Given the volatility in both the economy and consumer demand, there remains a moderate level of risk of a weaker selling rate in 2011

Given the volatility in both the economy and consumer demand, there remains a moderate level of risk of a weaker selling rate in 2011

New vehicle retail sales in September are expected to recover from the tumultuous summer selling season and post a significant selling rate increase, compared with August, according to analysts at JD Power.

September new-vehicle retail sales are expected to come in at 769,000 units, which represents a seasonally adjusted annualized rate (SAAR) of 9.7 million units. September's retail selling rate is expected to be the highest in more than two years, excluding the CARS-influenced August 2009 rate. Retail transactions are the most accurate measurement of true underlying consumer demand for new vehicles.

"The vigorous start to September is an indication that vehicle buyers delayed some of their purchases in late August, and were most likely waiting for Labor Day sales and hoping for increases in vehicle availability," said Jeff Schuster, executive director of global forecasting at JD Power and Associates.

Total light-vehicle sales for September are expected to come in at 961,500 units, 29 percent higher than September 2009, which was impacted by the expiration of the CARS program. Fleet sales in September are tracking at an increase of 8 percent from September 2009, representing a 20 percent share of total sales.

After two months of mixed indicators resulting in downward revisions to the vehicle sales outlook, JD Power and Associates is holding its 2010 forecast at 9.2 million units for retail sales and 11.6 million units for total sales.

"The strength in the first half of September is exactly what the industry has been looking for to begin a more measurable recovery through the remainder of the year with continued progress into 2011," said Schuster. "The expected increase in vehicle availability should provide relief in the coming months as many 2011 models hit the showrooms, but the industry's attention will remain on the economic indicators to gauge the level of recovery."

JD Power's 2011 forecast remains at 10.7 million units for retail sales and 13.2 million units for total sales. However, given the volatility in both the economy and consumer demand, there remains a moderate level of risk of a weaker selling rate in 2011, JD Power says.

Analysts at Edmunds were a little less sanguine. analysts predict that September's SAAR will be 11.47 million (compared with 11.8 million estimated by JD Power), up slightly from 11.44 in August 2010. SAAR for retail sales will remain constant from last month at about 9.4 million.
Average automaker incentives in the US are estimated to be US$2,595 per vehicle sold in September 2010, down US$106, or 3.9 percent, from August 2010, and down US$151, or 5.5 percent, from September 2009.
“Despite some noteworthy new car introductions, auto sales are stagnant right now,” commented Senior Analyst Jessica Caldwell. “Automakers seem to have accepted the current sales rate; most seem reluctant to invigorate the market through traditional incentives programs or unload significant levels of inventory as fleet sales.”

North American production

After a sharp increase during the first half of 2010, North American production continues to be balanced with demand. Light-vehicle production in the fourth quarter is expected to come in at 2.8 million units, an increase of nearly 3 percent from the same period in 2009. Full-year 2010 production is forecasted to be up 36 percent compared with 2009, totaling 11.7 million units. Capacity utilization improves to 66 percent this year, compared with 48 percent in 2009. Further improvement is expected in 2011, with production volume projected at 12.7 million units and capacity utilization at 72 percent.

U.S. inventory levels have been well-maintained in 2010. Days supply at the beginning of September was 52 days, and remained unchanged from August. This level is well above the 29-day supply in September 2009, which was significantly depleted as a result of the CARS program, but remains below the industry norm of 60 days.

"The recovery in North American production will finish 2010 by well outpacing the sales recovery, but the production increase in 2011 will not be as pronounced, as inventories are expected to be replenished and stable next year," said Schuster. "However, there are still availability shortages with some key models, which may impact demand during the remainder of 2010."

See also: ANALYSIS: US light vehicle market faces slow recovery