January 8, 2007

2007 U.S. new vehicle retail sales forecasted to increase, despite projected decline in total new vehicle sales – J.D. Power

Westlake Village, California – U.S. new-vehicle retail sales are expected to increase moderately to 13.2 million cars and light trucks in 2007 – up from 13.0 million in 2006 – according to J.D. Power and Associates Automotive Forecasting.

Retail sales – which does not include fleet sales – is a precise reflection of consumer demand for new vehicles. New-vehicle retail sales represented 78.8 percent of the total light-vehicle market in 2006 and are expected to increase to approximately 80 percent in 2007. While retail sales are increasing, total sales – which include fleet sales – are forecasted to drop by approximately 90,000 units to 16.5 million in 2007.

“We’re seeing a gradually recovering retail market, one that’s returning to pre-2005 levels,” said Jeff Schuster, executive director of J.D. Power and Associates Automotive Forecasting. “The fleet market is going through a correction as automakers pull back on fleet sales, and that’s causing a dip in the total market.”

Retail sales comprised nearly 85 percent of total U.S. light-vehicle sales between 2002 and 2004, but dipped dramatically to 77.7 percent in 2005 as fleet sales increased. Schuster notes that incentives carried the retail market between 2002 and 2004, and the retail market dropped dramatically when automakers began to decrease the dependency on incentives in 2005.

“Retail sales are returning to a healthy range, benefiting from an increase in new product in the car and crossover segments,” said Schuster. “It’s encouraging that the retail market as a whole is standing more on its own without major price reductions or the massive rebates we saw post 9/11.”

According to the Power Information Network (PIN), a division of J.D. Power and Associates, the average actual new-vehicle retail transaction price in the U.S. – which is the final vehicle price paid minus any customer cash rebates – has increased from $25,920 in 2004 to $26,881 in 2006, and customer cash rebates have decreased from $2,973 to $2,371 over the same period.

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