For the second consecutive year, the new vehicle retail sales pace in January is expected to fall from year-ago levels, according to a forecast developed jointly by J.D. Power and LMC Automotive. The seasonally adjusted annualized rate (SAAR) for retail sales is expected to be 13.7 million units, down 150,000 from a year ago. Retail sales are projected to reach 893,900 units, a 2.7 percent decrease on a selling day adjusted basis compared to January 2017. (Note: January 2018 has an extra selling day compared with January 2017).
“Coming off a strong sales period to close out 2017, a slower start to the year was anticipated,” said Thomas King, senior vice president of the data and analytics division at J.D. Power. “After the industry’s emphasis on the sell-down of old model-year vehicles in December, January is a transition month as manufacturers shift focus toward 2018 model-year vehicles.”
Through mid-January, 2018 model-year vehicles accounted for 73 percent of retail sales, an increase of more than 11 percentage points from December. Average transaction prices so far in January have risen to $32,169, the highest level ever for the month of January. This means that while sales will fall on a selling day adjusted basis, the total value of new vehicles purchased will increase by just over $1 billion from last year’s level.
“The challenge in 2018 will be maintaining incentive discipline, coming off a year when incentive spending per unit reached the highest level ever recorded,” said King. Average incentive spending through the first two weeks of January is $3,733, up $94 from the same period last year and on track to set a record high to start the year.
Jeff Schuster, senior vice president of forecasting at LMC Automotive, said, “On the heals of a strong close in 2017 to 17.2 million units, optimism for a solid 2018 seems to be growing. Most variables are aligned favorably, with the majority of that positive weight being carried by an expected boost in the economy. The tax cut is expected to help drive the economy toward the 3 percent growth level, which we haven’t seen since 2005. Pressure from the off-lease vehicles and the used vehicle market will remain, but is not expected to have a material affect on volume. The wildcard for the year is NAFTA. If the U.S. withdraws from NAFTA, economic growth will likely be reduced, the stock market volatility will increase and consumer goods, including vehicles will likely increase, causing a more pronounced pullback in vehicle demand in the second half of 2018 and into 2019.”
LMC’s forecast for 2018 total light-vehicle sales is at 17 million units, a decrease of 1.3 percent from 2017. Retail light-vehicle sales are expected at 13.8 million units, a decline of 1.5 percent from 2017. SUVs as a segment, are expected to grow another 3 percent in 2018 to a 45 percent market share while cars will remain under pressure with volume expected to drop 6 percent to a 33 percent share of market.