New car sales poised to regain momentum in July

New vehicle sales volumes are set to rise again in July as car dealers recover from delayed sales and reporting caused by widespread software outages in June.

Sales for new cars are forecasted to get a solid 5% boost this July year-over-year. According to J.D. Power, a total of 1,135,300 retail units will be sold this month.

Between the lines: While the top-line numbers look promising, they might be a bit inflated. June's sales pace had been forecast to finish much higher, but disruptions to dealer management systems at the end of the month prevented some sales from being recorded. Those missed sales are expected to be captured in this month’s final tallies.

By the numbers:

• The seasonally adjusted annualized rate (SAAR) for total new vehicle sales is expected to hit 16.7 million units—up 0.7 million from last July and the highest level in over three years.

• Average incentive spending per vehicle is expected to jump $990 from a year ago, or 5.9% of the average MSRP.

• Retail buyers will spend nearly $47.8 billion on new vehicles in July, an increase of $1.4 billion from last year.

The intrigue: Manufacturer discounts are climbing, with the average incentive spend per vehicle up 52.1% from last July. The main driver is lease deals, which are expected to make up 23.7% of retail sales this month.

Zoom in: These positive trends for the consumer are coming at the expense of dealer profitability. High inventory levels mean fewer vehicles are selling over MSRP. Total retailer profit per unit is expected to decrease by 33% year-over-year to $2,298.

What’s next for EVs? J.D. Power has revised its EV retail share forecast for 2024, reducing it from 12% to 9%. Premium EVs are now priced like gas-powered vehicles. But the mass market still lags. Yet, much progress has been made. This is especially true in high-volume segments like compact SUVs. Prices in these segments have dropped by over $10,000—opening up accessibility.

The bottom line: July 2024 is shaping up to be a strong month for new vehicle sales. With better deals and increased incentives, consumers are finding more value and could drive sales up even further come August.

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