J.D. Power and Associates Reports:Strength in December New-Vehicle Retail Sales Expected to Lead to Robust Finish for 2010

The December new-vehicle retail sales pace is significantly beating expectations, driving a strong close to a challenging year of recovery, according to J.D. Power and Associates, which gathers real-time transaction data from more than 8,900 retail franchisees throughout the United States.

Retail Light-Vehicle Sales

December new-vehicle retail sales are expected to come in at 936,300 units, which represents a seasonally adjusted annualized rate (SAAR) of 10.8 million units. December retail sales are expected to be up 19 per cent from one year ago. Retail transactions are the most accurate measurement of true underlying consumer demand for new vehicles.

“Even with the possibility that sales in the third week of December may be affected by the recent winter storms, the strength in sales during the second week is expected to continue through the rest of the month,” said Jeff Schuster, executive director of global forecasting at J.D. Power and Associates. “As a result, it appears that 2010 will end on a high note.”

Total Light-Vehicle Sales

Total light-vehicle sales for December are expected to come in at 1,133,000 units, which is 14 per cent higher than December 2009. Fleet sales are projected to decrease in December, with volume expected below 200,000 units-down three pe rcent from December 2009. Fleet share of total sales in December is expected to be at 17 per cent, the lowest level all year.

Sales Outlook

Given a stronger-than-expected retail performance in December, J.D. Power and Associates has increased its retail sales forecast for the year to 9.2 million units (from 9.1 million units). The forecast for total light-vehicle sales in 2010 has also been adjusted to round up to 11.6 million units (from 11.5 million units)

“The continuation of the strong performance in the retail market through December may be the confirmation that the industry has been looking for that the recovery has been re-engaged,” said Schuster. “The likelihood of an extension of the tax cuts, in addition to a strong close in 2010, bodes well for the automotive market in 2011.”

For 2011, J.D. Power’s forecast remains at 10.4 million units for retail sales and 12.8 million units for total sales.

North American Production

Nearly 11 million vehicles have been manufactured in North America YTD through November. With December projected at 800,000 units, 2010 production is expected to end at 11.8 million units-up 38 per cent from 8.5 million units in 2009.

Of the three countries comprising North America, Mexico is expected to post the strongest year-over-year increase, with production up nearly 50 per cent to 2.2 million units. Mexico is benefiting from a strong increase in truck production from the Detroit Three, as well as the addition of the Ford Fiesta to production. Canadian production is expected to be up 39 per cent to 2.1 million units, while volume in the U.S. is projected to be up 35 percent to 7.6 million units.

Vehicle inventory at the beginning of December was steady, compared with November, at 67 days supply. In comparison, the days supply is up five days from the level at the beginning of December 2009 (62 days). Currently, car inventory is outpacing truck inventory at a 71-day supply, compared with a 64-day supply.

The outlook for production in North American in 2011 has been increased slightly to 12.7 million units (from 12.6 million units), which is eight per cent higher than in 2010.