Hefty Sales Pare U.S. Inventory Again, But Dealers Still Well-Stocked

Unexpectedly high sales for the second straight month took another healthy chunk from U.S. light-vehicle dealer inventory in June.

June U.S. light-vehicle sales posted a 16.9 million seasonally adjusted annual rate, topping the prior month’s strong 16.7 million, and the best SAAR for any month in nearly eight years.

Even with an atypically low number of selling days in the month – 24 vs. the usual 26 or 27 –June’s volume knocked 2.1% off of May’s inventory total, coming in at 3.487 million LVs, 8.4% above year-ago. June inventory usually finishes flat to slightly higher than May.

LV days’ supply ended June at 63, vs. 60 in May and like-2013.

A big piece of the volume decline was with imports, which dropped 8.3% from May to 600,441 units, 5.3% below year-ago. However, the decline in part was due to a 1.0% shortfall in June from same-month 2013 in estimated shipments to the U.S. Import sales volume was up just 1% from like-2013.

But it was the first time since February 2012 that imports ended a month with lower inventory than the same year-ago period. Part of the reason for the downturn was spiking domestic inventory for the Honda Fit and Mazda3, which recently began first-time North American production. That trend will strengthen over the summer as first-time local sourcing of the Mercedes C-Class and Mazda2 kick in. Also, import stocks of the Nissan Rogue, which started local output last year, will begin to dry up now that Nissan has stopped dual-sourcing from Japan.

June 30 days’ supply for imports dropped to 51 from May’s 53 and year-ago’s 57.

Inventory of domestically made LVs declined less than 1% from May, but was up 11.8% from year-ago, in part due to the aforementioned first-time local sourcing. North American production in June increased an estimated 6.7% from year-ago, with an estimated 76% of that total meant for the U.S. market. Stronger production helped keep June’s 1.2% sales volume increase of domestic LVs vs. like-2013 from being a bigger drain on dealer stocks.

Domestic inventory totaled 2.89 million units, highest since 2006’s 3.22 million. Days’ supply was 66, compared with 62 the prior month and 61 a year ago.

Despite the healthy volume cut from May, domestic days’ supply was slightly higher than usual for the month, which bodes well for another strong month of sales in July, at least for locally built vehicles. Furthermore, even though more plants will be taking vacation shutdowns in July compared with recent years when the industry was struggling with capacity constraints to keep up with surging demand, North American production is forecast to increase 20% from July vs. year-ago.

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