Sixth Consecutive Month of Double-Digit Sales Growth Sees New-Vehicle Sales up 13.8% Amid Record Spending for September

J.D. Power:

The Total Sales Forecast

Total new-vehicle sales for September 2023, including retail and non-retail transactions, are projected to reach 1,309,900 units, a 13.8% increase from September 2022, according to a joint forecast from J.D. Power and GlobalData. September 2023 has 26 selling days, one more than September 2022. Comparing the same sales volume without adjusting for the number of selling days translates to an increase of 18.3% from a year ago.

The seasonally adjusted annualized rate (SAAR) for total new-vehicle sales is expected to be 15.4 million units, up 2 million units from September 2022.

New-vehicle total sales in Q3 2023 are projected to reach 3,941,700 units, a 17% increase from Q3 2022 with one more selling day.

The Retail Sales Forecast

New-vehicle retail sales for September 2023 are expected to increase when compared with September 2022. Retail sales of new vehicles this month are expected to reach 1,095,500 units, an 8% increase from September 2022 when selling day adjusted. Comparing the same sales volume without adjusting for the number of selling days translates to an increase of 12.4% from 2022.

New-vehicle retail sales in Q3 2023 are projected to reach 3,270,000 units, an 11.9% increase from Q3 2022 with one more selling day.

The Takeaways

Thomas King, president of the data and analytics division at J.D. Power:

“September finishes out the quarter relatively strong with double-digit year over year sales growth for a sixth consecutive month. Year-to-date total sales through September will be slightly more than 11.6 million units—an increase of 14.5% from a year ago—but still below pre-pandemic levels when sales were north of 12.7 million units. The UAW work stoppage, which has affected only a limited number of models, had a negligible effect on September sales. However, depending on the duration and scope of the stoppage, there could be disruption to sales results in October and beyond.”

Retail inventory levels in September are expected to finish around 1.3 million units, a 15.4% increase from last month and a large increase of 36.5% compared with September 2022, but still well below pre-pandemic levels.

“As sales volumes improve, the average new-vehicle retail transaction price is declining very modestly, trending down $94 or 0.2% from September 2022, to $45,516. However, even with the decline in average transaction prices, consumers are on track to spend nearly $46.8 billion on new vehicles this month—the highest on record for the month of September and 10.7% higher than September 2022.”

Sales to fleet customers are still elevated as manufacturers leverage higher vehicle production to allocate more vehicles to those fleet customers. Fleet sales are projected to increase 56.3% from September 2022.

“The increased vehicle supply and elevated interest rates have led to a decline in dealer profits—but those profits still exceed pre-pandemic levels. The total retailer profit per unit—which includes grosses, finance and insurance income—is expected to reach $3,300 in September. While this is 28.6% lower than a year ago, it is still nearly triple the amount in September 2019. The primary reason for the decline in profit is that fewer vehicles are being sold for prices higher than the manufacturer's suggested retail price (MSRP). This month, only 26.7% of new vehicles are projected to be sold above MSRP, which is down from 44.2% in September 2022.”

Total aggregate retailer profit from new-vehicle sales for this month is projected to be down 20.8% from September 2022, reaching $3.4 billion for the third-highest September on record.

"Retailers continue to sell many vehicles before they physically arrive at the dealership. However, with increased inventory levels, more shoppers are now able to purchase vehicles from dealer lots. In September, 43% of vehicles are projected to be sold within 10 days of their arrival at the dealership, which is down from the peak of 57% in March 2022. The average time that a new vehicle spends in the dealer's possession before being sold is expected to be 29 days, up from 19 days a year ago, but still less than half the pre-pandemic average of 70 days.

“Manufacturer discounts in September are expected to be relatively flat when compared with August, but have increased materially from a year ago when incentives were at record lows. The average incentive spend per vehicle has grown 80.8% from September 2022 and is currently on track to reach $1,806. Expressed as a percentage of MSRP, incentive spending is currently trending at 3.7%, an increase of 1.6 percentage points year over year. It is noteworthy that discounts on leased vehicles have risen in recent months. This month, leasing is expected to account for 20% of retail sales, up significantly from 16% a year ago, but still well below August 2019 when leased vehicles made up nearly 30% of all new-vehicle retail sales.

“Elevated pricing coupled with interest rate increases continue to inflate monthly loan payments. The average monthly finance payment in September is on pace to be $726, up $15 from September 2022. That translates to a 2.1% increase in monthly payments from a year ago. The average interest rate for new-vehicle loans is expected to be 7.3%, an increase of 162 basis points from a year ago.

“Used-vehicle prices have declined slightly from a year ago but remain close to all-time highs. The average trade-in equity for September is trending toward $9,082, down $327 from a year ago. For context, trade-in equity this month is still double the pre-pandemic level.

"As demonstrated by consumer expenditures in September, demand remains robust and the industry continues to struggle with adequate supply, thereby reinforcing support for new-vehicle pricing and overall profitability. At the same time, the relatively high values of used vehicles serve to keep trade-in values elevated, providing consumers with a means to mitigate the effects of higher interest rates and pricing."

Sales & SAAR Comparison

The Details

• The average new-vehicle retail transaction price in September is expected to reach $45,516, down $94 from September 2022. The previous high for any month—$47,362—was set in December 2022.
• Average incentive spending per unit in September is expected to reach $1,806, up from $999 in September 2022. Spending as a percentage of the average MSRP is expected to increase to 3.7%, up 1.6 percentage points from September 2022.
• Average incentive spending per unit on trucks/SUVs in September is expected to be $1,921, up $889 from a year ago, while the average spending on cars is expected to be $1,340, up $470 from a year ago.
• Retail buyers are on pace to spend $46.8 billion on new vehicles, up $4.5 billion from September 2022.
• Truck/SUVs are on pace to account for 79% of new-vehicle retail sales in September.
• Fleet sales are expected to total 214,360 units in September, up 56.3% from September 2022 on a selling day adjusted basis. Fleet volume is expected to account for 16.4% of total light-vehicle sales, up from 11.9% a year ago.
• Average interest rates for new-vehicle loans are expected to increase to 7.3%, 162 basis points higher than a year ago.

EV Outlook

Elizabeth Krear, vice president, electric vehicle practice at J.D. Power:

“The J.D. Power EV Index holds steady at 52 (on a 100-point scale), but there is movement at the factor level. Driven by aggressive pricing from Tesla—which had 58% of the EV market in August—the factor of affordability rises to 98 from 97 a month ago. The availability factor increases to 43, meaning that 43% of new-vehicle shoppers now have a viable substitute to an ICE counterpart. The increase is attributed to incentives, particularly among compact SUVs.

“However, headwinds are hitting the other factors of the EV Index. While infrastructure and experience declined slightly (-0.1 points and -0.6 points, respectively), the factors of interest and adoption decline 2.6 points and 1.5 points, respectively. Monthly EV retail share is stagnant at 8.4%, driving down true adoption, which is the measure of the percent of shoppers that purchase an EV when given a viable substitute to an ICE vehicle. While the availability of EVs is increasing, the retail share is stagnant, so true adoption is declining.

“As affordability and availability reach all-time highs for EVs, consumer interest and true adoption are not notably improving. This comes at a time when automakers are ramping up their EV product portfolios.”

Global Sales Outlook

Jeff Schuster, group head and executive vice president, automotive at GlobalData:

“The global light-vehicle selling rate (SAAR) once again outperformed expectations and reached 99.7 million units, the highest monthly SAAR since August 2018. Global year-over-year growth increased 10.5% from relative strength in demand. Europe was at the top of the markets in growth, with volume up 23%, while North America growth remained strong, up 17%. Growth across Asia was also stable, most notably in Japan (17%), South Korea (15%) and China (7%).

“September is expected to have a selling rate of 90 million units, making it the fourth consecutive month above the 90-million threshold. Volume is forecasted to be up nearly 5% as growth moderates from a strong base in September 2022.

“As we edge toward the end of 2023, the global automotive market has consistently outperformed expectations monthly, leading to another increase to the forecast from 86.8 million units to 87.9 million units, an increase of 8% from 2022. The wildcards to the finish of 2023 are the U.S. market—which may be influenced by the ongoing UAW strike—and China, with a price war that is attracting more consumers into the new-vehicle market but is negatively affecting OEM margins. The lift in the forecast for 2023 has spilled into 2024, with the outlook being increased to 91.6 million units from 90.2 million. Much of the change is due to a more optimistic view of the short-term outlook in China.”

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