New vehicle retail sales are expected to remain on pace with last year, but incentive spending is at record levels through April, according to a forecast developed jointly by J.D. Power and LMC Automotive.
Retail sales in the month of April are anticipated to reach 1,169,700 units, a 1.3% increase compared with April 2016 on a selling day adjusted basis. Year-to-date, retail sales in 2017 are up 0.3% compared to the same period a year ago.
Deirdre Borrego, senior vice president of automotive data and analytics at J.D. Power, said: “While industry retail sales pace remains high, it is being powered by elevated levels of incentive spending which pose a serious threat to the long-term health of the industry. The total value of incentives used to sell new vehicles has increased by $1.9 billion through the first four months of the year.”
Total incentive spending in the marketplace stands at $16.4 billion through April, up 13% from last year.
On a per unit basis, spending for the average new vehicle through April was $3,814, up $460 from a year ago.
On trucks and SUVs, spending was $3,740, up $578, while on cars, spending was $3,938, up $308.
Despite record incentive levels, average days to turn continues to rise. Nearly 30% of vehicles sold in 2017 sat on dealer lots for more than 90 days, up from 27% last year.
Borrego said: “With flat retail demand and inventory at record levels, manufacturers will continue to face a difficult choice between maintaining elevated incentives or making production cuts.”