According to a joint forecast from J.D. Power in Troy and LMC Automotive, new vehicle retail sales are expected to decline in June 2022 when compared to last June, showing a projected 965,300 units sold, an 18.2 percent drop when adjusted for selling days.
June 2022 has one additional selling day compared to June 2021. Comparing the same sales volume without adjusting for the number of selling days translates to a decrease of 15 percent from 2021.
“The 2022 theme we have seen of sales quality over sales quantity is continuing in June. On a volume basis, June year-to-date retail sales will be just under 5.9 million units, a large decline of 19.1 percent,” says Thomas King, president of the data and analytics division at J.D. Power.
“Excluding pandemic-affected 2020, this is the worst first six months’ sales volume performance since 2011. However, from a profitability standpoint, the first half of 2022 has set records for both retailers and manufacturers as vehicle prices continue to rise, manufacturer discounts get ever smaller and retailer margins set new highs.”
New-vehicle retail sales in the second quarter (Q2) of 2022 are projected to reach 2,977,300 units, a 23.3 percent decrease from Q2 2021 when adjusted for selling days.
King says despite the drop in quantity, the average transaction price is likely to reach $44,907, a 17.5 percent increase from 2021 and a new record. The total retailer profit per unit — inclusive of grosses, finance, and insurance income from new vehicle sales — are expected to reach first-half record levels on a per unit and total basis.
“Due to the ongoing inventory constraints, discounts from manufacturers continue to erode. The average incentive spend per vehicle is tracking toward $930, a decrease of 59.4 percent from a year ago and the second consecutive month under $1,000,” says King. Incentive spending per vehicle expressed as a percentage of the average vehicle MSRP is trending toward a record low of 2.0 percent, down 3.4 percentage points from June 2021 and the fifth consecutive month below 3.0 percent.
“One of the factors contributing to the reduction in incentive spending is the absence of discounts on vehicles that are leased. This month, leasing will account for just 18% of retail sales. In June 2019, leases accounted for 30% of all new-vehicle retail sales.”
Despite the record pricing levels, King says vehicles continue to sell quickly, with many vehicles being ordered or purchased by buyers before they arrive at the dealership. In June, it is projected that 56 percent of vehicles will be sold within 10 days of arriving at the dealership. The average number of days a new vehicle is a dealer’s possession is on pace to drop to 19 days from 37 last year.
“Looking forward, while higher interest rates and economic concerns represent directional headwinds for the industry, consumer demand remains considerably higher than available supply,” says King.
“With each additional month of inventory constraints, pent-up demand for new vehicles is building ever larger — and that demand will insulate the industry from the effects of these economic headwinds. As new-vehicle availability eventually improves, some softening of the current record per unit pricing and profitability may occur but will be mitigated by a return to higher monthly sales volumes.”