J.D. Power-GlobalData U.S. Automotive Forecast October 2023
TROY, Mich.-(BUSINESS WIRE)-Oct 26, 2023-
J.D. Power:
The Total Sales Forecast
Total new-vehicle sales for October 2023, including retail and non-retail transactions, are projected to reach 1,201,800 units, a 6.6% increase from October 2022, according to a joint forecast from J.D. Power and GlobalData. October 2023 has 25 selling days, one fewer than October 2022. Comparing the same sales volume without adjusting for the number of selling days translates to an increase of 2.5% from a year ago.
The seasonally adjusted annualized rate (SAAR) for total new-vehicle sales is expected to be 15.5 million units, up 0.9 million units from October 2022.
The Retail Sales Forecast
New-vehicle retail sales for October 2023 are expected to increase when compared with October 2022. Retail sales of new vehicles this month are expected to reach 1,012,800 units, a 6.9% increase from October 2022 when selling day adjusted. Comparing the same sales volume without adjusting for the number of selling days translates to an increase of 2.8% from 2022.
The Takeaways
Thomas King, president of the data and analytics division at J.D. Power:
“October results indicate a relatively robust performance with modest year-over-year sales growth but with record consumer expenditures. Year-to-date total sales through October are anticipated to surpass 12.8 million units, reflecting a 13.6% increase compared with the same period a year ago. Nonetheless, these figures remain below pre-pandemic levels when year-to-date sales exceeded 14 million units. The UAW work stoppage, which commenced in September, has had a limited effect on October’s industry sales. However, if the duration of the stoppage extends and scope escalates, it may disrupt sales results as we move into year-end.”
Despite the work stoppage, retail inventory levels in October are expected to finish around 1.5 million units, a 5.5% increase from last month and 41.2% increase compared with October 2022, but still well below pre-pandemic levels.
“As inventory and sales volumes improve, the average new-vehicle retail transaction price is declining modestly, trending down $451-or 1%-from October 2022, to $45,651. However, even with the decline in average transaction prices, consumers are on track to spend nearly $43.7 billion on new vehicles this month-the highest on record for the month of October and 0.8% higher than October 2022.”
Sales to fleet customers are still elevated as manufacturers leverage higher vehicle production to allocate more vehicles to those fleet customers. Fleet sales are projected to increase 4.9% from October 2022.
“The increase in new-vehicle supply and higher interest rates are resulting in a dip in dealer profits, yet these profits continue to surpass pre-pandemic levels. The total retailer profit per unit-which includes grosses, finance and insurance income-is expected to reach $3,182 in October. While this is 28.9% lower than a year ago, it is still more than double the amount in October 2019. The primary factor behind the profit decline is the reduced number of vehicles selling above the manufacturer’s suggested retail price (MSRP). This month, only 25.7% of new vehicles are projected to be sold above MSRP, which is down from 41.3% in October 2022.”
Total aggregate retailer profit from new-vehicle sales for this month is projected to be down 26% from October 2022, reaching $3 billion for the third-highest October on record.
“Retailers continue to pre-sell vehicles, however higher inventory levels enable more shoppers to buy directly from dealer lots. In October, 42% of vehicles are projected to be sold within 10 days of their arrival at the dealership, which is down from the peak of 57% in March 2022. The average time that a new vehicle spends in the dealer’s possession before being sold is expected to be 30 days, up 11 days from a year ago, but still less than half the pre-pandemic average of 70 days.
“Manufacturer discounts in October are expected to be relatively flat when compared with September but have increased materially from a year ago when incentives were at record lows. The average incentive spend per vehicle has grown 92.2% from October 2022 and is currently on track to reach $1,774. Expressed as a percentage of MSRP, incentive spending is currently trending at 3.7%, an increase of 1.7 percentage points from October 2022. It is noteworthy that discounts on leased vehicles have risen in recent months. This month, leasing is expected to account for 21% of retail sales, up significantly from 16% in October 2022, but still well below October 2019 when leased vehicles made up nearly 30% of all new-vehicle retail sales.
“Elevated pricing, combined with rising interest rates, are contributing to the escalation of monthly loan installments. The average monthly finance payment in October is on pace to be $728, up $11 from September 2022. That translates to a 1.5% increase in monthly payments from a year ago. The average interest rate for new-vehicle loans is expected to be 7.5%, an increase of 140 basis points from a year ago. Although, the month-to-month pace of rate increases are tempered when compared with the prior year.
“Used-vehicle prices have experienced a modest drop from the previous year but remain relatively close to their historical peak levels. The average trade-in equity for October is trending towards $8,956, down $378 from a year ago. It’s worth noting that trade-in equity this month remains at double the amount of pre-pandemic levels.
“Despite a slight increase in inventory levels compared with previous months, the industry is still facing a supply shortage. This is evident from consumer spending and inventory turnover rates in October, which highlight robust demand and ongoing supply challenges. This situation further strengthens the foundation for sustained strong new-vehicle pricing and overall profitability.”
Sales & SAAR Comparison