In March 2024, new car sales are poised to make a big leap. Analysts forecast 1,525,700 units sold, a 12.1% increase from the previous year, according to the latest joint forecast from J.D. Power and GlobalData. This surge in sales is matched by an equally strong seasonally adjusted annualized rate (SAAR) of 16.4 million units. The first quarter of 2024 is expected to keep this up. Projected sales will reach 3,830,500 units, a 4.5% increase from last year when adjusted for selling days.
Retail sales are also showing strength, with an anticipated 10.7% growth in March 2024, reaching 1,225,000 units. This performance reveals that demand from consumers is still outstripping supply. This is true despite the market’s adjustment to changing economic conditions. Overall, the first quarter shows vibrant retail activity.
“The average new-vehicle retail transaction price is declining as manufacturer incentives rise, retailer profit margins fall and availability of lower-priced vehicles increases. Transaction prices are trending towards $44,186—down $1,648 or 3.6%—from March 2023, the largest decline in March ever. However, despite that, higher sales volumes mean consumers are on track to spend nearly $51 billion on new vehicles this month—the highest ever for the month of March and 6.5% higher than March 2023,” said Thomas King, president of the data and analytics division at J.D. Power in a statement.
Yet, the automotive market is facing pressures. The evolving dynamics of retail and manufacturer profitability against a backdrop of increasing inventory levels is keeping dealers on their toes.
For example, retail inventory is set to end at about 1.7 million units in March. This is a big rise from the previous year. This inventory increase is impacting profit margins, with total retailer profit per unit forecasted to decline by 31.9% to $2,487.
J.D. Power and GlobalData also report heightened incentive spending, reaching an average of $2,800 per vehicle, up 66.6% from March 2023, and marking a significant shift in pricing strategies. These incentives and a changing sales landscape are affecting the new and used vehicle markets. They are also affecting trade-in values and financing conditions.
In the realm of electric vehicles (EVs), there’s a rebound in market share. EV retail share is at 9.1%, closely matching the peak of the previous year. This resurgence in EV interest comes amid regulatory changes and evolving consumer perceptions. The recent EPA ruling adjusted the EV adoption requirements for 2027-2030. It suggests a slower shift to electric cars. This change is more in line with market realities and consumer readiness for EVs.
As the industry navigates these challenges, the overall financial health of the sector remains strong, buoyed by high sales volumes and strategic adjustments. At the end of Q1 2024, the car industry seems to be adjusting toward a balance of volume and value. Profitability metrics are still better than before the pandemic.
