Clunkers Program Fuels August Auto Sales

August 31, 2009

This article is included in these additional categories:

Analytics, Automated & MarTech | Automotive | Financial Services | Retail & E-Commerce

New-vehicle retail sales in August are forecasted to cross the one-million-unit mark for the first time in the past 12 months, boosted by the government-funded Car Allowance Rebate System (CARS) program (better known as “Cash for Clunkers”), according to J.D. Power and Associates.

Based on the first 13 selling days of? August, new-vehicle retail sales for the month are expected to come in at slightly more than 1 million units, up nearly 2% from one year ago. This marks the first increase in retail sales volume since June 2007, J.D. Power.com said.

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“Improved consumer confidence and credit availability during the past six months have combined with the CARS program to lift industry sales out of their slumping year-to-date levels, which have been down approximately 35% year-over-year,” said Gary Dilts, SVP of global automotive operations at J.D. Power and Associates. “These factors set the foundation for a gradual recovery in the months ahead.”

Dilts added that smaller inventories will likely hold back some of this momentum, but carmakers are moving quickly to ramp up production and rebuild stock.

Fleet Sales to Decline

As inventory is channeled to retail sales, August fleet sales are expected to decline by more than 50%, compared with one year ago, according to the forecast.? As a result, August total light-vehicle sales are projected to come in at 1.1 million units, down just 8% from August 2008.

The August seasonally adjusted annualized rate (SAAR) for total vehicle sales increased to 12.2 million units, up 1.2 million units from July.

2009 Forecast Revised Upward

Given the positive impact of the CARS program, J.D. Power and Associates is increasing its forecast for 2009 to 10.3 million units for total sales. Retail sales are projected to come in at 8.6 million units – 300,000 units more than previously expected-while the projection for fleet sales has been reduced to account for a shortage in inventory.

In light of the expected pull-ahead sales as a result of the Clunkers program and a flatter-than-anticipated recovery, the firm lowered its forecast slightly for 2010 to 11.5 million units for total sales and 9.5 million for retail sales.

“Amid relative economic stability and a more disciplined management of fleet sales, the industry is showing signs of a more rational balance of sales and production levels,” said Jeff Schuster, executive director of global forecasting at J.D. Power and Associates. “However, there is risk that the expected pullback in sales as the CARS program ends could be magnified if manufacturers reduce incentive levels. This could stall the recovery and negate the boost that the program has generated in the third quarter.”

About the data: The forecasts above are based upon real-time transaction data from more than 10,000 dealerships across the US.

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