Lack of new vehicle inventory still limits the pace of sales as prices and profits reach record highs; Incentive spending at a new low

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TROY, Michigan, April 27, 2022–(BUSINESS WIRE)–JD Power:

retail sales forecast

Retail sales of new vehicles for April 2022 are expected to decline from April 2021, according to a joint forecast by JD Power and LMC Automotive. Retail sales of new vehicles this month are expected to reach 1,076,200 units, down 23.8% from April 2021 when adjusted for days on sale. April 2022 has one more selling day compared to April 2021. Comparing the same sales volume without adjusting for the number of selling days results in a decrease of 20.9% compared to 2021.

Total sales forecast

Total new vehicle sales for April 2022, including both retail and non-retail transactions, are expected to reach 1,241,300 units, down 21.5% from April 2021. Comparing the same sales volume without adjustment for the number of days of sale results in a decrease of 18.5% from 2021.

The seasonally adjusted annual rate (SAR) of total new vehicle sales is expected to be 14.5 million units, down 3.9 million units from 2021.

Takeaway meals

Thomas King, President of Data and Analytics at JD Power:

“April’s sales pace may seem disappointing compared to April 2021, but last April’s record sales pace was made possible by the combination of extremely strong consumer demand and sufficient inventory (nearly 1.7 million units) to turn that demand into actual sales In April, demand remains strong, but with less than 900,000 units in dealer inventory, sales volumes are bound to be well below sales levels. one year ago.

“However, as has been the case for the past two quarters, inventory constraints are driving record pricing and profitability. New vehicle prices continue to set records, with the average transaction price expected to reach a record high. of $45,232 in April, an increase of 18.7% from a year ago and the second highest level on record behind $45,247 set in December 2021.”

Growth in transaction prices means that, while the pace of sales is down 23.8% year-over-year, consumers will spend $48.7 billion on new vehicles this month, the second highest level on record for the month of April and a drop of just 6.1% from April 2021. .

“Given strong demand and a lack of inventory, it’s no surprise that manufacturer rebates continue to be minimal. For April, average incentive spend per vehicle is on track to hit an all-time low of $1,034, down 65.5% from Incentive spend per vehicle as a percentage of average vehicle MSRP is also trending toward an all-time low of 2.3%, down 4.8 percentage points from compared to April 2021 and the third consecutive month below 3.0% the absence of a rebate on leased vehicles contributes to the reduction in incentive spending Leases accounted for 30% of all retail sales of new vehicles in 2019. This month, rentals will represent only 18% of retail sales.”

While manufacturer rebates have fallen to record lows, dealer earnings per unit continue to be at record highs. Retailers’ total profit per unit, including gross revenue and financial and insurance revenue, is on track to hit a monthly record of $5,046, an increase of $2,313 from a year ago. year. Six of the past seven months have seen the retailer’s profit per unit equal or exceed $5,000. This strong level of profit per unit more than offsets the decline in sales volume, as retailers’ overall total profit from new vehicle sales is expected to increase 46.0% from April 2021 to $5.4 billion, the best April ever and the second highest. amount of any recorded month.

“Even at these record price levels, vehicles continue to sell quickly and a significant number of vehicles are ordered or purchased by buyers before they arrive at the dealership. This month, 56% of vehicles will be sold within 10 days after arriving at a dealership, while the average number of days a new vehicle is in a dealership before being sold is on track to be 18 days, up from 49 days a year ago. year.

“Rising interest rates pose a threat to maintaining current record high transaction prices. As expected, average new vehicle loan interest rates have increased, but at a temperate level. The average interest rate lending in April is expected to rise 33 basis points from a year ago to 4.61%.However, the high value of used vehicles continues to support affordability for new-vehicle buyers who have a vehicle to trade in. increase from a year ago.

“Even with high trade-in values, the average monthly finance payment is on track to hit an all-time high of $685 for the month of April, up $92 from April 2021. This translates to a 15.6% increase in monthly payments compared to a year ago. , which is still lower than the 18.7% increase in transaction prices. The combination of further interest rate increases and the expectation of some easing in used prices in the latter part of this year will present an increasing challenge to sustaining the current pricing environment, as will the eventual increase in vehicle availability. However, the environment current prices should persist in the short term.

“May has traditionally been one of the biggest sales months of the year, made possible by Memorial Day promotional activity and manufacturer discounts. This month of May will be very different as inventory constraints will persist and manufacturer rebates are unlikely to reappear in any meaningful way, so year-over-year sales results will again be suppressed and the pace of sales will be dictated by manufacturers’ vehicle offerings to dealerships during the month. With consumers remaining resilient even in a high price environment, automakers and retailers will continue to benefit from historically high profitability on nearly all vehicles sold.”

Comparison of sales and SAAR

New American Vehicle

April 20221, 2

March 2022

April 2021

Retail sales

1,076,214 units

(-23.8% less than April 2021)2

1,065,438 units

1,360,793 units

Total sales

1,241,315 units

(-21.5% decline April 2021)2

1,255,312 units

1,523,028 units

SARAR Retail

13.0 million units

11.4 million units

16.9 million units

Total SAAR

14.5 million units

13.4 million units

18.3 million units

1

Figures quoted for April 2022 are forecasts based on the first 20 selling days of the month.

2

April 2022 has 27 sales days, one more than April 2021.

The details

  • The average retail price for a new vehicle in April is expected to reach $45,232. The previous high for any month – $45,247 – was set in December 2021.

  • Average incentive spend per unit in April is expected to reach $1,034 from $2,996 in April 2021. Spend as a percentage of average MSRP is expected to fall to a record low of 2.3%, down 4.8 percentage points compared to April 2021.

  • Average incentive spend per unit for trucks/SUVs in April is expected to be $1,070, down $1,898 from a year ago, while average spend for cars is expected to be $906, in down $2,183 from a year ago.

  • Buyers are poised to spend $48.7 billion on new vehicles, down $3.2 billion from April 2021.

  • Trucks/SUVs are on track to account for 78.4% of new vehicle retail sales in April.

  • Fleet sales are expected to total 165,100 units in April, down 2.0% from April 2021 on a day-of-sale adjusted basis. Fleet volume is expected to represent 13% of total light vehicle sales, compared to 11% a year ago.

Global Sales Outlook

Jeff Schuster, President, Americas Operations and Global Vehicle Forecasts, LMC Automotive:

“Global light vehicle sales in March ended slightly stronger than expected, but were still down 14% from March 2021. The sales rate of 76.1 million units in March brings the sales rate Q1 2022 to 79.5 million units, down 4.5 million units from Q1 2021. Global supply chain issues, further complicated by the war in Ukraine, continued limit sales levels. Year-on-year, China remained somewhat resilient given the strict lockdown measures in place, but parts shortages did dampen sales in North America and Europe well below potential. We expect April to remain under pressure – which could expand as restrictions in China increase and inflation fears weigh on consumers. Volume is expected to decline 18% and the sell-through rate is expected to drop to 72.5 million units, down 17 million units from last April’s rate.

“At this point in 2022, given the number of negative variables, it is not surprising that the outlook remains uncertain and subdued compared to what should be a notable recovery from the pandemic. After another round of outlook revisions in China and India, our forecast for light vehicles in 2022 slipped to 81.7 million units, an increase of only 0.3% compared to 2021 and a decrease of 900,000 units compared to last month. While the outlook is clouded and growth has evaporated, we still believe weak global demand is due primarily to address supply shortages.But if inflation does not ease, more consumers could be squeezed out of the new vehicle market as 2023 approaches.”

About JD Power and Advertising/Promotional Rules www.jdpower.com/business/about-us/press-release-info
About LMC Automotive www.lmc-auto.com

See the source version on businesswire.com: https://www.businesswire.com/news/home/20220427005370/en/

contacts

Geno Effler, JD Power; Western coast; 714-621-6224; media.relations@jdpa.com
Emmie Littlejohn, LMC Automotive; Troy, Michigan; 248-817-2100; elittlejohn@lmc-auto.com

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