New-vehicle retail sales in January are expected to be down from a year ago, according to a forecast developed jointly by J.D. Power and LMC Automotive. Retail sales are projected to reach 854,900 units, a -0.4% decrease compared with January 2019. J.D. Power and LMC Automotive are forecasting full year 2020 retail sales to reach 13.48 million units, a decline of 205,000 units from 2019.
“In a retail market that is expected to decline for the fifth consecutive year, it’s important to remember that January is typically the lowest sales month of the year.
Total sales in January are projected to reach 1,124,700 units, a 0.6% decrease compared with January 2018. The seasonally adjusted annualized rate (SAAR) for total sales is expected to be 16.7 million units, flat from a year ago. J.D. Power and LMC Automotive are forecasting full year 2020 total sales to reach 16.78 million units, a decline of 212,000 units from 2019.
“In a retail market that is expected to decline for the fifth consecutive year, it’s important to remember that January is typically the lowest sales month of the year," said Thomas King, President of the Data and Analytics Division at J.D. Power. "On average, January accounts for only 6.3% of annual sales and is more than 30% lower than December 2019 sales."
“The larger concern remains the record level incentive spending supporting the underlying volume,” King added. “This marks the first time ever that we will start the year with spending above $4,000.” Incentive spending is on pace to reach $4,136 in January, an increase of $258 from last year. Spending on cars is expected to be up $328 to $3,952, while spending on trucks/SUVs is up $217 to $4,200.
Cars also continue to see reduced demand in the marketplace and are on pace to account for only 27% of retail sales in January, a decline of 3.7 percentage points from last year. This would be the first time that car retail share of industry started the year below 30%.
Transaction prices remain a bright spot for the industry and are on pace to rise by 2.6% to $33,982, the highest level ever for the month of January. Prices will set records for both cars (+$126 to $27,363) and trucks/SUVs (+$766 to $36,316).
Record prices means that consumers are expected to spend $29.1 billion on new vehicles in January. This is up $600 million from last year and is a record to start the year.
Looking ahead to next month, February has a once-in-a-generation sales calendar quirk that represents a unique opportunity for manufacturers to capitalize. Due to the leap year and industry sales reporting practice, the February sales month contains five weekends for the first time since 1992. “Typically, February is the second-lowest volume month of the year,” King said, “but the calendar will pull an extra selling weekend into the month. The result could be industry retail sales exceeding one million units in the month for the first time since 2017.”
Originally posted on F&I and Showroom