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May 30, 2017 02:00 AM

U.S. vehicle sales expected to rebound in May

Nick Bunkley
Automotive News
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    Forecasts released May 25 by LMC, Kelley Blue Book and Edmunds project vehicle sales-volume increases of no more than 0.5 percent.

    DETROIT—U.S. new-vehicle sales are expected to rise very slightly in May from a year ago, narrowly snapping the industry's streak of four consecutive monthly declines. But one forecaster is cutting its outlook for the year after the spring selling season has come in weaker than anticipated.

    LMC Automotive said it now expects 2017 sales of 17.2 million, 2 percent fewer than the record 17.55 million sold last year.

    The annualized selling rate is projected to be less than 17 million for a third consecutive month, more evidence that the market has passed its peak. That would mean the industry will already have had as many sub-17 million months in 2017 as it did in each of the past two full years.

    Forecasts released May 25 by LMC, Kelley Blue Book and Edmunds project sales-volume increases of no more than 0.5 percent. That's in spite of the month having one more selling day than May 2016. Many auto makers are counting on showroom traffic over the long Memorial Day weekend to put May into positive territory.

    "Generous incentives are keeping traffic flowing to dealer lots, but a lot is riding on Memorial Day sales for auto makers to keep momentum strong through the crucial summer selling months," Jessica Caldwell, Edmunds' executive director of industry analysis, said in a statement. "As long as high inventories continue to drive attractive deals and the economy remains strong, consumers will be in a great position to take advantage of a buyers' market this summer."

    Incentive spending averaged $3,583 per vehicle in the first 11 days of May, which would be a $241 increase from a year ago and a record for the month, according to J.D. Power, which provides data for LMC's forecast. J.D. Power said May would likely mark the 10th time in the past 11 months in which incentives amounted to at least 10 percent of sticker prices.

    "While consumers will see substantial discounts this Memorial Day weekend, they are not expected to overcome the slowing demand in auto sales," Deirdre Borrego, J.D. Power's senior vice president of automotive data and analytics, said in a statement.

    "Continued elevated incentives reflect the challenges of balancing record levels of inventory and are likely to remain elevated unless production is adjusted to meet consumer demand."

    The next four days will be crucial for dealerships that are in danger of missing their targets for the month. Last year, the Friday through Monday of Memorial Day weekend accounted for more than 20 percent of the month's retail volume, J.D. Power said.

    Auto makers are scheduled to report May sales on Thursday, June 1. Through April, U.S. sales were 2.4 percent short of last year's pace, endangering a streak of annual growth that has stretched for seven years.

    Retail sales are expected to be 1.2 percent higher in May, J.D. Power said, while fleet deliveries are estimated to fall 1.8 percent.

    KBB analyst Tim Fleming said declining residual values are contributing to slowing sales by making subvented lease deals less appealing. He added that in recent months, leasing appears to be reaching its peak.

    General Motors is expected to gain the most market share in May, while Fiat Chrysler Automobiles and Hyundai-Kia are projected to lose share, according to KBB and Edmunds. The estimates for other auto makers are mixed, though none is expected to gain or lose more than 0.3 percentage points of share.

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