J.D. Power-GlobalData U.S. Automotive Forecast for August 2024

August Sales to Get Boost from Labor Day Retail Sales Surge; Inventory Also Rebounding

J.D. Power:

The Total Sales Forecast

Total new-vehicle sales for August 2024, including retail and non-retail transactions, are projected to reach 1,437,954, a 4.2% increase from August 2023 on a selling day adjusted basis, according to a joint forecast from J.D. Power and GlobalData. August 2024 has 28 selling days, one more than August 2023. Comparing the same sales volume without adjusting for the number of selling days translates to an increase of 8.1% from 2023.

The seasonally adjusted annualized rate (SAAR) for total new-vehicle sales is expected to be 15.3 million units, down 0.1 million units from August 2023.

The Retail Sales Forecast

New-vehicle retail sales for August 2024 are expected to increase from a year ago. Retail sales of new vehicles are expected to reach 1,209,800, a 6.8% increase from August 2023 when adjusting for selling days. Comparing the same sales volume without adjusting for the number of selling days translates to an increase of 10.8% from 2023.

The Takeaways

Thomas King, president of the data and analytics division at J.D. Power:

“New-vehicle sales in August are up from a year ago, as expected. A key element of the improvement is that this year, the Labor Day holiday weekend falls within the August sales reporting period instead of September where it normally falls.

“While the sales results for August will be positive, the seasonally adjusted annualized rate (SAAR), which corrects for Labor Day timing, is relatively modest at just 15.3 million units. The modest August SAAR reflects the trade-off between key factors: discounts from dealers and manufacturers are rising while average transaction prices are falling. As a result, the sales pace should improve. However, inventory—while rising for the industry as a whole—remains lean for some high-volume brands, which is limiting their sales pace. In addition, used-vehicle values continue to fall, which means buyers returning to showrooms have less equity in their trade-ins.

“Furthermore, the industry is still grappling with the effects of reduced leasing activity from three years ago. Fewer leases signed then mean fewer lessees are returning to dealers to purchase or lease a new vehicle today. The number of expiring leases decreased 8.4% from July and decreased 16% from August 2023. With fewer lease customers returning to the market, there are fewer opportunities for new sales.”

Retail inventory is projected to be around 1.7 million units, a 4.2% recovery from July and a 43.5% increase from August 2023.

“The average new-vehicle retail transaction price is declining from a year ago due to higher manufacturer incentives, larger retailer discounts and rising availability of lower-priced vehicles. Transaction prices are trending towards $44,039—down $1,895 or 4.1%—from August 2023. The combination of higher retail sales and lower transaction prices means that buyers are on track to spend nearly $50.7 billion on new vehicles this month— 6.3% higher than August 2023.

“Total retailer profit per unit—which includes vehicles gross plus finance and insurance income—is expected to be $2,249, down 33% from August 2023. Rising inventory is the primary factor behind the profit decline and fewer vehicles are selling above the manufacturer's suggested retail price (MSRP). Thus far, only 13.0% of new vehicles have been sold above MSRP, which is down from 31.2% in August 2023.”

Total aggregate retailer profit from new-vehicle sales for this month is projected to be $2.6 billion, down 26% from August 2023.

“Increased inventory means fewer vehicles are being pre-sold by retailers, with more shoppers able to buy directly off dealer lots. J.D. Power forecasts that 30.8% of vehicles will sell within 10 days of arriving at the dealership, down from a peak of 58% in March 2022. The average time a new vehicle remains in the dealer's possession before sale is expected to be 49 days, up from 21 days a year ago.”

Manufacturer discounts are continuing to rise. The average incentive spend per vehicle has grown 59.5% from August 2023 and is currently on track to reach $3,035. Expressed as a percentage of MSRP, incentive spending is currently at 6.2%, an increase of 2.3 percentage points from a year ago. Spending has increased by $18 per unit from July 2024.

“One of the drivers of higher incentive spending from a year ago is the increased availability of lease discounts. This month, leasing is expected to account for 24.2% of retail sales, up 3.8 percentage points from 20.4% in August 2023.”

Average monthly finance payments this month are on pace to be $729, up $4 from August 2023. The average interest rate for new-vehicle loans is expected to be 6.87%, down 36 basis points from a year ago.

So far in August, average used-vehicle retail prices are $27,999, reflecting a decrease of 4.5%—down $1,311—from a year ago. The decline in used-vehicle values is translating to lower trade-in equity for owners, now trending towards $7,774, which is down $1,433 from a year ago.

“In September, sales volumes are expected to be lighter than the previous year due to the Labor Day holiday weekend falling within the August sales reporting period. With that, all eyes will be on interest rates and the anticipated changes that could help new vehicle affordability through the end on the year.”

Sales & SAAR Comparison

The Details

• The average new-vehicle retail transaction price in August is expected to reach $44,039, down $1,895 from August 2023. The high for any month—$47,329—was set in December 2022.
• Average incentive spending per unit in August is expected to reach $3,035, up $1,132 from August 2023. Spending as a percentage of the average MSRP is expected to increase to 6.2%, up 2.3 percentage points from August 2023.
• Average incentive spending per unit on trucks/SUVs in August is expected to be $3,234, up $1,254 from a year ago, while the average spending on cars is expected to be $2,242, up $639 from a year ago.
• Retail buyers are on pace to spend $50.7 billion on new vehicles, up $3.0 billion from August 2023.
• Trucks/SUVs are on pace to account for 80.0% of new-vehicle retail sales in August.
• Fleet sales are expected to total 228,202 units in August, down 7.7% from August 2023. Fleet volume is expected to account for 15.9% of total light-vehicle sales, down 2.0 percentage points from a year ago.
• Average interest rates for new-vehicle loans are expected to be 6.87%, down 36 basis points from a year ago.

EV Outlook

Elizabeth Krear, vice president, electric vehicle practice at J.D. Power:

“The J.D. Power EV Index, which tracks the path to parity of EVs with gas-powered vehicles, reached a historic high score in July of 56 on a 100-point scale. July marked the fifth consecutive month that the EV Index rose but it’s the six factors that make up the index that tell the real story of the EV ecosystem’s dynamics.

“One factor—interest—reached a high for the year with 28% of new-vehicle shoppers saying they are ‘very likely’ to consider a battery electric vehicle for their next purchase, but the industry seems to be struggling to attract more buyers than a year ago, even with the tremendous improvements in another factor, availability. Availability has increased 22 points year over year, with 66% of shoppers now having a viable alternative to a gas-powered equivalent.

“Incentives have helped align prices in popular compact and midsize mass market segments, making them more affordable. Mass market and premium BEVs are at and above parity with gas-powered alternatives—from a total cost of ownership standpoint—and this is driven by aggressive manufacturer incentives; federal and state incentives; and lower operating costs. BEV monthly retail sales have held steady at 9.2% of the market for two consecutive months. While infrastructure remains insufficient, customer satisfaction with charging in the second quarter improved for a second consecutive quarter. Especially noteworthy is the satisfaction experienced by Ford and Rivian owners now having access to the Tesla charging network. An increase in the transition to EVs will take time, with several interdependent variables affecting adoption, but the foundation is growing as consumers try to match vehicle options with their lifestyle.”

Global Sales Outlook

Jeff Schuster, vice president of research, automotive at GlobalData:

“The global light-vehicle selling rate rose again in July 2024, increasing 200,000 units from June to 89.9 million units. While the sales pace remains at a healthy level, July decreased from 92.2 million units in July 2023 as the early inventory recovery supported pent-up demand a year ago.

"Volume declined for the second consecutive month, with July falling 1.6% from July 2023. Year-to-date sales volume through July reached 49.3 million units, marking a 1.7% increase from year-to-date July 2023. Sales performance in July was mixed, with some key markets showing weakness compared with the previous year. The domestic market in China experienced the largest decline, falling 10.3%. Posting declines were India (-3.3%), South Korea (-2.8%), the United States (-1.5%) and Western Europe (-0.6%). The volume markets showing growth were Eastern Europe (+8.4%) and Japan (+6.7%). As the base effect from last year's strong recovery affects growth rates, some market volumes are leveling off, leading to constrained growth that could affect the remainder of the year.

"August is expected to maintain a selling rate at or slightly above July's 90-million-unit level, but volume is projected to decline at least 1% from August 2023. China and Western Europe are anticipated to decline from the previous year, with Western Europe particularly affected by a more than 20% pullback in Germany. Markets expected to show positive gains in August include Japan, North America and Eastern Europe, but these increases are not expected to be sufficient to offset the declines.

“The global demand recovery is showing signs of slowing, with lower volume tempering the outlook for the rest of the year. The 2024 sales forecast remains at 88.7 million units, representing a 2.2% increase from 2023. While the overall environment and volume level remain healthy, any significant near-term increase in demand has been put on hold. There is a downside volume risk of approximately 500,000-750,000 units in 2024 with five months remaining in the year.”

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