June New Vehicle Sales to Improve Slightly from a Weak May

Total June vehicle sales are expected at 1,106,400, which is 8% higher than a lousy June 2010.

New-vehicle retail sales increased in the first half of June, as consumers, despite poor economic signals, returned to dealerships. As a result, vehicle sales are projected to come in at 884,800 units, which represents a seasonally adjusted annualized rate (SAAR) of 9.9 million units. In May the SAAR was running at a bleak 9.3-million level.

Surprisingly, the improvement is coming from large pickup truck sales, as well as compact car sales, according to J.D. Power and Associates. Large pickups are accounting for 10.6% of retail sales month-to-date, the highest level since February. Compact cars make up 17.6% of retail sales, up from 17.2% in May.

Nonetheless, Power has reduced its 2011 retail sales forecast to a meager 10.5 million units from 10.6 million units. The forecast for total sales has been revised to 12.9 million units from 13 million units.

Retail transactions are the most accurate measurement of underlying consumer demand for new vehicles, according to Power, which gathers transaction data from more than 8,900 retail franchisees throughout the United States.

“There has been some easing of negative variables in June, as the inventory shortage has not been as severe as expected, and gas prices have dropped noticeably from higher levels in April and May,” said Jeff Schuster, executive director of global forecasting at J.D. Power and Associates.

“Provided that the economy decides to cooperate, the automotive summer slowdown will only be a speed bump, and a return of a measurable recovery pace is still expected in the second half of 2011,” Schuster claimed.

Total Light-Vehicle Sales

Total light-vehicle sales in June are expected to come in at 1,106,400 units, which is 8% higher than a lousy June 2010. Fleet sales are expected to be lower in June due to the inventory shortages and are projected to finish the month at 221,600 units, down 9% from June 2010.

“Conditions for light-vehicle sales are improving, but the automotive market remains fluid and susceptible to a slower economic recovery or external shock,” said John Humphrey, senior vice president of automotive operations at J.D. Power and Associates. “This risk is driving a more cautious approach to the market outlook for the remainder of 2011 and into 2012.”

North American Production

Through May, light-vehicle production for North America on a year-to-date basis is up 10% from the same period in 2010. Volume for the first five months of 2011 came in at 5.3 million units, compared with 4.8 million units built during the same period in 2010. Production for Japanese manufacturers has declined nearly 13% thus far this year, as parts shortages have caused volume disruptions.

However, the recovery pace has been accelerated and most operations are expected to return to pre-disaster levels in the coming weeks. In addition to the recovery of volume with the Japanese brands, production has been ratcheted up among the Detroit Three and European and Korean brands.

The Detroit Three are up 18% year-to-date, compared with 2010. The European manufacturers are up 44%, and the Korean manufacturers are up 56% for the same period.

Inventory levels declined to 49 days’ supply at the beginning of June, five days less than the previous month’s 54 days’ supply.  Power says that inventory conditions should improve in the coming months, but many smaller size models and some Japanese imported models will remain in very short supply for the near future.