November U.S. sales expected to dip as market cools

U.S. light-vehicle sales are expected to dip slightly in November from a record high a year earlier, yet automakers will benefit from consumers paying higher prices for new rides.

It would be the first time that November sales have fallen since 2009. Automakers continue to back off on incentives to avoid eroding their profits. Fleet sales are forecast to rise while more-profitable sales to individual customers will fall.

"While the continued decline in retail sales is disappointing, record transaction prices remain an encouraging indicator for the long-term health of the industry," Thomas King, senior vice president of the data and analytics division at J.D. Power, said in a statement.

J.D. Power and LMC Automotive, which produce a joint forecast, project a 2.5 percent decline from November 2017. Cox Automotive expects a 2.6 percent setback, and Edmunds is projecting sales to slip 1.3 percent. The J.D. Power/LMC forecast calls for retail sales to drop 3.8 percent.

Meanwhile, the month’s average transaction price is on pace to hit $33,697, which would be the highest level ever recorded, J.D. Power said, and $1,088 higher than a year ago. The average is on track to rise 4 percent to $27,407 for cars and 1 percent to $36,123 for light trucks.

Incentive spending is set to fall on an annual basis for a fifth consecutive month, J.D. Power said. November incentive spending was $3,783 per unit, down $285 from the same period a year ago, the firm said, with discounts falling $784 on cars but only $48 on trucks.

“Strong transaction prices and lower incentives are helping maintain manufacturer profitability despite the decline in sales,” King said.

SAAR forecast

The forecasts call for a seasonally adjusted, annualized selling rate for November of 17.1 million to 17.3 million, down from 17.65 million a year ago.

“The market continues to outperform our earlier forecast with expected headwinds being offset by other market factors,” Charlie Chesbrough, senior economist at Cox Automotive, said in a statement. “Looking ahead, affordability concerns — attributable to increasing interest rates, weakness in home construction and volatility in the stock market are growing headwinds to watch."

Still, Chesbrough added, a SAAR of more than 17 million is very strong. "How long this pace continues is the key question,” he said.

Automakers are scheduled to report November U.S. sales on Monday, though transactions that close over the weekend count toward December. With Thanksgiving being the earliest possible date this year, automakers had a full week after Black Friday to continue building momentum amid heavily advertised promotions. But analysts still don’t expect that to be enough to produce a fourth consecutive record November.

“Retailers have been pushing Black Friday car deals through the entire month of November, so unless they decide to pull out all the stops in the 11th hour, this is likely going to be the first time we see November sales take a dip in nearly a decade,” Jeremy Acevedo, Edmunds' manager of industry analysis, said in a statement. "Although sales remain at a healthy level, factors such as increasing market saturation, rising transaction prices and elevated interest rates continue to create headwinds for the industry overall."

LMC’s full-year forecast remains at 17.2 million units, about the same as in 2017. It projects retail sales to dip 1 percent to 13.8 million units, while fleet sales grow 5 percent.

Through October, U.S. light-vehicle sales were up 0.5 percent.

Apples-to-apples

November has 25 selling days, the same as a year ago. After several months in which the number of selling days increased or decreased from 2017, that could give industry observers a good barometer for how the market is performing.

“It really is a chance for an apples-to-apples comparison,” Chesbrough told Automotive News.

Edmunds and Cox expect the largest increase among major automakers to come from FCA US. Cox calls for a 16 percent gain, while Edmunds expects a 14 percent rise. Both expect sales declines and market share losses for General Motors, Ford Motor Co., Volkswagen Group of America and American Honda. Cox sees Toyota’s sales dropping 3.5 percent, while Edmunds expects a 1 percent increase.

The forecasts show Nissan North America posting a double-digit decline.