U.S. new-vehicle sales this month are expected to be about the same as a year ago or down slightly, according to three forecasts issued this week, but it’s taking record incentives to keep up that pace.
Incentive spending in the first 12 days of the month reached a new February high of $3,748 per vehicle, J.D. Power said. That’s an 8.5 percent increase from February 2016. Average transaction prices also are rising, but incentives now account for more than 10 percent of transaction prices for the first time in any February since the auto market hit bottom in February 2009 during the 2008-09 Great Recession. Automakers will release February sales results on Wednesday, March 1.
While retail sales remain strong, the heavier discounts pose “a fundamental threat to the long-term health of the industry,” said Deirdre Borrego, senior vice president of automotive data and analytics at J.D. Power.
J.D. Power and LMC Automotive said they project new-vehicle sales to rise 0.6 percent after a slow start to the month, for a seasonally adjusted, annualized selling rate of 17.7 million. Edmunds estimates that sales will fall 1 percent, resulting in a SAAR of 17.6 million, and Kelley Blue Book is calling for a 3.3 percent decline and a SAAR of 17.1 million.
The SAAR was 17.57 million last month and 17.69 million in February 2016.
“Retail growth for manufacturers will be tough to achieve in February, as consumer demand remains relatively flat despite increased incentives,” KBB analyst Tim Fleming said in a statement. “Regardless of the expected dip in overall volume, at a SAAR of more than 17 million, the sales pace for the industry is healthy, and more importantly, looks to be sustainable as we head into the high-volume selling months ahead.”
KBB projects full-year sales of 16.8 million to 17.3 million, down from the 17.54 million sold in 2016.
In contrast, LMC said it still expects the industry to eke out a 0.2 percent gain for the year with 17.6 million sales. That would represent a third consecutive annual record.
LMC forecasts flat retail sales for the year of 14.1 million, meaning the increase it’s predicting would be wholly attributable to higher fleet deliveries. It said fleet sales are expected to rise 0.4 percent in February.
Edmunds said the month got a solid boost from Presidents Day promotions, but not enough to match last year’s volume, which was the highest for any February since 2001.
“The holiday weekend is likely a contributing factor to strong sales in February, but we’re also seeing signs that automakers are starting to be a bit more aggressive to move cars off the lot,” Jessica Caldwell, Edmunds’ executive director for industry analysis, said in a statement. “Fleet sales were robust in February, and incentives are continuing to rise. While trucks and SUVs don’t need as much help to find interested buyers, inventories of passenger cars have been building.”
General Motors, Volkswagen Group of America and Subaru are likely to gain market share in February, the forecasters said, while Fiat Chrysler Automobiles is on track to lose the most share for the month.
Ford Motor Co., Toyota Motor Sales U.S.A. and Hyundai-Kia also are projected to post declines that are larger than average. The forecasts show smaller declines for Nissan North America and American Honda.
