||February Auto Sales Looking Positive, But Buyers Paying More
Transaction Prices Up $1,000 Since Last Year
February vehicle sales are heading for another solid month despite headwinds such as economic turbulence created by gridlock in Washington D.C. and a spike in gasoline prices, according to those who track trends on the showroom floor.
The surge in demand is coming despite an ongoing cutback in incentives by automotive manufacturers. In fact, buyers are spending significantly more to drive off the dealer lot than they did just a year ago, industry watchers report.
"All signs of the industry's health are positive right now," said John Humphrey, senior vice president of the global automotive practice at J.D. Power and Associates, or JDPA. "Average transaction prices are up, incentives are stable, leasing is at a healthy level and newly redesigned models continue to make an impact on the marketplace."
The new-vehicle retail selling rate in February remains above 12 million units -- stronger than it was a year ago -- as the auto industry recovery continues, according to a monthly sales forecast developed by JDPA's Power Information Network. Including fleet numbers, the overall SAAR, or Seasonally Adjusted Annual Rate of car sales, is hovering around 15.2 million, the PIN data indicate.
"Demand is increasing, but the automakers deserve credit for doing a much better job of keeping alignment of production and demand." said Humphrey. "This has led to new-vehicle transaction prices that are averaging nearly $1,000 more in February than the same period in 2012 while incentives have remained relatively flat year over year."
Edmunds.com, a website specializing in information about the auto industry, estimates sales of new cars and trucks in February will total 1.2 million, for an estimated SAAR of 15.5 million light vehicles. The projected sales will be a 14.9% increase from January 2013, and a 4.3% increase from February 2012.
"Car sales are persevering despite economic factors on people's minds like rising gas prices and the implementation of the payroll tax," noted Edmunds.com Senior Analyst Jessica Caldwell. "Pent-up demand and widespread access to credit are keeping up car sales momentum."
Jeff Schuster, senior vice president of forecasting at LMC Automotive, said the outlook for 2013 continues to improve, with the selling pace remaining robust. LMC Automotive is increasing its 2013 U.S. forecast for total light-vehicle sales to 15.3 million units from 15.1 million units. The increase is split between fleet and retail light-vehicle sales, with the outlook for retail increasing to 12.5 million units from 12.4 million units.
"The current fundamentals that are driving strong vehicle sales -- pent-up vehicle demand and a stable, recovering economy -- are expected to get a boost by additional positive factors this year," Schuster said.
"An expected recovery in the housing market, and 50 percent more new-model launches combined with an increase in lease maturities should keep light-vehicle sales climbing throughout the year," he added.
Schuster also said stronger sales are encouraging manufacturers to boost the production of new vehicles.
North American light-vehicle production in January 2013 finished at more than 1.3 million units, 7% higher than in January 2012. Production in Mexico has increased by nearly 21% from January 2012, driven by higher General Motors, Ford, and Volkswagen volumes, especially for their most recently launched models. U.S. vehicle production has grown by 9% from January 2012, while Canadian production has declined by 13% during the same period.
Vehicle inventory levels in early February increased to a 74-day supply, compared with 59 days in January. A higher level is typical in February. However, at the current selling rate, inventory levels are expected to rebalance within the next month or two. Overall, there are nearly 3.1 million units currently available on dealer lots or in transit -- an increase of approximately 600,000 units from February 2012.
LMC Automotive's forecast for North American production remains at 15.9 million units for this year, a 3% increase from 2012.
"The current inventory situation and production plan for 2013 suggests that there is enough volume to support the expected increased level of demand, and there remains little risk for an overbuild environment," said Schuster.
(Source: The Detroit Bureau, 02/25/13)
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