May U.S. LV Inventory Dips More Than Expected

U.S. light-vehicle inventory in May fell more than expected from April’s 11-year high, as North American production and estimated import shipments declined from a year ago.

The month-to-month drop was not much above the typical April-to-May falloff, but could be a sign the industry will avoid a big summer sell-down of ’16 models prior to the start of the ’17 model year in the fourth quarter.

May inventory declined 3.2% from April to 3.76 million units, 7.2% above year-ago. Days’ supply fell 11 days from the prior month to 59, but still was above year-ago’s 56.

North American production in May is estimated at 2% below year-ago, and estimated shipments of overseas-sourced vehicles to dealer lots in the period were down 10%. The slowdown in deliveries to dealers was particularly acute in cars.

Car stocks fell 5.3% from April to 1.48 million units, but were down from year-ago by an even bigger 8.8%, thanks to production slowdowns that started last year. Days’ supply ended May at 56, same as year-ago, but well below April’s 69.

Inventory of trucks fell 2.0% from April to 1.90 million units, but was 16.4% above year-ago. May days’ supply was 64, up from like-2015’s 58, but down from April’s 73.

By source, domestically made LVs fell 2.9% from April to 2.99 million units and imports dropped 4.4% to 772,000.

Another reason the industry might avoid a huge summer blow-out sale to rid dealers of excess stock is June and July will be high-volume months that should help pare any excess stocks. June will have one more selling day vs. a year ago, and July’s period will include an extra weekend, including the first business day of August. Regardless if SAARs fail to top year-ago levels, June-July combined raw volumes still should be higher.

A preliminary look has June’s sales results totaling a 17.4 million-unit seasonally adjusted annual rate, up from year-ago’s 17.0 million. At that rate, volume will roughly be 100,000 units above June 2015’s total.

Inventory will be limited in part because combined North American production in June-July is forecast to be flat with year-ago. However, after May’s sharp decline, import dealer shipments likely will resume above year-ago levels in the 2-month period, especially of CUVs. If total inventory is not close to year-ago levels heading into August, market incentives could get hefty.

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