U.S. Automakers Dig Out of a Pandemic Hole as Prices Soar

U.S. Automakers Dig Out of a Pandemic Hole as Prices Soar

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Retail sales, which exclude deliveries to fleet buyers such as rental-car companies, probably grew year over year in September.

Photographer: David Paul Morris/Bloomberg

Automakers are climbing out of the ditch they fell into this spring, with U.S. auto sales expected to rebound strongly in the third quarter thanks to cheap borrowing costs and a shift toward private transportation amid the pandemic.

The seasonally adjusted annualized selling rate likely reached 15.7 million new vehicles in September, down 1.6 million from a year ago, according to researcher J.D. Power. Retail sales, which exclude deliveries to fleet buyers such as rental-car companies, probably grew year over year in September, the first time that’s happened since February thanks to a couple of extra selling days on the calendar.

Sales have rebounded after touching a multi-decade low of 8.6 million vehicles in April, when factories were idled and buyers across the country were quarantined at home.

Slow Rebound

U.S. sales of cars and light-duty trucks are gradually recovering

Source: Ward’s Automotive Group

It’s unlikely the auto industry can make up for volume lost during spring shutdowns, but that may not matter for manufacturers selling higher-margin SUVs and trucks. Incentive spending also is lower due to tight inventories caused by production shutdowns.

“Volumes are down slightly, but transaction prices are at all-time highs,” said Thomas King, president of J.D. Power’s data and analytics division. “Selling with lower discounts and incentives — that’s money that flows straight to the bottom line.”

The average transaction price is forecast to reach a record $35,655 in September, with trucks and SUVs making up 76% of retail sales this month, up from 72% a year ago, according to J.D. Power.

Uneven Recovery

On the consumer side, the surge in demand for vehicles has pushed up used-car prices, making trade-ins more valuable and putting more-expensive vehicles within reach.

Rising used-vehicle prices also likely made the new-car market more appealing for shoppers on the fence between the two,” said Jessica Caldwell, executive director of insights for the Edmunds auto-information service.

The rosy sales forecasts also speak to the unevenness of the U.S. economic recovery. While more than 13 million Americans are unemployed, others have seen their wealth increase thanks to a surging stock market and housing boom. Consumer confidence rebounded in September by the most in more than 17 years, the Conference Board reported this week.

“Some of the folks who’ve had the biggest economic disruption because of the virus are not folks who would traditionally be new-car buyers,” King said.



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