February 27, 2018 / 2:07 PM / 4 months ago

U.S. February auto sales seen down 2 percent: J.D. Power and LMC

DETROIT (Reuters) - U.S. auto sales in February likely fell just over 2 percent from the same month in 2017 as the market continues to cool following a boom for much of this decade, industry consultants J.D. Power and LMC Automotive said on Tuesday.

FILE PHOTO: Cars are seen in a parking lot in Palm Springs, California, U.S. on April 13, 2015. REUTERS/Lucy Nicholson/File Photo

February was marked by a slight decline in consumer discounts, which have risen as major automakers have pushed to move vehicles off dealer lots despite declining demand.

“The industry is expected to deliver mixed results in February, with a decline in retail sales volume, higher transaction prices and the potential for the first year-over-year drop in incentive spending in more than four years,” said Thomas King, senior vice president of J.D. Power’s data and analytics division.

February U.S. new vehicle sales will likely be about 1.304 million units, a decrease of just over 2 percent from 1.332 million units a year earlier, the consultancies said.

The forecast was based on the first 15 selling days of February. Automakers will release February U.S. sales results on March 1.

U.S. new vehicle sales fell 2 percent in 2017 to 17.23 million units after hitting a record high in 2016. They are expected to drop further in 2018 as interest rates rise and more late-model used cars return to dealer lots to compete with new ones.

LMC said it expects full-year 2018 U.S. new vehicle sales to hit just under 17 million units.

The seasonally adjusted annualized rate for February will be 17.1 million vehicles, down nearly 2 percent from 17.4 million units in February 2017, the consultancies said.

Retail sales to consumers, which do not include lower-margin fleet sales to rental agencies, businesses and government, were set to fall a little over 3 percent in February.

The average discount per vehicle in February fell $14 versus the same month in 2017, to $3,840.

But discounts still hit 10.2 percent of manufacturer’s recommended sales prices. Experts believe anything over 10 percent hurts vehicle resale values and is unhealthy for automakers.

The consultancies noted that discounts have exceeded 10 percent in 19 of the last 20 months.

They said lower discounts only affected popular SUVs and pickup trucks offered by U.S. manufacturers - a reference to General Motors Co (GM.N), Ford Motor Co (F.N) and Fiat Chrysler Automobiles NV (FCHA.MI).

While a reduction in discounts “in some segments of the market is a positive indicator for the long-term health of the industry, sustaining lower levels of incentives will be challenging,” the consultancies said.

Reporting by Nick Carey; Editing by Leslie Adler

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