Auto Sales Start Strong in 2021: January Retail Vehicle Sales Volumes, Transaction Prices Rise as Discounts Stay Low
TROY, Mich.–(BUSINESS WIRE)–J.D. Power:
The Retail Sales Forecast
New-vehicle retail sales for the month of January are expected to show growth from January 2020, according to a joint forecast from J.D. Power and LMC Automotive. Retail sales for new vehicles are projected to reach 890,800 units, a 6.1% increase compared with January 2021 when adjusted for selling days. January 2021 contains one fewer selling day and the same number of selling weekends when compared to January 2020. Comparing the same sales volume without adjusting for the number of selling days translates to an increase of 1.8% year over year.
The Total Sales Forecast
Total new-vehicle sales for the month of January, including retail and non-retail transactions, are projected to reach 1,073,100 units, a 0.9% decrease from January 2020, when adjusted for selling days. Reporting the same numbers without controlling for the number of selling days translates to a decrease of 4.9% from January 2020. The seasonally adjusted annualized rate (SAAR) for total new-vehicle sales is expected to be 16.3 million units, down 0.4 million units from 2020.
The Takeaways
Thomas King, president of the data and analytics division at J.D. Power:
“January continues the strong performance observed in Q4 of 2020 and points to a positive outlook for the balance of 2021. The growth in retail sales is encouraging, especially as it is being achieved with higher transaction prices and lower incentive levels. While retail demand remains strong, non-retail sales are still recovering, which is hampering total vehicle sales and SAAR.
“The primary risk to maintenance of the current retail sales pace is supply chain disruption. However, as January results show, the disruption has not yet become apparent in aggregate industry sales results.”
Lean inventories mean that vehicles are selling quickly once they arrive at dealerships, and they are selling with lower discounts. The average number of days a new vehicle sits on a dealer lot before being sold is on pace to fall to 51 days, down 19 days from last year.
The average incentive from manufacturers on new vehicles is on pace to be $3,639 per vehicle, a decrease of $510 from a year ago. Expressed as a percentage of the average vehicle MSRP, incentives for January are 8.4%, down two percentage points from a year ago, and the sixth consecutive month below 10%. For context, incentive spending per unit is 27% lower than when it peaked at $4,953 per unit in April 2020. Retailers also continue to offer smaller discounts on new-vehicle sales. Total grosses per unit, inclusive of finance and insurance income, are on pace to reach $2,212, an increase of $859 from a year ago.
Average transaction prices are expected reach another monthly high, rising 8.4% to $37,165, the highest ever for the month of January and just below the record set in December 2020. Disciplined incentives and discounting, along with the shift towards more expensive trucks and SUVs, remain the key drivers of higher prices. SUVs and trucks are on pace to account for a combined 78% of retail sales compared with 73% a year ago. For context, average transaction prices are 20% higher in January 2021 than they were in January 2016 at $30,838.
Low interest rates and higher trade-in values also are supporting higher transaction prices. The average interest rate for loans in January is expected to fall 117 basis points from a year ago to 4.4%. Over the same time, the average monthly finance payment is up only $14 to $599. Concurrently, the average trade-in value has risen to $5,298, an increase of $773 or 17.1%, from a year ago. Loan terms are relatively stable with the average term up less than one month, to 70 months, compared with a year ago.
The combination of strong retail sales, higher transaction prices and smaller discounts means that January 2021 likely will be one of the most profitable Januarys ever for both retailers and manufacturers.
Sales & SAAR Comparison
|
U.S. New Vehicle |
January 20211 |
December 2020 |
January 2020 |
|
Retail Sales |
890,800 units |
1,381,680 units |
874,967 units |
|
Total Sales |
1,073,100 units |
1,619,554 units |
1,127,869 units |
|
Retail SAAR |
14.1 million units |
14.2 million units |
13.5 million units |
|
Total SAAR |
16.3 million units |
16.4 million units |
16.7 million units |
1 Figures cited for January 2021 are forecasted based on the first 17 selling days of the month.
2 January 2021 has 24 selling days, one fewer day than January 2020.
The Details
- The average new-vehicle retail transaction price in January is expected to reach a monthly record $37,165. The previous high for any month of $37,966 was set in December 2020.
- Average incentive spending per unit in January is expected to reach $3,639, down from $4,149 in January 2020. Spending as a percentage of the average MSRP is expected to reach 8.4%, down two percentage points from a year ago.
- Average incentive spending per unit on trucks and SUVs combined is expected to be down $551 to $3,680, while the average spending on cars is expected to be down $421 to $3,497.
- Consumers are on pace to spend $33.1 billion on new vehicles, up $3 billion from January 2020 and the highest ever for the month of January.
- Truck/SUVs are on pace to account for 77.9% of new-vehicle retail sales.
- Fleet sales are expected to total 182,300 units, down 25% from January 2020 on a selling day adjusted basis. Fleet volume is expected to account for 17% of total light-vehicle sales, down from 22% a year ago.
Global Outlook for January 2021
Jeff Schuster, president, Americas operations and global vehicle forecasts, LMC Automotive:
“Global light vehicle sales finished strongly in December, posting another pre-pandemic selling rate record of 91.6 million units. After revising November upward, December also marks the fourth consecutive month well above the selling rate of 90 million units. The month was 2.5% stronger than December 2019, with continued support from China and the United States. In addition, some stability returned to volatile markets like South America and parts of Europe. Global light vehicle sales in 2020 ended at 77.7 million units—down 14%—as improvement in the second half of the year drove the recovery.
“Our forecast for 2021 is for a continued recovery, with volume projected to increase to 86.4 million units, an 11% increase from 2020. However, while 2021 starts with some uncertainties now in our rearview mirror, there are new risks emerging such as the global semiconductor shortage and the potential for additional disruptions. Our initial assessment suggests there could be weakness in the first quarter due to vehicle production losses related to the lack of chips, but we don’t expect a lasting negative effect on the year.”
About J.D. Power and Advertising/Promotional Rules www.jdpower.com/business/about-us/press-release-info
About LMC Automotive www.lmc-auto.com
Contacts
Media Relations Contacts
Geno Effler, J.D. Power; West Coast; 714-621-6224; media.relations@jdpa.com
Emmie Littlejohn, LMC Automotive; Troy, Mich.; 248-817-2100; elittlejohn@lmc-auto.com
