More consumers getting new cars, after delaying purchases because of tightened vehicle inventories. - Pixabay

More consumers getting new cars, after delaying purchases because of tightened vehicle inventories.


An analysis by J.D. Power and LMC Automotive suggests new-vehicle sales in May increase 15.6% year-over-year.

The forecast includes both retail and nonretail transactions and estimates total sales will reach 1.3 million units. Comparing the sales volume without adjusting for the number of selling days (the month has one more selling day than last May), the increase translates to a 20.4%  year-over-year rise.

Retail sales of new vehicles in May are also predicted to substantially increase year-over-year, reaching 1.1 million units, up 9.6% year-over-year. Without adjusting for the number of selling days, the increase amounts to 14.2%.

Thomas King, president of the data and analytics division at J.D. Power, highlights the positive performance of the automotive industry in May, noting that retail sales are estimated to surge by 9.6% compared to a year earlier, accompanied by a projected 0.7% increase in average transaction prices. As a result, consumers are expected to spend nearly $47 billion on new vehicles in the month, up13% year-over-year

While retail inventory levels are projected to remain consistent with April, finishing at approximately 1.3 million units, they have seen a 48% increase compared to last May. The improvement in vehicle availability has led to decreased dealer margins and increased manufacturer incentive spending. However, both metrics have remained relatively stable when compared with the previous month. Robust demand for vehicles is driven by consumers who had delayed purchases because of low inventory levels.

Manufacturers are leveraging increased vehicle production to allocate more units to fleet customers. Fleet sales are expected to increase by 50% year-over-year.

Growing demand for electric vehicles is another noteworthy trend. Elizabeth Krear, vice president of the electric vehicle practice at J.D. Power, points out EV lease affordability has surpassed purchase affordability in the J.D. Power EV Index, suggesting EV lease volumes will surge in the coming months.

Still, the average transaction price for new vehicles continues to rise, reaching a record high of $45,838 in May—a 0.7% increase from the previous year. That shows consumers are on track to spend nearly $46.9 billion on new vehicles this month, the second-highest figure for the month of May and a 13% increase year-over-year.

Manufacturer incentive spending per vehicle has also increased. In May, the average incentive spending per unit is expected to reach $1,788, up 88%. That represents 3.7% of the average manufacturer's suggested retail price, a 1.6 percentage point increase from the previous year. However, the proportion of vehicles sold above MSRP has decreased, with only 31% projected to be sold above MSRP in May compared to a high of 49% in July 2022.

Globally, Jeff Schuster, group head and executive vice president, automotive at GlobalData, parent of LMC Automotive, shared that the global light-vehicle selling rate hit 85.4 million units in April, up nearly 2 million units from March.

Sales volume was up 23.6% year-over -year to 6.8 million units, as the overall market continues to improve through increased production and less supply disruption. Of the major markets, China led the growth, up 81% from April 2022. Europe (+21.0%), India (+10.6%) and North America (+9.3%) also posted strong results.

“The selling rate in May is expected to decline slightly to 84.5 million units, but that is still well above May 2022’s 75.8 million units,” Schuster noted.

Global light-vehicle sales are projected to grow to 7 million units, up 12.8% from May 2022. Growth is expected to be more level across the various markets. Eastern Europe is an outlier at a nearly 20% increase as volume returns despite the ongoing war in Ukraine. China is expected to grow 18.5%, followed by North America at 14.7% and Western Europe at 11%

“April’s volume was in line with expectations, so we are not making any material changes to the topline forecast for 2023,” he added. “Volume is expected to reach 86.1 million units, up 6.2% from 2022.”

Risk is balanced overall, Schuster noted. However, he points to some upside potential in 2023 if major markets avoid a recession or consumers show further resilience.

“There is some mild risk that volume has been pulled forward, given expectations for an economic slowdown being delayed until late 2023 or early 2024,” he said. “The outlook for 2024 global light-vehicle sales is currently holding at 90.3 million units, an increase of 4.9% from 2023.”





Originally posted on Auto Dealer Today

About the author