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Upcoming Memorial Day Weekend Expected to Be Strong New-Car Sales Stretch

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Toyota Highlander

Especially for stores selling new models from a pair of Japanese OEMs, the unofficial start of summer this coming weekend is expected to be a busy time for franchised dealers based on projections from both Kelley Blue Book and

In fact, KBB thinks May’s new-vehicle sales should approach 1.4 million units or a 14.2 million seasonally adjusted annualizedsales rate, which would represent nearly 30 percent year-over-year improvement.

After adjusting for the two additional selling days this month and a major vehicle-selling holiday weekend, KBB noted sales are projected to show a 20-percent gain.

Alec Gutierrez, who is KBB’s senior market analyst of automotive insights, pointed out if sales strengthen as predicted, it would mark the most pronounced year-over-year gain in more than 12 months.

“At this point, it is almost as if the tail is wagging the dog,” Gutierrez explained. “During a typical post-recession recovery, we would expect to see auto sector gains being driven by broad economic growth.

“In the first quarter, the opposite was true, as auto sales were the primary driver behind GDP growth and have consistently been a bright spot in an otherwise slow-paced recovery,” he added.

KBB tabulated that vehicle sales accounted for half of the 2.2 percent increase in the first-quarter gross domestic product, highlighting the fact that economic growth largely has been driven by increases in production and revenue generated by automotive manufacturers.

Although Kelley Blue Book expects a significant increase in sales relative to last May, analysts emphasized it is important to consider the context behind the relatively mild pace of sales at this time last year.

Aging vehicles, improved access to credit and historically low interest rates are among the primary factors driving demand this year, and Kelley Blue Book analysts expect this trend will continue to carry sales in May and beyond.

Furthermore, Gutierrez pointed out that a year ago, Toyota and Honda were hit hard by inventory shortages stemming from the earthquake in Japan on March 11 of last year.  He said both OEM’s anemic inventory levels during popular Memorial Day sales events muted the usual sales bump expected in May.

Gutierrez recounted Toyota and Honda’s shortfall led to a 3.7-percent decline in sales this time last year, curtailing the strong growth exhibited through the first four months of 2011.

Kelley Blue Book expects 2012 to be much different as the industry appears to have ample inventory to meet the anticipated uptick in demand.

“With inventory shortfalls no longer a concern, budget-conscious consumers will look to incentives and advertised sales events to help narrow their purchase decisions,” Gutierrez said.

“Car shoppers will be pleased to find plenty of incentives available in terms of cash, finance and lease offers for a number of popular models,” he continued. “The most attractive offers are for those vehicles expected to be redesigned later this year, including the Nissan Altima, Honda Accord and Ford Escape.”

Toyota Poised to Surpass Ford for No. 2 Spot in Market Share

KBB noted Toyota hit 15.0 percent market share in April, just 0.2 percent shy of Ford’s No. 2 spot.

Analysts said Ford has remained ahead of Toyota since early 2010, when Toyota stumbled after unintended acceleration recalls forced the company to suspend sales on the Camry and Corolla.  Toyota was hit once again in March 2011 by the earthquake and tsunami that rocked Japan.

After bottoming out in May of last year at 10.2 percent market share, KBB highlighted that Toyota has recovered rapidly and now is poised to surpass Ford for the No. 2 spot in United States share once again.

“Toyota has surged in recent months thanks to the arrival of the redesigned Camry, as well as continued strength in demand for the Corolla and Prius from buyers looking for relief at the gas pump,” analysts stated.

“Toyota may be gunning for the second position, but Ford won’t go down without a fight,” they went on to say. “Ford will see a boost in sales later this year when its redesigned Escape and Fusion arrive at dealerships.

“It may be too early to call the winner of this coveted spot in market share, but Toyota clearly has its sights set on surpassing Ford and chasing after General Motors for the No. 1 spot in the United States,” KBB added.

Chrysler Relies on Incentives and New Product to Drive Sales

In discussing the other domestic automaker, KBB believes Chrysler will continue to trump its domestic counterparts in May with an expected 40 percent year-over-year increase in sales, or 30 percent after adjusting for a few extra selling days this month.

Analysts computed that Chrysler gained nearly 5 points in market share after plummeting to 7.4 percent share in the summer of 2009, just prior to its bankruptcy announcement.

“Since being acquired by Fiat, Chrysler has performed a remarkable turnaround that largely has been product driven,” Gutierrez said.

“The 200, 300, Grand Cherokee, Durango and soon-to-be released Dart are just a few of the vehicles that are critical to Chrysler’s turnaround,” he added

In recent months, KBB contends Chrysler has kicked up its sales growth through increased incentive spending.

Analysts think the brand’s best deals are available on the 200 and 300 sedans, which are available each with more than $2,000 in cash rebates. In addition, shoppers of all Chrysler products, including Chrysler, Dodge, Jeep, Ram and Fiat that finance through Ally Financial or Chase Auto Finance by May 31 will be eligible to defer payments for 90 days.

The Dodge Dart should be arriving at dealerships in the next few months, and Kelley Blue Book expects Chrysler to continue capturing share in the months ahead.

KBB May 2012 Segment Forecast
Sales  Volume  Market  Share
 Segment  May 2012  May 2011  Year-Over-Year Change  May 2012  May 2011  Year-Over-Year Change
 Midsize Car  259,064  176,071  +47.1%  18.8%  16.6%  +2.2%
 Compact Car  183,274  179,059  +2.4%  13.3%  16.9%  -3.6%
 Compact Crossover  148,824  115,074  +29.3%  10.8%  10.8%  0.0%
 Full-size Truck  143,312  108,391  +32.2%  10.4%  10.2%  +0.2%
 Subcompact Car  75,790  37,302  +103.2%  5.5%  3.5%  +2.0%
 Total  1,378,000  1,061,841  +29.8%
KBB May 2012 Automaker Forecast
 Sales  Volume  Market  Share
 Manufacturer  May 2012  May 2011  Year-Over-Year Change  May 2012  May 2011  Year-Over-Year Change
 General Motors  245,284  221,192  +10.9%  17.8%  20.8%  -3.0%
 Toyota  210,834  108,387  +94.5%  15.3%  10.2%  +5.1%
 Ford  209,456  191,529  +9.4%  15.2%  18.0%  -2.8%
 Chrysler  161,226  115,363  +39.8%  11.7%  10.9%  +0.8%
 Honda  139,178  90,773  +53.3%  10.1%  8.5%  +1.6%
 Hyunda/Kia  124,020  107,426  +15.4%  9.0%  10.1%  -1.1%
 Nissan  96,460  76,148  +26.7%  7.0%  7.2%  -0.2%
 Volkswagen  52,364  40,783  +28.4%  3.8%  3.8%  0.0%
 Total  1,378,000  1,061,841  +29.8% May Sales Expectations

Meanwhile, acknowledged Memorial Day weekend has been particularly strong for automotive sales in the last two years, and that’s a trend dealers hope will continue this weekend.

According to site data, Memorial Day weekend accounted for 14.7 percent and 13.1 percent of May sales in 2010 and 2011, respectively. Both numbers well exceed the Memorial Day weekend average of 10.8 percent of May sales over the preceding five years (2005-2009).

“Until recently, the hype surrounding Memorial Day sales was met with little more than average sales volume,” senior analyst Jessica Caldwell said.

“But Memorial Day’s performance over the last two years — combined with strong momentum in the new car market this year — has the auto industry feeling especially optimistic going into this holiday weekend,” Caldwell added.

John Paul Strong

John Paul Strong combines his two decades of automotive marketing experience with a team of more than 150 professionals as owner and CEO of Strong Automotive.

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