Smaller passenger cars – like the Honda Civic – showed surprising momentum in July.
While automakers are still tallying up the final numbers, they’re expected to reveal that, boosted by a strong economy, July vehicles sales bounced back after a weak June. Here’s a preview of what we’re likely to see.
With the U.S. economy continuing to expand at a healthy clip, sales of new vehicles are expected to show an increase of roughly 1% for July, according to analysts at Bank of America.
That’s not much of a year-over-year gain but suggests the market may be back on track after an unexpected weakening in demand during late spring.
“We estimate July US light vehicle sales will increase about 1% (year-over-year) on a selling day adjusted basis, resulting in a SAAR (seasonally adjust annual rate) of 16.3 million units,” BoA analysts wrote in an alert sent to investors. “Sales at this level would be well above the 15.million SAAR in June 2024
July sales boosted by computer recovery
The ransomware attack on CDK continued to cause problems for dealers during July.
That said, it could prove difficult to get a clear sense of what’s happening in the market. A ransomware attack on CDK Global – the country’s largest dealer data service provider – caused major headaches for many of its 15,000 clients. Tens of thousands of new vehicle sales were lost or delayed, according to industry analysts.
Some of them were recovered at some point during July, helping bolster the monthly sales totals, according to BoA analysts. But the CDK meltdown wasn’t fully resolved until after the Independence Day holiday – ending only after the data company reportedly paid a $25 million ransom. As a result, July sales likely also were negatively impacted.
It could take several more months until the backlog of orders is resolved, according to various industry-watchers.
Sales of small vehicles set the pace
Smaller crossovers, like the Ford Escape appeared to do well in July.
While larger vehicles have dominated the market in recent years, sales of small and compact models were particularly strong in July according to Cox Automotive data. That has helped boost sales of Toyota and Honda model lines this year.
Overall vehicle sales were up about 2% nationwide during the first half of 2024, but subcompact crossovers grew more than 20%. Compact cars and SUVs also increased 18% and 12% respectively, per Cox. That marks one of the strongest month for sedans and other passenger vehicles in some years.
On the other hand, sales of full-size pickup truck sales were down 4% for the first half, which has put substantial pressure on Stellantis and the truck-dependent Ram brand, which suffered the biggest drop in sales during the first half of the first half of the year. It reduced the second quarter income not only of that Euro-American automaker but also General Motors and Ford Motor Co., both of which basically have abandoned the passenger car business in favor of trucks.
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High interest rates continue to hold back sales.
Demand for big trucks, like this Ram 1500, has slowed sharply in recent months.
Analysts believe the auto industry is still not recovering from post-COVID shortages nearly as well as it could. They blame macroeconomic uncertainty and higher interest rates for the lackluster consumer confidence hobbling new vehicle sales. However, positive economic news such as continuing job growth and the steady decline in inflation point to strong potential for growth in the months ahead.
“In 2023, US sales grew 12.5% as supply chain disruptions dissipated and the economy remained relatively robust,” BoA said in a research study. “We now expect a slight uptick in US auto sales (for the coming months) for a SAAR of 15.7 million units” for the full year.
That would remain well below the numbers seen pre-COVID.
More growth forecast
Longer-term, sales are likely to continue to grow as dealers rebuild inventories that shriveled to record lows due to COVID-related shortages of semiconductors and other parts and components, BOA predicts.
One thing that should help is the decline in average transaction prices – what consumers pay after factoring in options and discounts. If anthing, the build-up in dealer inventory has led to a rebound of the incentives that all but vanished between 2020 and 2023.
According to Kelley Blue Book, industry prices declined slightly in June 2024 with ATPs down 0.6% year-over-year to $48,644. June incentives were up 53% year-over-year in June averaging about 6.4% of the average vehicle price tag. But this is still well below 2019 levels.
If supply continues to increase and the automotive consumer is further stressed, pricing could come under still more pressure. During 2022 and 2023, combined U.S. dealer inventories fell to barely 1 million vehicles. They’re now around 2.8 million, according to J.D. Power. That’s close to typical levels, pointing to additional price cuts, especially for brands like Jeep and Ram which now have above normal stock on dealer lots.
Paul A. Eisenstein contributed to this story.
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