New light-vehicle sales will drop to 14.2 million units in 2008 – a 12% decrease from 16.1 million units in 2007 – and a reduction of 750,000 units from the 14.95 million projected earlier this year – according to a revised forecast by J.D. Power and Associates.
That 14.2 million figure would be the lowest since 1993, J.D. Power said.
Specifically, fleet sales are projected to drop to 2.6 million units – a 21% decrease from 2007. Retail sales, which reflect actual consumer behavior in the new-vehicle marketplace, are expected to decline 10%, to 11.6 million units.
The forecast revision is prompted by a deteriorating economic environment, prolonged effects wrought by the credit crisis, elevated gas prices and a reduction in the daily rental fleet market, J.D. Power said.
Below, additional findings reported by J.D. Power.
Although sales for smaller vehicles are rapidly increasing, the growth rate of smaller vehicle segments has not been enough to offset significant declines experienced in large-vehicle segments:
- Retail sales for the compact basic segment from January to June 2008 were up 28% compared with the first half of 2007.
- In contrast, sales in the first half of 2008 for all vehicles in the large segments – which include large pickups and SUVs – were down 26%, compared with the same time period in 2007.
New-vehicle sales for smaller cars have also been constrained by a thinning supply, as measured by “days to turn,” the number of days a vehicle remains on the dealer lot before selling:
- Days to turn for the compact basic segment averaged 57 days from January to June 2008, according to the Power Information Network (PIN).
- However, days to turn decreased sharply, averaging 47 days from May to June.
- By contrast, days to turn for the large pickup segment averaged 85 days from January to June 2008, but increased to 95 days from May to June.
Mid-year Doldrums
“The weak performance seen in June 2008 is expected to carry over into July, and year-over-year comparisons mark June as the weakest month on a seasonally adjusted annualized rate [SAAR] since 1993,” said Jeff Schuster, executive director of automotive forecasting for J.D. Power and Associates.
Total light vehicle sales in July are forecast to sink below an SAAR of 13.6 million units – down 2% from June 2008 and 12% from July 2007.
Retail sales are down 21.6% (selling day adjusted) in July, PIN transaction data to date indicates – suggesting that poor sales performance in June was not simply an abnormality, but a continuation of a downward trend that may continue into the balance of 2008.
2009 Projection
“The economic stress and uncertainty that consumers may face over the next 6-12 months will likely result in a continuous period of slow new-vehicle sales,” said Schuster. “It is also unlikely that a pronounced rebound will occur in 2009 and conditions could actually worsen before they improve.”
J.D. Power and Associates projects a slight sales improvement to 14.3 million units in 2009, with an increase in retail sales to just 11.7 million units, and fleet sales remaining essentially unchanged at 2.6 million units.
