Going Up: J.D. Power Forecasts July Sales Uptick
Dealers still struggle with profitability as inventory begins to stabilize.
J.D. Power reports that in July 2024, retail and non-retail automotive transactions are expected to be 2.8% higher than last July, but it’s not time for dealers to celebrate.
Software outages stalled June 2024 sales, pushing them into July. Full lots combined with manufacturers’ incentives depressed dealer profits.
“Total retailer profit per unit, which includes gross vehicle plus finance and insurance income, is expected to be $2,298, down 33% from July 2023,” says Thomas King, president of the data and analytics division at J.D. Power. “Rising inventory is the primary factor behind the profit decline and fewer vehicles are selling above the manufacturer’s suggested retail price (MSRP). Thus far in July, only 14.5% of new vehicles have been sold above MSRP, down from 32.4% in July 2023.”
As reported in WardsAuto, the bright spot for dealers is that manufacturers are “showing real discipline in pricing” and “keeping incentive spend in check,” says Erin Keating of Cox Automotive, the parent company of Kelley Blue Book (KBB). June data from KBB showed steady new-vehicle transaction prices and declining month-over-month incentives despite high inventory levels for many dealers.
But looking at micro figures shows why dealers still struggle with profitability. According to J.D. Power, the average new-vehicle retail transaction price in July is expected to reach $44,271, down $1,166 from July 2023. The high for any month – $47,329 – was set in December 2022.
Plus, average incentive spending per unit in July is expected to reach $2,892, up $990 from July 2023. Spending as a percentage of the average MSRP is expected to increase to 5.9%, up 1.9 percentage points from July 2023.
The result is that volatility in the retail sector is calming, albeit slowly.
J.D. Power goes on to offer other forecast points that may provide dealers with roadmaps for the near future, including:
The seasonally adjusted annualized rate (SAAR) for total new-vehicle sales is expected to be 16.7 million units, up 0.7 million units from July 2023 and the highest in over three years.
New-vehicle retail sales for July 2024 are expected to increase from a year ago. Retail sales of new vehicles are expected to reach 1,135,300, up 5% from July 2023
The decline in leasing that began about three years ago results in fewer lessees returning to dealers to buy or lease. Lease holders are generally loyal to the dealership from which they lease.
The volume of leases expiring decreased 7.5% in July from June, following a 14.4% drop in June from May.
Overall inventory is down 6.7% from the end of June. This is mostly due to the timing of the 2025 model-year transition, which creates temporary disruptions in vehicle availability. By month’s end, retail inventory is projected to be around 1.6 million units, a decline from recent months but a considerable 32.5% increase from July 2023.
Total aggregate retailer profit from new-vehicle sales for this month is projected to be $2.5 billion, down 29.2% from July 2023.
So far in July, average used-vehicle retail prices are $28,070, reflecting a decrease of 5.4% – down $1,601– from a year ago. The decline in used-vehicle values is translating to lower trade-in equity for owners, now trending toward $7,809, which is down $1,118 from a year ago.
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