Quickening Pace of July Sales Is Not a Full Recovery, Edmunds.com Says
By Michelle Krebs July 20, 2010Early July sales are selling at a rate close to 12 million vehicles on a Seasonally Adjusted Annual Rate, but Edmunds.com warns that should not be read as a sign of a full recovery for the industry.
"July and August sales may suggest a rebound but the underlying trends haven't changed," said Edmunds.com CEO Jeremy Anwyl.
The market mostly consists of deal-seekers today, and July and August are historically among the best months for picking up bargains due to model year close-outs, he noted.
"The cloud behind the silver lining is that September, October and November will probably be soft, since the old model inventory is largely gone by then, and so are the deals - or so car-shoppers have become conditioned to expect," Anwyl said.
Edmunds.com analysis indicates that in June 2010, 88 percent of new cars sold were from the 2010 model year. Traditionally by November, three-quarters of new cars sold are from the new model year and the old model year does not fully sell out until June of the following year.
Consumer psychology also drives people to believe that car incentives are high now, but in truth most car incentives are not particularly generous today, said Edmunds.com Senior Analyst Jessica Caldwell.
"Inventory is relatively low and automakers are reluctant to cut into profit margins more than necessary," she said. "However, brands are advertising big sales events and consumers are responding."
Caldwell pointed to Nissan as perhaps the biggest winner this month, as early figures suggest that the brand may be up approximately 25 percent from June's levels. Nissan has the most aggressive deals in the industry.
"Remember that comparisons with last summer are not valid," reminded Edmunds.com Senior Economist Rebecca Braeu. "In the first part of July 2009, consumers stood by, anticipating the Cash for Clunkers program, and then later in the month they rushed to dealerships to take advantage. These were not typical patterns."
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