February U.S. Light-Vehicle Inventory Hits New High

Two consecutive months of sales downturns combined with strong production for the market did little to alleviate the excess stock anchored on dealer lots since the latter half of 2016, as February’s U.S. light-vehicle inventory totaled record volume for the month of 4.096 million units.

The total follows a record high for January of 4.029 million and was 6.8% above same-month 2016’s 3.836 million. The previous high for the month was 4.055 million in 2005.

Days’ supply ended the month at 74, well above year-ago’s 69, which is a healthier total for February. In a sense, February’s days’ supply actually is painting a better picture than it should because sales are being jacked up with hefty retail spiffs, while manufacturers scramble to maintain sales share in a stagnant market.

Artificially higher sales increase a month’s daily selling rate, which is used to determine days’ supply – the higher the DSR, the lower the days’ supply.

On the flip side, the combined January-February seasonally adjusted annual rate of 17.5 million makes sales appear to be weakening. But when they really are not, because of pull-ahead volume in December that caused a surge to an 18.3 million SAAR, thanks to some year-end bargain-basement deals. The 3-month SAAR beginning with December of 17.8 million probably is closer – though 17.6 million to 17.7 million is more realistic – to the underlying market, including the effect of incentives.

Based on typical month-to-month patterns, plus taking into account record inventory and assuming the 3-month SAAR is more in line with current conditions, an initial look at March suggests a 17.7 million SAAR.

The thrust of excess inventory continues to be in cars.

Production slowdowns in cars are finally making a dent. Car stocks totaled 1.591 million units on Feb. 28, down 1.3% from year-ago. The year-over-year decline was the first in three months after inventory levels shot above year-ago totals in November, due to acceleration in already-sliding demand for the vehicles.

However, car inventory remains higher than needed. Days’ supply ended February at 79, well above year-ago’s 70, with a range of 65-67 considered an optimum level. The Small, Middle and Luxury Car groups all still are contributing to the excess.

Trucks overall appear in good stead, although some pockets are starting to emerge.

Truck inventory ended February at 2.505 million units, 12.6% above year-ago. Even though above like-2016’s 68 days’ supply, February was a healthy 71.

An 11% year-over-year surge in sales of large pickups in February, likely induced by greatly increased incentives, helped keep the light-truck total in check. The Feb. 28 days’ supply for large pickups of 92 is normal for this time of year and slightly below year-ago’s 95.

Also helping keep truck inventory in balance with demand, and likely helped with some extra incentives, was a 17% upward spike in sales of Middle CUVs in February. Middle CUV days’ supply was 58, same as a year ago.

However, most other CUV segments are on the high side, including Small CUV, which recorded the hottest growth of all segments in 2016. Small CUV days’ supply was a whopping 83, well above February 2016’s 69.

The luxury CUV segments, which have overtaken cars as the dominant luxury vehicles, are pushing levels of excess, but demand remains strong enough that stock levels are easily manageable.

Mainly due to bloated car stocks, inventory of domestically made LVs ended February 7.2% above like-2016, equating to a 76 days’ supply, and up from year-ago’s 69. Feb. 28 import stocks were up 5.1% year-over-year, and ended with a healthy 69 day’s supply, slightly above like-2016’s 67.

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