TROY—The Troy-based customer experience analytics and auto industry consulting firm J.D. Power predicted that new vehicle retail sales in June are expected to be just over 1 million units, down 11.3 percent in June from June 2019, and a 5.7 percent decrease compared to the J.D. Power pre-virus forecast
The seasonally adjusted annualized rate (SAAR) for total sales is expected to be 12.8 million units, down 4.4 million units from a year ago. That’s because of a huge decline in fleet sales, which are forecasted to tumble 74 percent year-over-year, just 83,000 units.
“The industry continues to show signs of recovery in June, with retail sales down only 6 percent compared with the J.D. Power pre-virus forecast,” said Thomas King, president of the data analytics division of J.D. Power. “This represents a significant improvement from May, when retail sales were off 20 percent from the pre-virus forecast. The combination of pent-up demand, states relaxing coronavirus-related restrictions, and elevated incentives are all providing a tailwind for the industry.”
Remarkably, in markets like Detroit, one of the most severely affected areas by COVID-19, retail sales are on pace to exceed 2019 levels.
Record levels of manufacturer incentives for the month of June are supporting the sales recovery. Incentive spending is on pace to reach $4,411 in June, the highest ever for the month and an increase of $445 from June 2019. Incentives on cars are expected to be up $459 to $4,031, with trucks/SUVs up $407 to $4,524.
Transaction prices continue to set records and are on pace to rise by 3.9 percent to $34,981, the highest level ever for the month of June. Record prices are being supported by the ongoing shift in consumer demand from cars to trucks and SUVs. Car sales are on pace to account for just 24 percent of new-vehicle retail sales in June, the lowest level ever for the month of June and the third month in a row below 25 percent. As the industry shifts towards more expensive products, SUV mix is expected to reach a record 56 percent.
Record prices are helping to offset the decline in sales, with consumers expected to spend $35.1 billion on new vehicles in June, representing a decline of $4.5 billion from last year.
Looking ahead, inventory constraints and any easing of the pent-up demand that is currently elevating sales will be headwinds to the overall sales recovery.
“Despite the challenges the industry continues to face, one notable positive for retailers is the strength of margins on new vehicle sales,” King said. “On average, total grosses inclusive of finance and insurance income on new vehicles are expected to reach the highest level ever in June.”
Total gross per unit is on pace to reach $1,759, up $414 from last year. Strong per-unit grosses offer some mitigation to June’s sales pace, while also helping retailers maintain operations after experiencing massive business disruption in March, April and May.
Days to turn, the average number of days a new vehicle sits on a dealer lot before being sold to a retail customer, is 98 days, up 23 days from a year ago.