July U.S. Inventory Hits 12-Year High

U.S. light-vehicle inventory ended July at a 12-year high for the month, up 5.5% from year-ago to 3.534 million units.

July’s sales volume, strongest in years, knocked the day’s supply to 61 from June’s 66, but was slightly above like-2015’s 58 days’, and the average range (55-58) for the month.

Days’ supply for the domestic and import splits, 63 and 54, respectively, also were slightly above normal. Dealer stocks of domestically made vehicles ended July 4.5% above same-month 2015 and imports rose 9.5%.

The higher year-over-year gap for imports is in line with the sales mix. Year-to-date import sales penetration of 22.0% is well above 7-month 2015’s 20.8%. July’s share of 23.4% – spurred by increases in CUVs and Small Cars – was the highest for any month in five years.

Dealers went into August with over 180,000 more vehicles in inventory than a year ago when the industry embarked on its strongest stretch since before the recession, driving the final five months of 2015 to a 17.8 million-unit seasonally adjusted annual rate.

Initial modeling for August projects a 17.3 million SAAR, compared with year-ago’s 17.7 million. However, momentum from July might help push August’s total higher.

Despite a significant rise in incentives, June’s results totaled a disappointing 16.7 million SAAR. With a slight uptick in price discounting, July’s SAAR surged to 17.8 million. A continuation of July’s spiffs, or even an increase, combined with a lofty inventory level, gives August a good chance of finishing above the initial outlook.

August tends to be a good month on a seasonal basis for small and midsize cars, small/middle CUVs and fullsize pickups. Each group has ample inventory, with the Small and Middle Car segments slightly high for two segments slipping in demand.

Battlegrounds to look for signs of sales heating up in the next few months to year-ago levels are pickups and, to a lesser extent, SUVs.

Whereas sales volumes for the rest of the industry between the first and second half of any year tend to stay close to a 50:50 split, the majority of demand for large pickups is nearly always in the second half. The same also is true for SUVs.

Inventory for Large Pickups ended July 11.3% above year-ago, compared with just a 3.8% year-to-date gain in sales, including flat results in July. A similar scenario holds for SUVs.

Except for segment-leader General Motors, with Large Pickup inventory 3.4% below year-ago, the other four competitors in the segment ended July with stock levels up double digits.

Even though Ford’s two F-150 plants pared July production by taking summer shutdowns for the first time in three years and its Kentucky Truck plant recorded slower output from year-ago due to changeover to its redesigned F-SuperDuty, the automaker’s pickup inventory is 22.8% above year-ago.

Also, inventory of the Ram pickup is up 17.1% and Nissan Titan, which comes offered with a single-cab version later this year, ended July with stocks up 49.4%. After slowing production in the early part of the year to build more Toyota Tacoma small pickups, Toyota Tundra stocks are up 13.5%.

SUV inventory ended July 17.4% above year-ago, with to-date 2016 deliveries up 4.8%, brought lower by a lukewarm 1.4% gain in July. GM, which dominates the Large SUV segment, is bulging with inventory while stock levels for the Ford Explorer, Jeep Grand Cherokee and Toyota 4Runner midsize SUVs are up a combined 35% in spite of a 5.2% sales downturn in July due to a hefty shortfall in Explorer deliveries.

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