J.D. Power: October Could Finish with Year-High SAAR

While also sharing what social media trends are impacting brands most, J.D. Power and Associates believes October’s seasonally adjusted annualized rate for new-vehicle retail sales should surpass 10 million for the first time this year.

Sparking what J.D. Power thinks is a sign of a more pronounced recovery trend is an October new-vehicle retail sales figure expected to come in at 756,300 units. Analysts said that amount would represents a SAAR of 10.2 million units — making October the first month to reach a 10-million-unit selling rate this year.

J.D. Power emphasized again that retail transactions are the most accurate measurement of true underlying consumer demand for new vehicles.

Meanwhile, the firm forecasted that total light-vehicle sales for October could finish at 922,700 units, 14 percent higher than October of last year. J.D. Power figures October fleet sales should be up 3 percent from one year ago, representing an 18-percent share of total sales.

“October is typically a month with a lower level of fleet sales, but October fleet volume is expected to be the lowest of the year,” J.D. Power insisted.

As the industry continues to improve at what J.D. Power concedes is a slower-than-anticipated pace, analysts revised their 2010 forecast downward slightly to 9.1 million units for retail sales (from 9.2 million units) and 11.5 million units for total sales (from 11.6 million units).

The firm also mentioned the 2011 gross domestic product is now expected to grow at the same rate as this year — approximately 2.5 percent. Given the weaker economic outlook for next year, J.D. Power’s 2011 forecast was changed to 10.5 million units for retail sales (from 10.7 million units) and 12.9 million units for total sales (from 13.2 million units).

Despite what could happen further down the line, Jeff Schuster, executive director of global forecasting at J.D. Power, stressed how the industry should be upbeat about the short-term gains new-vehicle retail sales could be making.

“Unlike July, August and September, which experienced some mid-month weakness, October’s robust sales pace has continued through the second week,” Schuster declared.

“Coming off a strong close to September, October’s expected performance marks the first back-to-back months of strength since the spring,” he continued. “Despite the drag from high unemployment and lower incentive levels, improvement in the automotive market continues in October, suggesting that consumers are discounting the negative sentiment.”

North American Production Outlook

J.D. Power determined North American production volume in the first three quarters of this year has already exceeded production for all of last year. The firm found 8.9 million units produced during the first three quarters of 2010 compared with 8.5 million vehicles last year.

Analysts think 2010 fourth-quarter production should be 2.8 million units, compared with 2.7 million units in 2009. Their forecast for 2010 edged up to 11.7 million units, an improvement of 37 percent compared with 2009.

Also of note, J.D. Power mentioned vehicle inventory rose slightly from September to 58 days supply with 2.2 million units in stock. However, the firm believes the overall level continues to be well-balanced with demand and inventory remains below historical levels. 

“Production for several high-profile models — such as the Chevrolet Cruze and Volt, Ford Explorer and Focus, and the Dodge Durango and Charger — will start this quarter or will continue to ramp up, driving a strong production recovery at the close of 2010,” Schuster noted.

“North American production levels are expected to grow by an additional 1 million units in 2011 to 12.7 million,” he added.

Five Social Media Trends for 2011

Along with the encouraging October sales projections, J.D. Power contends it has identified five important consumer trends emerging from examining social media commentary.

These five points include:

—Access: J.D. Power emphasized consumers now have access to more information than ever before, including unprecedented access to brands and people through social networks. The firm believes this access to information will continue to accelerate through the proliferation of smartphone and mobile devices. Therefore, analysts insist that it becomes increasingly critical for brands to provide timely and accurate information online that can be accessed through mobile devices.

—Elimination of excess: Triggered by the economic downturn and environmental factors, J.D. Power ascertained consumers are scaling back from excess and gravitating toward simplification and minimalist lifestyles. Analysts found many consumers seem to be pleased with these changes. For brands and marketers, they contend this change means that it is critical to reinforce the value of their products and services, and lead consumers to perceive products as essential to their lifestyles.

—Quality: In response to the economic difficulties of 2008 and 2009, J.D. Power said many consumers curtailed purchase of more expensive products, at times at the expense of quality. The firm indicated this year consumers are increasingly questioning why low price and high quality seem to be mutually exclusive. So brands that succeed at delivering both may have a competitive advantage.

—Control: With the proliferation of online information and smart devices, analysts discovered how consumers are taking greater control over their purchase experiences, and by extension, their lives. As a result, conveying a sense of empowerment to consumers may be a particularly effective marketing theme.

—Identity: J.D. Power concedes traditional notions of life stages are changing and evolving. For example, people are entering marriage and childbearing phases at a later age and the definition of retirement is changing for many baby boomers. J.D. Power indicated approximately 85 percent of college graduates in 2011 plan to move back in with parents after graduation. As a result, analysts insisted marketers must re-evaluate how they segment and target consumers, as traditional perceptions and roles may no longer apply.

Additional insights regarding consumer trends arising from J.D. Power’s social media research is scheduled to be available in a report titled, “Trendspotting in Social Media.” The full report is to be published next month.

“Mining social media content and clickstream behavior yields tacit knowledge streams that are rich with insight about consumer behavior, including the thought processes and decision-making that consumers either can’t or don’t articulate,” explained Dave Howlett, senior director of consumer insights and strategy at J.D. Power.

“Understanding this information is crucial to targeting customers and driving sales,” Howlett added.

J.D. Power released these preliminary details during the 2010 Automotive Internet Roundtable currently being held at the Red Rock Casino, Resort and Spa in Las Vegas. Almost 1,100 dealers and industry professionals registered to attend.