September New Vehicle Sales Rise, Hurricanes to Spur Demand Into 2018

Janina Lim – Fourth Estate Contributor

Detroit, Michigan, United States MI – September retail sales of new vehicles are expected to drop from a year ago as Typhoonc Harvey and Irma continue to impact sales, according to a joint forecast of US auto marketing firms.

A forecast developed jointly by J.D. Power and LMC Automotive said sales of new vehicles last month are anticipated to reach 1.213 million units, down 2.6% from the same month in 2016, although this stands as the highest record for the year.

The firms expect seasonally adjusted annualized rate (SAAR) for retail sales to total 15 million units this year, nearly unchanged from last year’s level.

“Hurricanes Harvey and Irma have disrupted—and will continue to disrupt—new-vehicle retail sales in September and beyond,” Thomas King, Senior Vice President of the Data and Analytics Division at J.D. Power was quoted as saying.

King noted a 14% climb in sales in the South Central region, which includes Houston, as shoppers scramble to replace storm-damaged vehicles and complete purchases that were postponed during the storm while sales in the Southeast region, which includes Florida, are down 16% due to back-to-normal operations.

Incentives granted by manufacturers last month reached all-time high at an average incentive spending per unit of $4,050 to date, surpassing November 2016’s record of $4,024.

“While the industry will benefit from additional replacement demand from storm damaged vehicles in the coming months, elevated incentives remain a threat to the overall health of the industry,” King said.

Some $37.7 billion is expected to be poured out on new vehicles during the period, a record for the month and $0.5 billion more than September 2016’s level.

Trucks account for 65% of new-vehicle retail sales through Sept. 24—the highest level ever for the month of September—making it the 15th consecutive month above 60%.

Fleet sales are expected to total 220,200 units in September, down 11.2% from September 2016 on a selling day adjusted basis.

Fleet volume is expected to account for 15% of total light-vehicle sales, down from 17% in September 2016.

All in all, the effect of hurricanes Harvey and Irma is expected to boost retail light vehicle sales by 70,000 units to 17.1 million and carry over demand until 2018 as consumers may take a few more months to replace vehicles destroyed by the typhoon, according to Jeff Schuster, Senior Vice President of Forecasting at LMC Automotive.

“In addition, a short-term increase in fleet sales may also be an outcome as current shortages are replenished. However, this does not change the overall expectation of level to weaker demand in the U.S. over the next 2-3 years,” Schuster added.

Estimates of retail light-vehicle sales is hiked to 13.9 million units from 13.8 million while retail sales and fleet volume are forecast to drop year-on-year to 1.4% and 8%, respectively.

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