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July 24, 2013 02:00 AM

Good news for auto industry: Sales to jump 16% in July

Crain News Service
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    Auto makers and analysts expect U.S. sales to continue rebounding in 2013, albeit at at a slower pace, with some forecasts as high as 15.6 million light vehicles.

    By Nick Bunkley, Crain News Service

    DETROIT (July 24, 2013) — U.S. new-vehicle sales are projected to rise 16 percent this month as the industry gains strength entering the second half of the year, according to a forecast released today by LMC Automotive.

    LMC estimated that the seasonally adjusted annualized selling rate for July would reach 15.9 million, nearly matching June's rate of 15.98 million, which was the highest in 5 1/2 years. The seasonally adjusted annualized selling rate for July 2012 was 14.1 million.

    The forecasting firm also increased its full-year forecast for light-vehicle sales by 200,000 units, to 15.6 million.

    "The overall trend in vehicle demand has outshined economic growth, and looking forward, the improving economic fundamentals should hold demand at the current level, if not accelerate it over the next several months," Jeff Schuster, senior vice president of forecasting at LMC, said in a statement. "With a strong tailwind, it is not unreasonable to think about a 16 million-unit level of demand in 2013."

    A 16 percent gain from July 2012 would represent the industry's largest year-over-year gain since last August, when sales rose 20 percent.

    LMC, which develops its forecast with registration data from J.D. Power and Associates, said stronger-than-expected retail demand compelled it to raise its full-year outlook. It now projects retail sales for 2013 to total 12.8 million units, up from its earlier estimate of 12.6 million.

    LMC's forecasts, which are based on J.D. Power transaction data for the first half of the month, have underestimated the industry's performance in most months this year.

    Auto makers are scheduled to report July sales results on Aug. 1.

    Most analysts expect U.S. light-vehicle volume to reach 15.3 million to 15.6 million for the year, compared with 14.49 million in 2012.

    The J.D. Power data show that increased leasing and availability of long-term loans are helping to drive sales higher. Loans with terms of at least six years accounted for 30 percent of new-vehicle retail transactions in the first half of the year, up from 29 percent in the same period of 2012, and leasing represented 24 percent of first-half sales, up from 21 percent a year earlier.

    "Elevated new-vehicle transaction prices are being enabled by the availability of longer-term loans, affordable leases and strong used-vehicle values, compounded by the availability of low interest rates," said John Humphrey, senior vice president of the global automotive practice at J.D. Power.

    J.D. Power said light-vehicle production in North America rose 4 percent in the first half of the year from the same period of 2012. That includes gains of 15 percent for Hyundai Motor Co. and 14 percent for Ford Motor Co., while General Motors production fell 4 percent.

    Auto makers had a 61-day supply of vehicles in early July, up from 57 days a month earlier, according to Power.

    This report appeared on the website of Automotive News, a Detroit-based sister publication of Tire Business.

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