May U.S. Light-Vehicle Inventory Tops Pre-Recession High

U.S. light-vehicle inventory for the first time in more than four years is higher than in like-2007, the last full year before the 2008-2009 global recession.

Supply is in line with the 15.2 million seasonally adjusted annual rate of sales through May and set to meet the 15.4 million-unit SAAR expected over the year’s final seven months.

Not all vehicle models have stock levels matching demand, but most of the deviations are those in short supply. That bodes well for production levels, as a surplus can lead to a slowdown in output.

May inventory of 3.21 million units was the highest for the month since 2007’s 3.35 million. Except for a blip in December 2008, which occurred because sales were spiraling down faster than auto makers could cut production, it was the first time inventory in any month since the recession was higher than its counterpart in 2007.

May inventory finished slightly below prior month, typical due to seasonal sales trends, and was up 18.7% from year-ago. Days’ supply of light vehicles was 58, compared with 64 in April and 53 in like-2012.

Inventory of the booming large-pickup segment was solid at the end of May. But if the sector continues outrunning the rest of the industry, as expected, stocks may begin thinning during the summer.

Over the past three years on average, more than 54% of large-pickup deliveries have occurred in the last six months of the year. This year could improve on that as long as industry sales, and other indicators such as housing and construction, continue growing.

Other thin spots in inventory are in SUVs, mainly the Ford Explorer and General Motors’ stable of large utility vehicles.

The Explorer ended May with a 28 days’ supply. Since its debut in 1990, there have been only two other months when daily inventory was lower.

Even with Ford’s Chicago plant working on three shifts and overtime, the auto maker can’t keep up with demand for the Explorer, up 34% in January-May from prior-year. Sales of the SUV easily will top 200,000 this year, making it the first time since 2005.

GM’s large SUVs probably lost some sales in May, despite a 30% gain on year-ago. Inventory has yet to fully recover from January, when the Arlington, TX, plant where the vehicles are built transitioned to a 3-shift operation.

Days’ supply of the large SUVs nosedived to 53 in May from 98 in January. Expect overtime to continue to run regularly at Arlington, even with the third shift. As with large pickups, sales of the utility vehicles are expected to grow stronger in the year’s second half.

Although the SUV segment overall appears to have ample inventory for this time of year, recently launched redesigned midsize cars are in short supply, including the Ford Fusion, Honda Accord and Nissan Altima.

Ford may not be able to alleviate the short supply of Fusions until it adds production of the cars at the Flat Rock, MI, plant at the end of August.

The Accord’s supply grew closer to demand in May, but generally sees its highest volume months in the summer, so units could be running lean until at least the fourth quarter.

With two plants producing the Altima, Nissan should be able to solidify stock levels over the summer.

[email protected]