New-vehicle selling rate expected to be highest of year in May

(May 23, 2014) WESTLAKE VILLAGE, Calif. — With strong new light-vehicle retail sales anticipated over the Memorial Day weekend, the selling rate in May is expected to be at the highest level of the year, according to a monthly sales forecast developed jointly by J.D. Power and LMC Automotive.

Retail light-vehicle sales in May are expected to come in at 1.3 million units, 4 percent higher than in May 2013. The seasonally adjusted annualized selling rate (SAAR) is expected to be 13.6 million units, up from 12.8 million in May 2013, a significant improvement from the beginning of the year and the highest monthly SAAR recorded so far in 2014.

J.D. Power estimates that consumers will spend more than $37 billion purchasing new vehicles this month, surpassing the previous May high of $34.3 billion set in 2004. May is the eighth consecutive month that consumer spending on new vehicles increased on a year-over-year basis.

"The anticipated strong performance in May reflects the combination of strong underlying demand coupled with a quirk of the industry sales calendar, with the May sales month containing five weekends, compared with just four weekends last May," said John Humphrey, senior vice president of the global automotive practice at J.D. Power.

"The record level of consumer spending reflects a combination of record transaction prices in May—which, at $29,600, are up $800 from the previous May high of $28,795 set in 2013—and the strongest retail sales performance in May since 2004."

The strong retail performance is expected to lift total light-vehicle sales to 1.5 million units in May 2014, a 3 percent increase from May 2013. Fleet sales are expected to decline 0.5 percent on a selling day adjusted basis year over year.

LMC Automotive's forecast for total light-vehicle sales in 2014 is holding steady at 16.1 million units, up 3 percent from 2013. Retail light-vehicle sales are expected to drive the growth, with a 4 percent increase from 2013 to 13.3 million units.

"Three consecutive months of solid growth has returned the market to the expected trend level on a year-to-date basis," said Jeff Schuster, senior vice president of forecasting at LMC Automotive. "As we move toward the second half of the year, the selling rates are expected to continue improving, but the growth rates will begin to flatten out, increasing competitive pressures for all brands."

Following a strong first quarter in North America, LMC Automotive projects second quarter production to hit 4.25 million units, which is flat from the same time period in 2013. However, this represents more than a 1 percent gain from the first quarter. Manufacturers that are expected to achieve a year-over-year gains in the second quarter are BMW, General Motors, Honda, Renault-Nissan and Tesla.

LMC Automotive is forecasting North American production for the full year 2014 to increase 3 percent to 16.65 million units. During the past few months, manufacturers have cleared a significant amount of inventory, which has been reduced from its peak of 88 days' supply at the end of January to 69 days at the end of April, stabilizing production.