October is on track to be the second-best month of 2017 for U.S. new-vehicle sales, analysts said, partly due to surging demand in states recovering from hurricane damage, though volume is projected to fall slightly from the same month last year.
Forecasts from LMC Automotive, Kelley Blue Book and Edmunds call for a 2 to 4 percent decline in industry sales this month. They estimate the seasonally adjusted, annualized selling rate will be 17.6 million to 17.9 million. While that’s a drop-off from September’s rate of 18.6 million — which was the sixth-highest ever — it would be well above the industry’s sales pace in the first half of the year.
“October looks relatively strong for the industry, as evidenced by the nearly 18 million SAAR,” KBB analyst Tim Fleming said in a statement. “Sales blew past expectations in September … and we expect October to keep up some of that momentum. Some of the strength can be attributed to replacement demand that continues in Texas and Florida, but perhaps more importantly, higher incentive spend is playing a role.”
Fleming said incentives have risen to 11 percent of average transaction prices — “an indicator that new-vehicle demand is still contracting, and production cuts could be on the horizon to prevent oversupplies.”
Discounts are all but certain to rise further in the coming months, as automakers roll out year-end promotions that typically start in the next few weeks and stretch into early January. J.D. Power, which provides data used in LMC’s forecast, projects that incentive spending could rise to an all-time high in November and December.
Incentives averaged $3,901 per vehicle in the first 17 days of October, J.D. Power said, topping the month’s previous record, set last year, by $66. At the same time, the industry’s average transaction price also set an October record, rising $615 from a year ago to $32,185 and suggesting that the discounts are not eroding profits.
Sweeter deals could help draw consumers who had delayed making a purchase because of the hurricanes back into the market, in addition to others who have been on the fence about buying, said Jessica Caldwell, Edmunds’ executive director of industry analysis.
“We expect to see increasingly aggressive incentives offered on outgoing models through the end of the year as automakers look to build on this momentum,” Caldwell said in a statement, “so car buyers can likely anticipate some door-buster deals this holiday season.”
Automakers are scheduled to report October sales on Wednesday. October has 25 selling days this year, one fewer than it did in 2016. The expected decline for the month also can be attributed in part to consumers having five weekends to shop for vehicles last October but only four in 2017.
Source-AutoNews
