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August new-vehicle retail sales are projected to come in at 898,000 units, which represents a seasonally adjusted annualized rate (SAAR) of 9.9 million units. The retail selling rate is higher than in July, although volume remains essentially flat. Retail transactions are the most accurate measurement of true underlying consumer demand for new vehicles.
"The selling rate in August is expected to be slightly stronger than in July, but without a significant increase in incentive levels or a reversal of the economic woes, there isn't a compelling reason for those consumers sitting on the fence to return to dealer showrooms and purchase a vehicle," says Jeff Schuster, executive director of global forecasting at J.D. Power and Associates. "There is little question that a strong level of pent-up demand exists, but economic and financial uncertainty is keeping it from being released."
Total light-vehicle sales in August are expected to come in at 1,074,900 units, which is just 4% higher than in August 2010. Like July, August is normally a low fleet month, with sales of 177,000 units expected-which is 16% of total sales.
Sales OutlookGiven the recovery stall that continues to persist and lower expectations for growth in the economy, J.D. Power is lowering its forecast for light-vehicle sales in 2011 and 2012, as the slower recovery is expected to extend into next year. Total light-vehicle sales for 2011 are now expected to come in at 12.6 million units. This is still a 9% increase from 2010, but is down from the previous forecast of 12.9 million. Retail light-vehicle sales are now forecasted at 10.2 million units for 2011 (from 10.5 million).
For 2012, the outlook for total light-vehicle sales has been reduced to 14.1 million units (from 14.7 million). Retail light-vehicle sales are now at 11.5 million units (from 12 million).
"The economy and automotive industry continue to wrestle with a series of unsettling developments, which are now likely too strong to overcome within 2011," says John Humphrey, senior vice president of automotive operations at J.D. Power and Associates. "While it is not time to hit the panic button, it is clear that ascending from the recession is proving to be just as bumpy as the decline into it, and a full recovery in vehicle sales is further down the road than previously thought."
North American ProductionLight-vehicle production in the North American region has increased by 8% through the first seven months of 2011 from the same period in 2010, with volume of 7.3 million units. At the country level, production in Mexico is showing the strongest year-over-year change, rising 16% with the addition of the Fiat 500, Ford Fiesta and new VW Jetta models. The United States follows Mexico with an 8% increase, while volume in Canada is off 1%-hurt by production losses from Honda and Toyota.
Vehicle inventory has decreased to a 49 days' supply at the beginning of August, down from a 54-day level in early July, mainly due to the typical July shutdown at many of the assembly plants last month. Car inventory was at 40 days, while truck supply was at 58 days-both low for their respective norms. Several manufacturers continue to have limited availability: Hyundai/Kia with a 19 days' supply and Honda with a 28 days' supply. Production continues to support inventory replenishment, but it likely won't be until October before closer-to-normal industry levels (60 to 65 days) are reached.
The 2011 North American production outlook has been trimmed slightly, but it continues to round to 12.9 million units. The decrease is the result of the reduction in the outlook for vehicle sales, but it is not as severe due to the current low level of inventory. Had the sales pace returned to the strength shown at the beginning of 2011, production would have needed to be increased in order to meet the demand and replenish inventory levels by the end of the year.