(May 23, 2012) IRVINE, Calif. — Kelley Blue Book (www.kbb.com) projects that Memorial Day shopping will propel new-vehicle sales to approach 1.4 million units, or 14.2 million seasonally adjusted annual sales rate (SAAR), in May, a nearly 30 percent year-over-year improvement. 

After adjusting for the two additional selling days this month and a major car-selling holiday weekend, sales are projected to show a 20 percent gain. This will mark the most pronounced year-over-year gain in more than 12 months.

"At this point, it is almost as if the tail is wagging the dog," said Alec Gutierrez, senior market analyst of automotive insights for Kelley Blue Book.  "During a typical post-recession recovery, we would expect to see auto sector gains being driven by broad economic growth. In the first quarter, the opposite was true, as auto sales were the primary driver behind GDP growth and have consistently been a bright spot in an otherwise slow-paced recovery." 

Vehicle sales accounted for half of the 2.2 percent increase in the first-quarter gross domestic product (GDP), highlighting the fact that economic growth largely has been driven by increases in production and revenue generated by automotive manufacturers. 

Although Kelley Blue Book expects a significant increase in sales relative to May 2011, it is important to consider the context behind the relatively mild pace of sales at this time last year. Aging vehicles, improved access to credit and historically low interest rates are among the primary factors driving demand this year, and  Kelley Blue Book analysts expect this trend will continue to carry sales in May and beyond.

Last year, Toyota and Honda were hit hard by inventory shortages stemming from the earthquake in Japan on March 11, 2011. Both company's anemic inventory levels during popular Memorial Day sales events muted the usual sales bump expected in May 2011. Toyota and Honda's shortfall led to a 3.7 percent decline in sales this time last year, curtailing the strong growth exhibited through the first four months of 2011. Kelley Blue Book expects 2012 to be much different, as the industry appears to have ample inventory to meet the anticipated uptick in demand.

"With inventory shortfalls no longer a concern, budget-conscious consumers will look to incentives and advertised sales events to help narrow their purchase decisions," said Gutierrez.  "Car shoppers will be pleased to find plenty of incentives available in terms of cash, finance and lease offers for a number of popular models.  The most attractive offers are for those vehicles expected to be redesigned later this year, including the Nissan Altima, Honda Accord and Ford Escape."

Chrysler will continue to trump its domestic counterparts in May, with an expected 40 percent year-over-year increase in sales, or 30 percent after adjusting for a few extra selling days this month.  Chrysler gained nearly 5 points in market share after plummeting to 7.4 percent share in the summer of 2009, just prior to its bankruptcy announcement.

"Since being acquired by Fiat, Chrysler has performed a remarkable turnaround that largely has been product driven," said Gutierrez.  "The 200, 300, Grand Cherokee, Durango and soon-to-be released Dart are just a few of the vehicles that are critical to Chrysler's turnaround." 

In recent months, Chrysler has kicked up its sales growth through increased incentive spending, so consumers seeking value should take note.  The brand's best deals are available on the 200 and 300 sedans, which are available each with more than $2,000 in cash rebates.  In addition, shoppers of all Chrysler products, including Chrysler, Dodge, Jeep, Ram and Fiat that finance through Ally Financial or Chase Auto Finance by May 31 will be eligible to defer payments for 90 days.  The Dodge Dart should be arriving at dealerships in the next few months, and Kelley Blue Book expects Chrysler to continue capturing share in the months ahead.