J.D. Power & GlobalData U.S. Automotive Forecast for August 2023

Fifth Consecutive Month of Double-Digit Sales Growth Sees New-Vehicle Sales up 15.4%, Record Consumer Spend for August

J.D. Power:

The Total Sales Forecast

Total new-vehicle sales for August 2023, including retail and non-retail transactions, are projected to reach 1,354,600 units, a 15.4% increase from August 2022, according to a joint forecast from J.D. Power and GlobalData. August 2023 has 27 selling days, one more than August 2022. Comparing the same sales volume without adjusting for the number of selling days translates to an increase of 19.9% from a year ago.

The seasonally adjusted annualized rate (SAAR) for total new-vehicle sales is expected to be 15.3 million units, up 2.1 million units from August 2022.

The Retail Sales Forecast

New-vehicle retail sales for August 2023 are expected to increase when compared with August 2022. Retail sales of new vehicles this month are expected to reach 1,108,800 units, a 10.4% increase from August 2022 when selling day adjusted. Comparing the same sales volume without adjusting for the number of selling days translates to an increase of 14.6% from 2022.

The Takeaways

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

“August feels like another rinse-and-repeat month as the industry continues its pace of double-digit sales growth for a fifth consecutive month. This is facilitated by incremental increases in vehicle production and leveraging continued strong demand from fleet customers. Year-to-date total sales through August will be slightly more than 10.3 million units—an increase of 14.4% from a year ago—but still below pre-pandemic sales levels, which were north of 11.4 million.

“As sales volumes improve, the average new-vehicle retail transaction price is declining modestly, trending down $566 or 1.2% from August 2022, to $45,537. The decline mostly is due to an increase in sales of smaller vehicle segments that have inherently lower transaction prices. However, even with the decline in average transaction prices, consumers are on track to spend nearly $47.8 billion on new vehicles this month—the highest on record for the month of August and 10.5% higher than August 2022.”

Retail inventory levels in August are expected to finish around 1.3 million units, an increase from July 2023 and a large increase of 48.4% compared with August 2022, but still well below pre-pandemic levels.

Sales to fleet customers are still elevated as manufacturers leverage higher vehicle production to allocate more vehicles to those fleet customers. Fleet sales are projected to increase 45.6% from August 2022.

“The increased vehicle supply and elevated interest rates have led to a decline in dealer profits—but those profits still exceed pre-pandemic levels. The total retailer profit per unit—which includes grosses, finance and insurance income—is expected to reach $3,534 in August. While this is 26.4% lower than a year ago, it is still nearly triple the amount in August 2019. The primary reason for the decline in profit is that fewer vehicles are being sold for prices higher than the manufacturer's suggested retail price (MSRP). This month, only 28.5% of new vehicles are projected to be sold above MSRP, which is down from 46.8% in August 2022.”

Total aggregate retailer profit from new-vehicle sales for this month is projected to be down 16.8% from August 2022, reaching $3.7 billion for the third-highest August on record.

"Retailers continue to sell vehicles before they physically arrive at the dealership. However, with increased inventory levels, more shoppers are now able to purchase vehicles from dealer lots. In August, 45% of vehicles are projected to be sold within 10 days of their arrival at the dealership, which is down from the peak of 57% in March 2022. The average time that a new vehicle spends in the dealer's possession before being sold is expected to be 28 days, up from 19 days a year ago, but still less than half the pre-pandemic average of 70 days.

“Manufacturer discounts in August are expected to be relatively flat when compared with July but have increased materially from a year ago when incentives were at record lows. The average incentive spend per vehicle has doubled from August 2022 and is currently on track to reach $1,902. Expressed as a percentage of MSRP, incentive spending is currently trending at 4%, an increase of 1.9 percentage points from August 2022. It is noteworthy that discounts on leased vehicles have risen in recent months. This month, leasing is expected to account for 20% of retail sales, up significantly from 16% in August of 2022, but still well below August 2019 when leased vehicles made up nearly 30% of all new-vehicle retail sales.

“Elevated pricing coupled with interest rate increases continue to inflate monthly loan payments. The average monthly finance payment in August is on pace to be $729, up $19 from August 2022. That translates to a 2.7% increase in monthly payments from a year ago. The average interest rate for new-vehicle loans is expected to be 7.3%, an increase of 182 basis points from a year ago.

“Used-vehicle prices have declined slightly from a year ago but remain close to all-time highs. The average trade-in equity for August is trending toward $9,101, down $780 from a year ago. For context, trade-in equity this month is still double the pre-pandemic level, helping owners offset some of the pricing and interest rate increases.

"In September, the main focus will be on any potential work stoppages that could hinder production. A disruption in production could create more asymmetry in the market and potentially extend the overall tight supply situation currently in place. This would give support to new-vehicle pricing but also keep used-vehicle values high. Thereby trade-in values could remain elevated longer continuing to help consumers offset higher interest rates and pricing.”

Sales & SAAR Comparison

¹ Figures cited for August 2023 are forecasted based on the first 17 selling days of the month.

² August 2023 has 27 selling days, one more than August 2022.

The Details

• The average new-vehicle retail transaction price in August is expected to reach $45,537, down $566 from August 2022. The previous high for any month—$47,362—was set in December 2022.
• Average incentive spending per unit in August is expected to reach $1,902, up from $953 in August 2022. Spending as a percentage of the average MSRP is expected to increase to 4%, up 1.9 percentage points from August 2022.
• Average incentive spending per unit on trucks/SUVs in August is expected to be $1,813, up $831 from a year ago, while the average spending on cars is expected to be $1,483, up $638 from a year ago.
• Retail buyers are on pace to spend $47.8 billion on new vehicles, up $5 billion from August 2022.
• Truck/SUVs are on pace to account for 78.6% of new-vehicle retail sales in August.
• Fleet sales are expected to total 245,785 units in August, up 45.6% from August 2022 on a selling day adjusted basis. Fleet volume is expected to account for 18.1% of total light-vehicle sales, up from 14.4% a year ago.
• Average interest rates for new-vehicle loans are expected to increase to 7.3%, 182 basis points higher than a year ago.

EV Outlook

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

“With an EV Index score of 52 [on a 100-point scale], EVs are more than halfway to achieving parity with gas-powered vehicles. Affordability remains the highest-scoring factor at 97, driven by aggressive pricing from Tesla. The three factors of interest, availability and adoption show modest improvement and infrastructure remains flat. Experience declines 1.4 points, evidenced in the recent Initial Quality Study as EV owners had more problems with their new vehicles than owners of gas-powered vehicles.

“Although the affordability factor is approaching parity, it is skewed by the premium market, driven largely by Tesla’s 63% EV market share—and their continual price cuts. In the high-volume segments like compact SUV and large pickup-light duty, affordability scores are at 80. The glaring hole is that no EV options exist in the huge midsize SUV segment.

“EV retail market share—8.5%—was flat in July, however, it’s expected to reach 9% by year’s end, according to the new J.D. Power EV Retail Share Forecast. Updated twice a year, the forecast projects EV retail share by segment, by state and by designated market area (DMA). For example, 2035 forecast shows increasingly uneven adoption rates across the country, with California projected to reach 94% EV retail share and North Dakota projected to be less than 20%.”

Global Sales Outlook

Jeff Schuster, group head and executive vice president, automotive at GlobalData:

“The global light-vehicle selling rate rose for the fifth consecutive month in July, reaching 96.3 million units and outperforming expectations from the beginning of the month. While year-over-year growth continues, global light-vehicle sales volume in July increased a moderate 7.2% from July 2022, following a run of stronger growth during previous months. China took a backseat in July, posting a decline of 3% from a year ago. Europe was up 25% and recovery in Eastern Europe (up 58%) was substantial. The growth trend in North America remained consistent, up 15% year over year.

“The strong selling rate is expected to continue into August, but the selling rate is projected to dip to 89 million units. Volume is forecast to be flat at 7.6 million units, with volume from August 2022, as the 12% year-over-year decline in China is expected to accelerate from the tax-incentive boost last August.

“The global automotive market remains resilient and the outlook for 2023 has been increased from 86.4 million units to 86.8 million units, an increase of 7% from 2022. Supporting this improvement, the effects of production and supply disruption continues to improve. The estimated disruption to volume globally in 2023 has been cut to 3.4 million units from 3.8 million in June and that is less than half of the disruption of 8.2 million units in 2022. Looking into 2024, the forecast for global light-vehicles in 2024 is holding at 90.2 million units.”

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