New Car Sales Down in December From 2016 as Record Incentives Given

J.D Power says 2017 will still rank as the eighth-best retail year for the auto industry. With that said, record incentives remain a concern.

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Add another voice to the chorus calling for new car sales to be down in December from 2016 levels. 

The forecast from J.D. Power and LMC Automotive on Friday calls for the eighth such monthly drop in 2017 from the year-ago numbers. The seasonally adjusted annualized rate for retail sales is expected to be 14.6 million units, down 350,000 from a year ago, projecting sales of 1,305,800 units, a 2.6 percent decline compared to December 2016.

“The year will still rank as the eighth-best retail sales year in history and only a modest 280,000 units below the 14.2 million sold in 2015,” Thomas King, senior vice president of the data and analytics division at J.D. Power, said in a statement. “The larger concern remains the elevated incentives being used to drive the current sales pace.”

Average incentive spending rose to a record $4,302 per unit in December, marginally above the $4,188 set in November and significantly above the $4,001 spent in 2016. 

While retail demand is down, even with high incentives, the appetite for SUVs continues unabated. "SUVs are expected to account for 50 percent of new model activity in 2018, which will help push the share of total sales to 45 percent" from 43 percent in 2017, said Jeff Schuster, senior vice president of forecasting at LMC Automotive.

LMC’s forecast for 2017 total light-vehicle sales is holding at 17.2 million units, a decrease of 1.9 percent from 2016. Retail light-vehicles are expected to finish the year just below 14 million units, down 1 percent from 2016. 

J.D. Power

In 2018, LMC expects total light-vehicle sales to remain just under 17 million units, down 1.2 percent, and retail light-vehicles sales to be 13.8 million units, a decline of 1.4 percent.