JD Power and LMC Automotive forecast total new vehicle sales in the US for March 2023, including retail and non-retail transactions, at 1,330,700 units, a 6.2% increase from March 2022.

March 2023 has the same number of selling days as March 2022.

New vehicle total sales for Q1 2023 are projected to reach 3,526,700 units, a 7.3% increase from Q1 2022 when adjusted for selling days.

Joint analysis from the two companies points to the market is being lifted by pent-up demand following supply shortages and improved availability. However, the analysis also suggests that the market is still supply constrained and that record high transaction prices are continuing to rise – particularly as more sales are being allocated to fleet buyers.

Thomas King, president of the data and analytics division at JD Power, said: “March is shaping up to be yet another positive month for the industry. With retail sales forecasted to be up nearly 2% – along with average transaction prices tracking up 3.5% – consumers are on pace to spend nearly $50 billion this month, an increase of 5.5% from what they spent on new vehicles a year ago.

“Retail demand for vehicles remains strong, due primarily to considerable pent-up demand. The availability of new vehicles in inventory at retailers is improving, resulting in a softening of dealer margins and increased manufacturer incentive spending. But, overall, the industry remains supply constrained, and profitability is well above historical norms.

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“This dynamic of high transaction prices despite increased production levels is being assisted by an increased manufacturer focus on sales to fleet customers. Rather than allocate incremental production to retailers, manufacturers are selling more vehicles to fleet buyers. Sales to fleet buyers are expected to increase 31% from a year ago.”

New vehicle transaction prices continue to rise, with the average price reaching a March record of $45,818. This is a 3.5% increase from a year ago.

The record transaction prices means that consumers are on track to spend nearly $50.0 billion on new vehicles this month—the second highest for the month of March and an increase of 5.5% from March 2022. For the first quarter of 2023, consumers spent more than $132 billion on new vehicles, the highest on record for any quarter and 4.4% higher than Q1 2022.

King added: “As expected with improved supply, dealer profits are taking a step back but remain well above pre-pandemic levels. Total retailer profit per unit—inclusive of grosses and finance and insurance income—is on pace to be $3,761. This is down 23.4% from a year ago but still more than double 2019. The decline is due primarily to fewer vehicles being sold above MSRP. In March, 30% of new vehicles are being sold above MSRP, down from the high of 48% in July 2022.”

Total aggregate retailer profit from new vehicle sales for the month of March is projected to be down 22% from March 2022, reaching $4.1 billion for the second highest March on record.

King says dealerships are still pre-selling a large portion of their inventory allocation, but increased supply means more buyers are purchasing vehicles that are in inventory at a dealership. “This month, 44% of vehicles will be sold within 10 days of arriving at a dealership, down from a high of 57% in March 2022. The average number of days a new vehicle is in a dealer’s possession before being sold is on pace to be 30 days—up from 18 days a year ago—but still less than half the pre-pandemic average of 70 days.

“Manufacturer discounts are up slightly from a month ago and up significantly from a year ago, but they remain historically low. The average incentive spend per vehicle is tracking toward $1,558, a 45.2% increase from a year ago. Incentive spending per vehicle expressed as a percentage of the average vehicle MSRP is trending at 3.3%, down 0.9 percentage points from March 2022. One of the factors contributing to the low level of spending is the absence of discounts on vehicles that are leased. This month, leasing accounts for just 20% of retail sales. In March 2019, leases accounted for 31% of all new-vehicle retail sales.

“Elevated pricing coupled with interest rate increases continue to inflate monthly loan payments. After breaking the $700 level for the first time ever in July 2022, the average monthly finance payment in March is on pace to be $711, up $46 from March 2022. That translates to a 6.8% increase in monthly payments from a year ago. The average interest rate for new-vehicle loans is expected to be 6.7%, an increase of 228 basis points from a year ago.

Elizabeth Krear, vice president, electric vehicle practice, at JD Power noted that as EV market share reaches 8.5%, the JD Power EV Index, which tracks the transition from ICE to EV, increased 2 points in February, and now stands at 49.

Krear said: “Interest remains strong for EVs in the mass market segment, with Ford F-150 Lightning coming in as the most considered model, followed by Toyota bZ4X. Interest in premium brands follows pricing fluctuations, with the Cadillac LYRIQ seeing the highest gain in 2023,” she said. “The EV landscape is changing quickly. Newer models are bringing in more mainstream, first-time buyers who expect build quality and dependability to be on par with ICE vehicles.”

Global picture pulled down in March by China

The global light vehicle selling rate fell in February to 81 million units from 83 million units in January. However, on a year-over-year basis, volume was up 10% to 6.5 million units, as drag from global supply constraints remain a factor in the month’s performance. Individual markets continue to vary in the recovery path, though there was some consistency in February. Japan and Korea led mature markets, with volume up 21% and 20%, respectively. North America, Western Europe, China and India were all up approximately 10% from February 2022.

Jeff Schuster, group head and executive vice president, automotive at GlobalData, parent of LMC Automotive, expects the global market up in March but with the annualized selling rate to slip. He said: “As March ends, we expect global light vehicle sales to finish at 7.7 million units, up nearly 5% from March 2022. The selling rate is expected to slip to 79.1 million units, which is still an increase from 76.7 million units in March 2022. Of the major markets, China is expected to pull down sales in March with volume projected to be 2% lower year over year.

“The automotive environment in 2023 remains challenging and while there are some warning signs in the banking industry and with the general economy, the outlook for global vehicle sales has been increased by 200,000 from a month ago to 86.1 million units, up 6.2% from 2022. Supply disruption is expected to continue to ease, shifting the level of recovery over to the consumer to decide.”