New vehicle retail sales in the US are experiencing further recovery and strength through the first half of November, according to a monthly sales forecast developed by JD Power and LMC Automotive.

The market is continuing to see support arising from the elimination of inventory issues which were an issue earlier in the year, particularly for the Japanese OEMs, as parts shortages followed the March 11 earthquake and tsunami in Japan.

November new vehicle retail sales are projected to come in at 791,900 units, which represents a seasonally adjusted annualised rate (SAAR) of 11.3m units – the highest monthly selling rate in three and a half years. Retail transactions are the most accurate measurement of true underlying consumer demand for new vehicles.

“Retail light vehicle sales in November are outperforming expectations on a month-to-date basis, providing good news as 2011 comes to a close and the focus starts to shift to 2012,” said John Humphrey, senior vice president of global automotive operations at JD Power and Associates. “The improving performance of the past three months suggests that the current momentum, primarily driven by replacement demand and improvements in vehicle availability, is not an aberration.”

Total light vehicle sales in November are expected to come in at 975,600 units, which is 8% higher than in November 2010. Fleet sales are expected to decrease by 6% compared with November 2010, but will account for 19 percent of total sales.

After a solid October and expectations for a strong November, LMC Automotive is increasing its forecast for 2011 to 12.7m units (from 12.6 million units) for total light vehicle sales and to 10.3m units (from 10.2m units) for retail light vehicle sales.

LMC Automotive is maintaining its forecast for 2012 at 13.8m units for total light vehicle sales and 11.2m units for retail light vehicle sales.

“The upward forecast revision to 2011 represents the first increase to the forecast all year and tempers the cloud of uncertainty that has been over the automotive market for several months,” said Jeff Schuster, senior vice president of forecasting at LMC Automotive.

“The current recovery pace appears sustainable into 2012. As long as there is not an external shock or economic setback, the selling rate could be stable above the 14-million-unit level during the second half of 2012.”

North American production

Light vehicle production volume in North America has increased by 920,000 units, or 9% through the first 10 months of 2011 compared with the same period in 2010, according to LMC Automotive. The Detroit 3 OEMs are seeing nearly a 14% increase in year-to-date production through October, while European OEMs are up 38%.

Hyundai Group production is up 48% after increased production of existing models and additional localisation of models in 2011. Japanese manufacturers, as a group, posted an 8% decline year-to-date in October from the same period in 2010. The decline is due to the Japan earthquake disaster and additional setbacks to Honda and Toyota from the flooding in Thailand. The impact of the flooding is expected to continue through the fourth quarter, causing further downtime to their North American operations, LMC says. Toyota is recovering faster than initially anticipated, with lost volume estimated to be 5,000 units in the fourth quarter. The impact to Honda is expected to be more severe due to the location of their Thai plants. Honda’s fourth quarter loss in North America is estimated at 35,000 units.

Overall vehicle inventory improved to a 58-day supply at the beginning of November from 50 days at the beginning of October. Car inventory improved to a 53-day supply, up from 43 days in October, while truck levels are stable with a 62-day supply. Several manufacturers continue to remain below the industry norm of a 60-day supply. Hyundai/Kia began November with 28 days’ supply, Honda was at 37 days’ supply, and BMW at 28 days’ supply.

LMC said that despite some setbacks, the 2011 North American production outlook remains on track for 12.9m units, an increase of nearly 9% from 2010. While overall production volume in 2011 is the highest since 2007’s 15m-unit level, it remains well below the mid-15m level during the 2001-2006 time period.