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Retail Car Sales Dip, But Prices Rise So Far in June

Retail Car Sales Dip, But Prices Rise So Far in June

By Joseph Dobrian, June 24, 2016

The summer heat may be on, but June new-car sales have cooled a bit. According to a monthly update by J.D. Power and auto forecasting partner LMC Automotive, new-vehicle retail sales in June should reach 1,206,700 units, a decline of 0.5% from June 2015 on a selling-day adjusted basis. Retail sales through the first half of 2016 are projected to reach 6.8 million units, down 0.2% from the same period in 2015.

The forecast also states that the seasonally adjusted annualized rate (SAAR) for retail sales in June 2016 is projected to reach 13.3 million units, down from 13.5 million units in June 2015. However, new-vehicle retail transaction prices thus far in June are at an all-time high for the month: $31,089. Consumers are on pace to spend a record $37.5 billion on new vehicles in June.

Auto Sales

LMC Automotive is maintaining its full-year forecast at 17.7 million units, but fleet sales, while rising, may not be enough to maintain total volume.

“We have seen a slowdown in retail demand since April, posing a significant challenge to manufacturers on a volume basis,” said John Humphrey, senior vice president of the global automotive practice at J.D. Power. Humphrey added: “Despite sales slowing down, consumer spending remains at record levels due in large part to a continued shift from cars to trucks. The key going forward will be to what degree automakers are able to adjust production levels to slowing demand rather than relying on profit-damaging incentives to move inventory. This will be something to watch as the industry is nearing what is close to being the peak of an average cycle.”

Jeff Schuster, senior vice president of forecasting at LMC Automotive, also sees a slowdown occurring, but remains optimistic that car sales will continue to be strong for the remainder of the year, even if the market fails to surpass last year’s record. “Year-over-year growth is evaporating, and while we are now expecting a slight contraction in retail sales, the total light-vehicle market should remain 1% higher than 2015,” he said. “However, risks continue to mount for the second half of 2016, with 200,000 to 300,000 units of volume risk. If the selling rate averages 17.5 million units, which is higher than the projected 17.1 million-unit pace in the first half of the year, total sales for the year will end at 17.4 million units, or a decline of 0.3% from 2015,” Schuster added.

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