New vehicle sales for 2023 are expected to increase 13.2% compared to 2022.  -  IMAGE: Pexels

New vehicle sales for 2023 are expected to increase 13.2% compared to 2022.

IMAGE: Pexels

A joint forecast by J.D. Power and GlobalData suggests December will see total new-vehicle sales, including retail and nonretail transactions, reach 1,396,700 units, up 13.2%  year-over-year.

This December has 26 selling days, one less than last year, J.D. Power said. Sales volume, without adjusting for the number of selling days, is up 9%.

The forecast also predicted the seasonally adjusted annualized rate will be 15.4 million units, up 1.9 million units year-over-year. Total fourth-quarter sales are projected to reach 3.8 million units, up about 10% year-over-year when adjusted for selling days.

Projected total sales of new vehicles for the full year are expected to reach 15,466,000 units, up 13.2% year-over-year when adjusted for selling days.

The forecast also predicts that December retail sales will be up year-over-year to 1,169,000 units, a 13% increase. Comparing the same sales volume without adjusting for the number of selling days translates to about a 9% increase.

Fourthquarter retail sales are projected to reach 3,186,700 units, up about 10% quarter-over-quarter when adjusted for selling days, the forecast noted. Full-year retail sales are expected to reach 12,645,600 units, upn 8.4% year-over-year when adjusted for selling days.

“December results cap off the year with a strong performance, illustrated by double-digit year- over-year sales growth and the second-highest consumer expenditure on new vehicles ever recorded for the month,” said Thomas King, president of J.D. Power's data and analytics division, in a press release. “What's even more noteworthy is that consumer expenditure on new vehicles in 2023 set a record of $578 billion.”

Sales grew in December because of improved vehicle availability and affordability, the companies said. The month's retail inventory is projected to reach 1.7 million units, up 7.6% month-over-month and 55% year-over-year but still almost 40% below prepandemic levels, according to the release.

“As inventory improves, the average new-vehicle retail transaction price is declining. Transaction prices in December are trending towards $46,055, down $1,274—or 2.7%—from December 2022,” King said. “However, even with the decline in average transaction prices, consumers are on track to spend nearly $50.4 billion on new vehicles this month—the second highest on record for the month of December and 5.1% higher than December 2022.”

Sales to fleet customers are also rising as vehicle availability improves. The forecasters predit they'll be up about 14% year-over-year, or 9.4% on a non selling-day-adjusted basis.

Projected total retailer profit from new-vehicle sales this month is $3 billion, down 27% year-over-year but up 103% from December 2019. Full-year retailer profit is projected at $42 billion, down 23% year-over-year but still more than double prepandemic levels.

Though retailers still presell vehicles, the release noted that rising inventory is enabling more shoppers to buy directly from dealer lots. In December, about 36% of vehicles are projected to sell within 10 days of arrival, down from the peak of 57% in March 2022, the data show. New vehicles now spend an average of 38 days at dealerships, up from 25 days last year but still lower than the prepandemic average of 70 days.

“Manufacturer discounts in December are expected to be up $145 from November and have materially increased from a year ago when incentives were at record lows,” King added. “The average incentive spend per vehicle has grown 90.7% from December 2022 and is currently on track to reach $2,458. Expressed as a percentage of MSRP, incentive spending is currently at 4.9%, an increase of 2.3 percentage points from December 2022. This month, leasing is expected to account for 21.2% of retail sales, up significantly from 17% in December 2022, but still well below December 2019 when leased vehicles made up 30% of all new-vehicle retail sales”.

Despite falling transaction prices, higher interest rates and reduced trade equity are contributing to escalating loan payments, the release noted. December's average monthly finance payment is projected to be $739, up $9 year-over-year.

Average used-vehicle prices are forecasted to be $29,413 in December, down about 3% year-over-year. “However, they remain 28.7% higher than the pre-pandemic level,” King said. “The decline in used-vehicle values is translating to lower trade-in equity for consumers.”

In 2024, King said to expect retail inventory to keep rising, which will lead to price moderation. Anticipated interest rate cuts will also help affordability, he said. 

Elizabeth Krear, vice president, electric vehicle practice at J.D. Power, noted electric vehicle (EV) sales accounted for about 10% of retail sales thus far in December—up over a percentage point year-over-year.

Krear points out J.D. Power EV Index factors of consumer interest, availability and affordability are hitting the highest levels of the year. EV availability also has increased significantly—51 models now versus 43 models a year ago. She expects the first quarter of 2024 to be one of the most dynamic quarters the EV market has ever seen, citing the Inflation Reduction Act’s impact on EV prices, and purchase credits for qualifying vehicle purchases, which can be used as a down payment.

Originally posted on Auto Dealer Today

About the author
0 Comments