"We are behind," Jominy said of industry retail sales. As of mid-October, about 26 percent of dealership retail sales were of the coming model year (2020), compared with 32 percent of 2019 models at the same point a year ago. Meanwhile, sales of previous model-year vehicles — in this case, 2018s — were 40 percent higher than a year ago, when dealer lots were clearing out remaining 2017s.
So why does it matter what's selling if the industry continues to sell a robust 17 million vehicles a year in the U.S.?
Because selling a bigger percentage of older vehicles in the retail mix costs more, both in larger incentive spending for automakers and greater carrying costs for dealers, Jominy said.
"Incentives have been skyrocketing pretty fast," Jominy said. "We're now at an average of about $4,100 per unit. That's a 10.4 percent spend as a percentage of MSRP, and anytime incentives rise above 10 percent, alarm bells should start going off."
Automakers don't differentiate their monthly or quarterly sales reports by model years, so it can be easy to forget about exactly which new vehicles are being reported sold. To exacerbate the issue, the Detroit 3 automakers now report their sales only quarterly.
Those automakers that did release their sales reported a mixed bag for October. Volume at both Honda and Hyundai climbed on crossover sales. Sales at Subaru and Mazda were up, while Toyota, Volkswagen and Nissan fell. Among luxury brands, BMW, Mercedes, Porsche, Audi, Land Rover and Genesis all rose year-over-year.
Overall, the industry remains healthy — although buoyed by near-record incentives and heavy reliance on fleet — with some analysts now shifting their 2019 sales predictions back above 17 million vehicles for the fifth consecutive year. See full sales results on Page 37.
Jominy said the older vehicles crowding dealer lots later into the year is a phenomenon that began in 2017, when automakers were late to recognize slowing sales and continued production at then-current levels, when monthly SAAR rates were topping 18 million. Inventory levels began to creep up, and as a result, dealers spent more time in 2018 selling off remaining 2017s, and putting their new models at a sales disadvantage. The cycle bled into this year, Jominy said, as automakers largely continued producing more vehicles than dealers were able to sell at retail.