US September Auto Sales Projected Down -25%

Ken Zino of AutoInformed.com on US September ’21 Auto Sales Projected Down

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New-vehicle retail sales for the month of September 2021 are expected to drop when compared with September 2020 and September 2019, according to a joint forecast from J.D. Power and LMC Automotive. Retail sales of new vehicles this month are expected to reach 888,900 units, a -24.8% decrease compared with September 2020, and a -19.8% decrease compared with September 2019 when adjusted for selling days*.

New-vehicle retail sales in Q3 2021 are projected to reach 2,990,500 units, a -14.3% decrease from Q3 2020 and an 18.8% decrease from Q3 2019 when adjusted for selling days. The seasonally adjusted annualized rate (SAAR) for total new-vehicle sales is forecast at 12.2 million units, down 4.0 million units from 2020 and down 4.9 million units from 2019.

“The mismatch between strong consumer demand and constrained inventory is leading to higher vehicle prices.  In September 2021, average transaction prices are expected reach an all-time high of $42,802, the fourth consecutive month over $40,000,” said Thomas King, president of the data and analytics division at J.D. Power. This begs the question, AutoInformed opines, are automakers about to face another revenue threatening affordability crisis?

“For context, average transaction prices are trending to be 18.6% higher in September 2021 than they were in September 2020 when prices broke the $36,000 level for the first time ever. This is partially due to continued compression of manufacturer incentives. The average manufacturer incentive per vehicle is on pace to be $1,755, a decrease of $2,037 from a year ago and the lowest amount on record. Expressed as a percentage of the average vehicle MSRP, incentives for September 2021 are trending toward a record low of 4.0%, down nearly -5.2 percentage points from a year ago,” King observed.

“Looking forward to October, with inventory and production levels at historical lows, dealers are turning vehicles on lots almost as soon they arrive and, as demand continues to exceed production, the overall industry sales pace will continue to be supply constrained. At these unprecedented low levels of inventory, the sales pace will be dictated mostly by manufacturers’ procurement, production and distribution activities. However, regardless of inventory position or production levels, manufacturers and retailers will continue to benefit from the current intense level of consumer demand achieving higher profits per every unit sold,” said King.

*September 2021 has the same number of selling days as September 2020, but two additional selling days than September 2019. Comparing the same sales volume without adjusting for the number of selling days translates to a decrease of -24.8% from 2020 and a -12.8% decrease from 2019.

More Details

  • The average new-vehicle retail transaction price in September is expected to reach a record $42,802. The previous high for any month, $41,528, was set in August 2021.
  • Average incentive spending per unit in September is expected to fall to $1,755, down from $3,792 in September 2020 and $4,154 in September 2019. Spending as a percentage of the average MSRP is expected to fall to -4.0%, down 5.2 percentage points from September 2020 and down 6.3 percentage points from September 2019.
  • Average incentive spending per unit on trucks/SUVs in September is expected to be $1,739, down $2,134 from a year ago and down $2,574 from 2019, while the average spending on cars is expected to be $1,816, down $1,711 from a year ago and down $1,891 from 2019.
  • Consumers are on pace to spend $38.0 billion on new vehicles, down $4.6 billion from September 2020 but up $3.6 billion from September 2019.
  • Truck/SUVs are on pace to account for 78.3% of new-vehicle retail sales in September.
  • Fleet sales are expected to total 120,500 units in September, down -22.1% from September 2020 and down 55.8% from September 2019 on a selling day adjusted basis. Fleet volume is expected to account for 12% of total light-vehicle sales, flat from 12% a year ago.

New Vehicle Residual Values

“ALG has updated its forecast for three-year-old retention values to reflect continued production constraints and the resulting decline in used-vehicle supply that will affect values until the middle of the decade,” said Eric Lyman, vice president, ALG. “Late-model-year vehicles will continue to see elevated values throughout 2022 calendar year, when returning leases on 2019 model-year vehicles are expected to retain a staggering 60.6% of their original MSRP, with continued used supply constraints alone contributing a full seven points to vehicle retention next year. While this is down from the 65.0% retention experienced for 2018 model-year vehicles in 2021, these unprecedented values will continue to disrupt the traditional off-lease remarketing environment with lessees and dealers intercepting vehicles at lease maturity before they can be sent to traditional wholesale auctions and upstream sales channels.”

“Looking further out into the future, ALG expects three-year-old vehicles returning in 2024 calendar year to drop to 53.7% of original MSRP. While these values may seem low compared with current market performance, they still represent a residual value forecast +4.0 percentage points higher than the five-year pre-pandemic average experienced from 2015-2019.”

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