In advance of automakers’ second quarter sales announcements this week, Randy Miller of the EY Global Automotive Center gives us his take on sales data sourced from LMC Automotive.
According to Miller, the North American market is continuing to show signs of positive growth.
"The North American market has once again proved why it is still an important global region for manufacturers, as sales beat projections, showing an overall increase of 4.8 percent percent versus the same quarter in 2013," said Miller. "Sales have been driven across the three NAFTA markets by truck sales, especially in the U.S., as housing starts remain high (at the 1 million mark in May) as well as stronger production in the region. Overall for 2014, the region is forecast to hit sales of 19 million units driven by healthy consumer spending, rising consumer confidence and employment, and continuing access to credit.
"U.S. sales for second quarter 2014 14 reached 4.4 million units, up 6.8 percent compared to the same quarter in 2013 and an increase of 18 percent over the previous quarter. The quarter-over-quarter increase was primarily driven by continuous improvements in consumer confidence and employment figures as well as local sourcing of production, which lead to healthy inventory levels. Light trucks and European luxury brands drove sales for the quarter. Incentive spending was relatively flat in May with an average of $2,673 per unit, an increase of just 0.3 percent on an annual basis. Incentive spending rose 1.9 percent year-over-year (YoY) in June and 0.3 percent over May.
"Used vehicle prices were up 4 percent year-over-year in June versus June 2013. Improved credit conditions spurred strong retail demand and are keeping prices high. The average price of pickups in June increased 8 percent YoY versus June 2013. Barring any major economic variations or political instability, prices are expected to fall to between a range of 2 to 2.5 percent in June and 1 to 1.5 percent in July before rebounding back to 2 percent by August.
"The U.S. sales forecast for the full year 2014 is approaching 16.2 million units matching original forecasts for the year and showing an improvement of 3.9 percent over 2013. With the economy continuing to improve and credit remaining widely available, sales are headed for their biggest year since 2007. Increasing demand and the introduction of new vehicle models will spur production in the second half of the year. There is some concern that automakers will use incentives to move inventory rather than cut back or stall production. However, if sales stay on course, inventory should remain relatively low so that automakers will be less likely to resort to incentivizing vehicles.
"From a longer-term perspective, it seems unlikely for the market to reach its pre-crisis sales level even by the end of this decade, owing to shifting customer preferences from car ownership to access, declining interest of the youth in cars, and several large cities or countries taking measures to deter car usage.
"On the capacity utilization front, the scenario is likely to improve with automakers expected to close 2014 with around 70 percent utilization, owing to plant-closures and rise in car sales. However, overcapacity challenges are likely to persist in the medium term."
