Market rebound rolls on

Pent-up consumer demand and robust fleet shipments continue to power the U.S. auto industry's rebound from a severe chip shortage and the pandemic. Parts shortages continue to ease at many automakers, providing more cars and light trucks for dealers and fleet customers.

U.S. sales rose 21 percent in June to 1.38 million, GlobalData estimated in a preliminary report released Thursday, with retail volume at 1.097 million and fleet at 282,000, or 20 percent of overall volume. U.S. light vehicle sales were forecast to rise 16 to 23 percent in June, based on estimates from J.D. Power-GlobalData, Cox Automotive and S&P Global Mobility.

The seasonally adjusted, annualized rate of sales for June came in at 15.8 million, Motor Intelligence and GlobalData said, near the high end of forecasts of 15.2 million to 15.9 million. June's sales pace, the third highest of the year so far, was up from 15.1 million in May and 13.1 million in June 2022.

While mired below 15 million for much of 2022 due to extremely low inventory levels, the SAAR has hovered at or well above that level each month in 2023. Yet industry volumes remain well below the boom years of 2015-19, when annual U.S. sales topped 17 million units.

Overall, second-quarter light-vehicle sales across the industry rose 17 percent, with first-half volume rising 13 percent.

GlobalData, citing resilient American households that appear to be shrugging off near-record high transaction prices and rising interest rates, hiked its 2023 U.S. sales forecast by 500,000 to 15.4 million.

June capped a stronger-than-expected first half, though some analysts expect the sales pace to cool in the second half of the year as higher interest rates and affordability undermine demand, and as pent-up demand eases.

U.S. sales rose for the fourth straight quarter at General Motors and the third straight month in June at Toyota Motor Corp. as output, deliveries and inventories across the industry continue to bounce back. Ford Motor Co., powered by a 26 percent gain in pickup sales, on Thursday said second-quarter deliveries rose 9.9 percent.

Stellantis snapped a slump that stretched seven quarters with second quarter U.S. deliveries rising 6 percent while Honda Motor Co.'s rebound continued in June, helped by wider availability of redesigned models.

GM said second-quarter sales rose 18 percent at Chevrolet, 18 percent at GMC, 48 percent at Buick and 15 percent at Cadillac, with light trucks driving the gains. Overall, GM said its retail sales advanced 15 percent and fleet shipments rose 34 percent during the latest three-month period. 

The automaker ended June with 427,000 vehicles in U.S. dealer stock or in transit, up slightly from 412,000 at the end of the first quarter.

Toyota volume rose 15 percent to 195,448 last month, with the Toyota division up 14 percent and Lexus advancing 18 percent. All but one of the Toyota brand's top sellers posted solid gains: Camry, up 24 percent; Corolla, up 4 percent; RAV4, up 15 percent; Highlander, up 17 percent; and Tundra, up 38 percent. Tacoma sales were flat.

Toyota Motor, with one of the industry's lowest days supply of vehicles throughout the chip shortage, said it ended June with 167,666 cars and light trucks in stock — 39,901 at dealers and 127,765 at ports or in transit, enough for a 22-day supply. That is up from the 153,742 Toyota and Lexus models in stock as June started. The Toyota division started July with a 21-day supply of vehicles while Lexus has a 30-day supply.

Ford division volume rose 11 percent, with F-Series sales up 34 percent, while Lincoln deliveries dropped 15 percent during the latest three-month period. It was the second consecutive quarterly gain for the Ford division but third straight quarterly decline at Lincoln.

Ford said its gross vehicle stocks in the U.S. totaled 409,000 at the end of June, up from 383,000 at the close of May.

Stellantis' latest results were aided by the Ram brand — up 3 percent, though Ram pickup sales were flat — and two smaller brands, Dodge and Chrysler. Jeep, Stellantis' biggest brand, continues to struggle, with second-quarter volume off 3 percent, and Wrangler, the brand's second-biggest seller, down 13 percent during the period.

Jeep sales have now dropped eight straight quarters. Only two Jeep models, Compass and Grand Cherokee, racked up gains last quarter, while six models — Gladiator, Wrangler, Wagoneer, Grand Wagoneer, Cherokee and Renegade — saw double-digit declines.

Second-quarter volume rose 33 percent at Chrysler and 37 percent at Dodge but dropped 42 percent at Fiat and 25 percent at Alfa Romeo.

Jeff Kommor, head of U.S. sales for Stellantis, said the company saw increased demand in the second quarter as market conditions improved, adding the company's dealer network continues to make the "necessary adjustments to drive sales growth across our brand portfolios.”

Honda, Nissan and Hyundai-Kia all reported sales gains, too, for the second quarter. But Volkswagen said second-quarter sales slipped 1.7 percent to 76,934.

Honda said June deliveries rose 57 percent to 111,498, the fourth straight month volume has topped 110,000 units, with the Honda brand up 54 percent and Acura advancing 83 percent. It was the fourth straight monthly gain for Honda and Acura's fifth consecutive gain.

Helped by inventory turn rates of more than 70 percent, Honda's five core models all posted major gains in June: Accord, up 68 percent; CR-V, up 36 percent; Civic, up 66 percent; Pilot, up 86 percent; and HR-V, up 57 percent.

"While we now have some industrywide transportation issues to overcome, our dealers are doing a great job with high turn rates to get products in the hands of our customers,” Mamadou Diallo, senior vice president of automotive sales at American Honda Motor Co., said in a statement.

The automaker has told dealers a shortage of rail cars in Canada and trucks and drivers in the U.S. is hampering some deliveries. The company builds the Civic and CR-V in Alliston, Ontario.

Honda said it ended June with about 35,000 light vehicles in stock on the ground, up slightly from 34,000 at the end of May but a sharp increase from the 10,500 on hand as June 2022 closed. Acura has 19,000 units in stock to start July, down from 21,000 at the start of June but up from 4,200 in early July 2002.

U.S. sales rose for the 11th consecutive month in June at Hyundai and Kia, helped by rising inventories and more generous discounts tied to July 4 holiday promotions.

Hyundai said deliveries rose 10 percent to 69,351 last month, but retail sales, a strength for the brand in recent months, slipped 2 percent to 61,991.

Among Hyundai's key models, June sales were mixed: Elantra, up 60 percent; Tucson, up 13 percent; Santa Fe, up 8.7 percent; Ioniq 5, up 10 percent; Palisade, down 14 percent; and Sonata, down 19 percent.

At Kia, June sales rose 8 percent to 70,495, capping a first half that produced record deliveries of 394,333, up 18 percent. Kia's key models posted mixed results last month, with sales of the Forte, K5, Soul, Telluride and Seltos rising, but Sportage, Sorento and EV6 volume down.

Hyundai and Kia also continue to benefit from demand for new and redesigned electrified vehicles.

“Our strong retail partners and the right product at the right time have enabled us to attract new and existing customers to the Hyundai brand,” Hyundai Motor America CEO Randy Parker said in a statement.

Hyundai said it ended June with 49,329 cars and light trucks in stock, up from 47,671 at the close of May and 17,922 at the end of June 2022.

Genesis also remained on a roll last month, with sales jumping 33 percent to 6,003, marking its eighth straight month of higher sales and biggest gain since U.S. deliveries rose 53 percent in April 2022.

Hyundai Motor Group, with Hyundai, Genesis and Kia, has been a first-half "standout in the market," Cox Automotive said in a statement. Combined first-half U.S. sales for the three brands rose 17 percent to 820,180, enough for Hyundai Motor Group to surpass Stellantis, with first half sales of 806,819, to become the market's No. 4 seller after GM, Toyota and Ford.

Kia's first-half retail sales rose 17 percent to 362,933. The company said total sales of electrified models jumped 40 percent, and SUV deliveries increased 25 percent in the first half.

“As production continues to improve on models that were in short supply during the pandemic, we are seeing sales strength across our core SUV models," said Eric Watson, vice president of sales operations for Kia America, adding the company expects "continued momentum" the remainder of year with the planned introduction of the EV9, an all-electric three-row crossover.

Nissan Motor Corp., behind a sharp rise in light truck sales, led by the Rogue, posted a 33 percent gain in second-quarter volume. Sales at the Nissan division rose 32 percent, while Infiniti racked up a 57 percent gain. It was the second consecutive quarterly advance for Nissan Motor.

Subaru sales have now jumped 28 percent for two consecutive months, with June volume hitting 55,168, behind gains of 24 percent or more for the brand's three top sellers: Outback, Forester and Crosstrek. The company's U.S. deliveries have advanced 11 straight months now.

At Mazda, sales rose for the ninth straight month, with June deliveries surging 97 percent to 29,786. 

Among other luxury brands, Mercedes-Benz volume dropped 2.8 percent in the second quarter behind sharply lower light-truck volume. Audi's second-quarter sales rose 16 percent, its fourth consecutive quarterly gain, while Volvo deliveries surged 53 percent in June, its second back-to-back increase.

Porsche, citing model cycle changes and supply restrictions, said second-quarter U.S. sales slipped 3 percent, snapping a streak of four consecutive quarterly gains, though first-half volume rose 12 percent.

Retail transactions are being driven by pent-up demand as well as improving inventory and selection and rising discounts. Automakers are also boosting fleet shipments to fill a backlog of orders from daily rental operators, commercial customers and government agencies.

Fleet sales were expected to total 275,900 in June, up 55 percent from June 2022, J.D. Power and GlobalData said, with fleet volume expected to account for 20 percent of all light-vehicle sales, up from 16 percent a year earlier.

Millions of American households also must start or resume student-loan payments in September, Cox Automotive Chief Economist Jonathan Smoke noted, placing another drag on consumer spending in the third and fourth quarters.

Based on the first-half sales pace, several analysts have raised their outlook for 2023 sales to 15 million to 15.2 million, compared with 13.8 million in 2022.

For the second quarter, Edmunds projects that Honda, up 48 percent, and Nissan, up 35 percent, will post the biggest gains among major automakers, while Toyota, up 6.3 percent, and Stellantis, up 7.4 percent, will gain the least.

J.D. Power and GlobalData said retail inventory levels in June stood at just over 1.2 million vehicles, a 17 percent increase from May and 45 percent higher than June 2022. Toyota, Honda, Kia, Lexus, Subaru, BMW, Land Rover, Cadillac, Hyundai and Chevrolet had the tightest supplies in late June, Cox Automotive said, while Jaguar, Infiniti, Lincoln, Chrysler, Buick, Ram, Dodge, Audi, Ford and Genesis had the highest stockpiles.

The average new-vehicle retail transaction price in June was expected to reach $45,978, flat from June 2022 and down from the record high of $47,362 in December, according to J.D. Power and GlobalData. They estimate that 30 percent of new vehicles were sold above sticker price last month, down from a high of 49 percent in July 2022.

AlixPartners, citing growing supplies and rising discounts, projects average transaction prices will fall 7 percent by 2025.

Average incentive spending on each new car and light truck in June is expected to reach $1,798, nearly double the level of $918 in June 2022, J.D. Power and GlobalData said, with spending as a percentage of the average sticker price expected to increase to 3.7 percent, up 1.7 percentage points from June 2022. Jeep, Ram, Nissan, Chevrolet, Ford, GMC, Hyundai, Honda, Mazda, Kia and Subaru have been the most aggressive in hiking incentives in recent months, Cox Automotive said.

• There were 26 selling days last month, the same as June 2022.
• The average incentive per light truck in June was expected to be $1,649, up $949 from a year earlier, J.D. Power and GlobalData said, while the average discount on cars was projected to be $1,393, up $597 from June 2022.

• J.D. Power and GlobalData, noting a rise in discounts on leased vehicles in recent months, expect leasing to account for 21 percent of retail sales in June, up from a low of 16 percent in September but well off June 2019, when leased vehicles made up nearly 30 percent of all retail volume.
• The average monthly finance payment in June was on pace to total $726, up $27, or 3.9 percent, from a year earlier, J.D. Power and GlobalData said.
• The average interest rate for a new-vehicle loan was 7 percent last month, an increase of 1.9 percentage points from a year earlier, J.D. Power and GlobalData said.
• Edmunds said the average age of vehicles traded in for a new vehicle increased in the second quarter to 5.6 years from 5.2 years a year earlier, but it was still down from 6.1 years in the second quarter of 2019.

"We're still in a pull market, but getting much more normalized over this period, which puts pressure on pricing, and of course pressure on manufacturer profits."

— Mark Wakefield, head of AlixPartners' automotive practice

"This road to recovery for the industry has been a winding one. With many automakers committing to better aligning production and demand, we might be on the cusp of seeing what a new normal sales pace looks like compared to the pre-pandemic years, when bloated inventories and deep discounts shaped the industry."

— Ivan Drury, director of insights at Edmunds