J.D. Power: November New-Vehicle Sales Look Strong

It might be a more festive Thanksgiving for franchise dealers if current sales trends continue.

J.D. Power and Associates believes new-vehicle retail sales will remain strong in November and continue to provide the muscle behind the market’s strength for a third consecutive month

Firm analysts projected that November new-vehicle retail sales are expected to come in at 699,700 units, which represents a seasonally adjusted annualized rate (SAAR) of 10 million units. Should the industry post that level, it would mark the second straight month with a selling rate above 10 million units.

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

“Another strong month in retail sales signifies a return of natural demand in the market,” noted Jeff Schuster, executive director of global forecasting at J.D. Power.

“With the mid-term election behind us and the economy indicating stability, if not mild acceleration, consumers are returning to showrooms even without an increase in incentive levels,” Schuster added. “Currently, total incentives are down 5 percent from October.”

J.D. Power thinks total light-vehicle sales for November should settle at 867,700 units, 12 percent higher than the same month a year ago. Analysts predict November fleet sales are expected to remain below 20 percent of total sales with volume up less than 1 percent from the same month last year.

“Fleet share at this level is consistent with the continued discipline in the industry and focus on the retail side of the market,” J.D. Power indicated.

Analysts also pointed out that strength in November is a positive sign as they predict the market should close out 2010 with a small rally. As a result, J.D. Power is maintaining its 2010 forecast of 9.1 million units for retail sales and 11.5 million units for total sales.

Even with a possible strong close to 2010, the firm conceded there remains a moderate level of risk with new-vehicle sales in 2011. Therefore, J.D. Power’s forecast for the year has been adjusted downward to 10.4 million units for retail sales (from 10.5 million units) and 12.8 million units for total sales (from 12.9 million units).

“It is unclear how cautious consumers will be in 2011 as unemployment is expected to remain above 9 percent and the drag on the economy from the housing market continues,” Schuster explained.

“While the forecast for 2011 has been reduced slightly, there are signs that consumer optimism is growing, leaving room for upward momentum,” he continued

Wrapping up its latest analysis by looking at North American production, J.D. Power noted that production is on target to end this year at 11.8 million units. That figure is up 38 percent from 8.5 million units in 2009.

Analysts project that fourth-quarter volume should settle at 2.9 million units, compared with 2.7 million units in the year-ago quarter.

J.D. Power determined vehicle inventory at the end of October rose by 7 percent from September to a 67-day supply — the highest level since February. However, days’ supply is still only four days higher than the inventory level at the end of October 2009 when it was 63 days.

“The increase in vehicle production outpaced the increase in demand, but this pattern is consistent with the buildup of new model year vehicles coming off a summer selldown,” Schuster insisted.

“With November’s expected performance, concerns of an inventory glut decrease, but levels will need to be monitored closely as the year balances out,” he went on to say.

J.D. Power concluded its report by noting North American production is expected to grow by 7 percent next year to 12.6 million units.

J.D. Power and Associates U.S. Sales and SAAR Comparisons

¹Figures cited for November 2010 are forecasted based on the first 11 selling days of the month.

²The percentage change is adjusted based on the number of selling days (24 days vs. 23 days one year ago).