U.S. retail light-vehicle sales in February are being harmed by severe weather in much of the United States during the first half of February, according to the latest forecast. Conventional wisdom has it that the rate of sales will increase toward month end, with an increase from President’s Day holiday weekend promotions and a normal increase in sales at month’s end as dealers try to move metal. (See – Presidents Day Car Deals)
February’s new-vehicle retail sales are now forecast at 972,400, a 5% percent increase from February 2013, with the seasonally adjusted annualized rate, aka SAAR, for retail sales projected at 12.7 million.
Total light-vehicle sales are projected at 1.2 million units, a 3% increase from February 2013. This means that fleet sales are less than 21% of total new-vehicle sales, below the February average of more than 22% from the previous two years. Fleet sales for the full year are forecast at 17.8% of total sales, slightly higher than 2013.
“Although severe weather impacted sales in early February, the negative effect should be somewhat mitigated since the majority of vehicle sales occur in the second half of the month,” says John Humphrey, of J.D. Power, the source of the soothsaying.
“The industry is on track to reach its highest-ever average transaction price for the month of February, with prices exceeding $29,000,” Humphrey says. “This beats the previous record from February 2013 by more than $400.”
He also expects consumer spending on new vehicle – sum of retail sales multiplied by transaction price – to exceed $28.3 billion in February, also the highest for the month and an increase of nearly $1.7 billion from February 2013.
North American Production
January vehicle production in North America in January, weather hurt in the southeastern United States, came in at 1.3 million units, flat from January 2013 but a 250,000 unit increase from December.
Combined with a slower-than-expected sales pace in January (Chrysler Bucks January Sales Dive in U.S. Subaru continues its Streak too), combined with excess production in the fourth quarter of 2013, built a large increase in days-supply inventory. It started February at an 88-day supply, an increase of 24 days from the start of January. The Detroit Three combined stock on hand increased to 109 days (60 is considered ideal), with an additional 92,000 units sitting on dealer lots and storage locations. All other manufacturers, with the exception of Subaru, also had an increase in inventory for the month.
“While inventory levels are excessive at this point, demand during the spring selling season will help resolve the situation,” says Bill Rinna, of LMC Automotive. “However, if inventory is not cleared out by June, production levels in the second half of the year are at risk.”
Given the current environment and risk, LMC Automotive has reduced its 2014 North American production forecast by nearly 100,000 units to 16.5 million units, a 2.5% increase from 2013. This – if true – is still the highest total in the region since 2000.
