New-vehicle retail sales are expected to post the second strongest year-over-year growth rates during the past 12 months, according to the July sales forecast developed by J.D. Power and Associates’ Power Information Network® (PIN) and LMC Automotive.
“Retail sales got off to a fast start in July, and while they’ve slowed down a bit as the month has progressed, through the first 16 selling days, they’re still up 15.1%, compared to July 2011,” said John Humphrey, senior vice president of global automotive operations at J.D. Power and Associates. “The positive growth has continued to build, as July is looking strong across most vehicle segments, as well as for many of the major manufacturers.”
All major segments are expected to show year-over-year sales gains in July, with the exception of the midsize CUV segment. The sub-compact conventional, midsize conventional and compact conventional segments are projected to show year-over-year increases of 28% or more.
Vehicle loans may be a key to that, as lenders have eased their financing and interest rates for many buyers remain low. Data shows that new-vehicle loans of 72 months or greater account for 30% of retail sales in July 2012.
“Long-term financing is a key driver in sales growth,” said Humphrey. “Loan terms and credit availability are bringing consumers back into the market who have been shut out since the recession began in 2008.”
Total light-vehicle sales remain stable, with the volume in July expected to come in a 20% increase from July 2011. July is typically a low fleet month, averaging 15% of total light-vehicle sales during the past five years. July 2012 remains low at 17%, but stronger than the historical average.
Risk of further economic slowdown continues to mount as the U.S. labor market weakens. However, construction is gaining traction, which is typically a leading indicator of recovery. Given the conflicting variables and a sustained level of pent-up demand, LMC Automotive is maintaining its 2012 forecast for light-vehicle sales at 14.5 million units, with retail sales at 11.6 million units.
“The Automotive industry is closely watching the sales performance over the next two months as the industry wrestles with a mixed bag of economic signals,” said Jeff Schuster, senior vice president of forecasting at LMC Automotive. … Increases in North American production volume remain a bright spot in the automotive industry this year, as volume teeters at 15 million units and is at the highest level since 2007. Much like demand, there remains some risk of a cooling as the year progresses, but inventory is being well managed.”