Dive Brief:
- Total new vehicle sales in June could reach more than 1.38 million units, a 22.6% year-over-year increase, according to estimates from J.D. Power and GlobalData.
- J.D. Power and GlobalData expect total new vehicle sales to reach nearly 7.69 million units in the first half of the year, a 13.6% year-over-year increase.
- Increased vehicle production and “pent-up demand” for new vehicles are driving sales growth, said Thomas King, president of the data and analytics division at J.D. Power, in a statement.
Dive Insight:
Higher interest rates and worsening economic conditions have the potential to dampen sales growth, but strong demand for new vehicles should continue to benefit the automotive industry, King said.
“As new-vehicle availability gradually improves, there will be an easing of the current record levels of pricing and profitability as manufacturer incentives gradually increase and retailer profit margins gradually fall,” he said.
Transaction prices increased about 3% in the first half of the year, according to the report. King said consumers would spend over $281 billion on new vehicles in H1 2023, an 8% year-over-year increase.
But dealer profits are shrinking thanks to greater vehicle production and higher interest rates, largely because they’re selling fewer vehicles above the manufacturer's suggested retail price. J.D. Power and GlobalData estimate that about 30% of new vehicles will be sold above MSRP in June, down from a high of 49% in July 2022.
Automakers continue to offer historically low discounts, especially for leased vehicles, but that trend is starting to change.
“The average incentive spend per vehicle has risen 95.9% from June 2022 and is currently on track to reach $1,798,” King said. “Expressed as a percentage of [the manufacturer's suggested retail price], incentive spending is currently trending at 3.7%, an increase of 1.7 percentage points from June 2022.”
Fleet sales have seen exceptionally strong growth, with analysts estimating a 54.5% in fleet sales year-over-year.
