New-vehicle retail sales in the US are off to a weak start in May 2011 as several variables, including gas prices that are nearing historically high levels, have contributed to a significant pullback from a strong showing in April, according to J.D. Power and Associates. May new-vehicle retail sales are projected to come in at 858,400 units, which represents a seasonally adjusted annualized rate (SAAR) of 9.6 million units.
May Retail SAAR Up YOY, Down MOM
The May retail SAAR is 10% higher than 8.7 million units in May 2010, but has dropped almost 13% from 11 million the previous month. This month’s SAAR is also down 8% from the 2011 year-to-date average of 10.7 million units.
“Retail sales in May are being hit by several negative variables; specifically, high gas prices, lower incentive levels and some inventory shortages,” said Jeff Schuster, executive director of global forecasting at J.D. Power and Associates. “As a result, the industry will likely be dealing with a lower sales pace at least through the summer selling season, putting pressure on the 2011 outlook.”
Total Light Vehicle Sales Follow Retail SAAR Trend
Total light-vehicle sales in May are expected to come in at 1.07 million units, which is 6% higher than 847.1 million units in May 2010 but about 9 lower than 935.7 million units in April 2011. Fleet sales are expected to be lower in May due to the inventory shortages and are projected to finish the month at 214,600 units, down 8% from May 2010.
In addition, total SAAR for May is projected to be 11.9 million units, down 10% from 13.2 million units the prior month but up almost 3% from 11.6 million units the prior year. J.D. Power has reduced the forecast for 2011 retail sales slightly to 10.6 million units from 10.7 million units. The forecast for total sales remain at 13 million units.
North American Production Up 12% YOY
Year-to-date North American production is up 12% from the same timeframe in 2010. In 2011, 4.3 million light vehicles were produced during the first four months of the year, compared with 3.8 million units built during the same period in 2010. J.D. Power expects disruptions to the Japanese supply chain related to the earthquake/tsunami crisis to cause more than 400,000 units of production to be lost in the short term.
At 54 days’ supply, the inventory level at the beginning of May was the same as it was at the beginning of April. However, several small cars and many models imported from Japan remain in very short supply. J.D. Power says inventory will continue to be under pressure during the next few months as manufacturers work to build up the low inventory levels.
The North American production forecast in 2011 has been reduced slightly, with volume now rounding down to 12.8 million units (from 12.9 million units). As the parts situation stabilizes and unaffected manufacturers increase production, most of the lost volume is expected to be recouped during the second half of 2011 at the topline level.
China Spurs Light Vehicle Growth in Emerging Markets
Share of global light vehicle sales arising from so-called “emerging” markets has surpassed share from economically mature regions, led largely by growth in the China market, according to previously released data from J.D. Power and Associates. In 2010, J.D. Power data indicates light vehicle sales in emerging markets comprised 51% of global sales.
About the Data: J.D. Power and Associates gathers real-time transaction data from more than 8,900 retail franchisees throughout the United States and is the source of the enclosed charts.