar’s vice president of industry insights, said in a statement. “July should also get off to a good start as Independence Day weekend typically sees aggressive sales promotions. The fact that new car and truck deliveries, after six consecutive years of growth, continue to rise halfway to seven years underscores the strength of retail demand.”
The forecasts represent the highest volume for June since 2005 and a seasonally adjusted, annualized selling rate of 16.9 million to 17.2 million. That would be slightly less than the May rate of 17.46 million and about the same as the June 2015 rate of 17.01 million. June has one more selling day than it did in 2015.
Automakers are scheduled to release U.S. sales figures for June on Friday.
American Honda, Nissan North America, Fiat Chrysler Automobiles and Hyundai-Kia all are expected to gain market share, according to the forecasts from TrueCar, KBB and Edmunds. They show General Motors, Toyota Motor Sales U.S.A. and Volkswagen Group of America losing share, while predictions for Ford Motor Co. are mixed.
“The industry may not be growing as fast as in recent years but, at the halfway point of 2016, it’s still on pace to set another annual sales record,” Jessica Caldwell, director of industry analysis for Edmunds, said in a statement. “As long as economic conditions -- like low unemployment and easy access to credit -- continue, the industry will be in a strong position through the busy summer sales months.”
LMC said it still projects full-year sales of 17.7 million, 1.3 percent more than the 17.47 million tallied in 2015. But it said slowing retail demand since April has raised the possibility that 2016 could come up just short of last year if summer and fall turn out to be flatter than expected.
Retail forecast declines
LMC, which does not release projections for individual automakers, said it has reduced its forecast for retail sales by 100,000 units to 14.2 million. Fleet deliveries are likely to make up for most if not all of the retail shortfall, it said.
“Year-over-year growth is evaporating, and while we are now expecting a slight contraction in retail sales, the total light-vehicle market should remain 1 percent higher than 2015,” Jeff Schuster, LMC’s senior vice president of forecasting, said in a statement. “However, risks continue to mount for the second half of 2016, with 200,000 to 300,000 units of volume risk.”
J.D. Power, which jointly develops LMC’s forecast, said it sees the retail selling rate falling to 13.3 million in June, which would be the second lowest level in the past 12 months. But because light-truck sales are so strong, the industry’s average transaction price climbed to a June record of $31,089 in the first half of the month, J.D. Power said. At the same time, incentives were also at a record for June at $3,278 per vehicle, $119 more than a year ago.
'Ford Freedom' promotion
Ford kicked off a new “Ford Freedom” promotion over the weekend that offers interest-free financing for up to 72 months plus $1,000 discounts on most 2016 models. The deals runs through Sept. 6, according to a memo Ford sent to its dealers last week.
“Despite sales slowing down, consumer spending remains at record levels due in large part to a continued shift from cars to trucks,” John Humphrey, senior vice president of J.D. Power’s global automotive practice, said in a statement.
“The key going forward will be to what degree automakers are able to adjust production levels to slowing demand rather than relying on profit-damaging incentives to move inventory. This will be something to watch as the industry is nearing what is close to being the peak of an average cycle.”
