J.D. Power: January Pace Reinforcing Upbeat Sales Projections

J.D. Power and Associates continued the flood of positive projections for 2011 new-vehicle sales as the firm indicated January new-unit retail sales are starting the year ahead of expectations.

Analysts believe January new-vehicle retail sales are expected to come in at 632,100 units. That figure would represent a seasonally adjusted annualized rate of 10.0 million units, nearly 2 million units higher than January of last year.

J.D. Power also estimates January retail volume will be up 23 percent from one year ago. The firm thinks retail transactions are the most accurate measurement of true underlying consumer demand for new vehicles.

“While the January selling rate reflects a decline from the strong rate in December, the month of January typically experiences a much more pronounced pullback in sales,” explained Jeff Schuster, executive director of global forecasting at J.D. Power.

“For three of the past four months, sales have been above a 10-million-unit SAAR, and buyers have returned to showrooms without the crutch of high incentives. This signals stability and strength of natural demand,” Schuster continued.

J.D. Power forecasted that total light-vehicle sales for January will settle at 794,500 units, a figure that is 14-percent higher than January 2010. Analysts contend fleet sales are projected to account for 20 percent of total sales, with volume at 160,000 units.

Based on the growing recovery momentum, J.D. Power increased its retail sales forecast for 2011 to 10.5 million units, up from 10.4 million units. In addition, its forecast for total light-vehicle sales in 2011 has also been revised upward to 13.0 million units from 12.8 million units.

“Optimism is increasing for the auto industry following a stronger outlook for the economy,” Schuster offered.

“GDP growth is expected to be in the 3 percent to 3.2 percent range for 2011,” he went on to say. “As the macro drivers continue to improve and credit availability increases, further upside potential remains.”

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

¹Figures cited for January 2011 are forecasted based on the first 11 selling days of the month.

North American Production Analysis

At the close of 2010, J.D. Power calculated North American production volume was nearly 40-percent higher than 2009 at 11.8 million vehicles. Analysts insist this year’s production levels are expected to continue to recover, but not at the same pace as experienced last year as production continues to be well managed to demand.

J.D. Power said 2011 production volume should climb to 12.6 million units, an increase of 7 percent over last year.

“The quarterly pattern is expected to be more balanced with each quarter accounting for approximately one-fourth of the annual volume,” J.D. Power suggested.

To be specific, the firm projected that first-quarter production would be 3.2 million units — an increase of 12 percent from the same period last year

“Several manufacturers have high-profile vehicles starting volume production in the first quarter, including the Ford Focus, Chrysler 300 and Honda Civic,” J.D. Power pointed out.

Furthermore, analysts noted vehicle inventory at the beginning of this month fell to 2.3 million units, down from 2.4 million units at the beginning of December. They also mentioned days’ supply decreased to 55 days in January — down from 67 days last month when inventory was built up for the strong close to 2010.

Currently, J.D. Power believes car inventory is outpacing truck inventory at a 59-day supply, compared with a 52-day supply.