Growing inventories and falling prices, but US auto sales growth still progressing slowly

New light vehicle sales in May are expected to maintain the
gradual pace of the preceding months; uncertainty remains for
remainder of year

As the market awaits a clear signal that either growing
new-vehicle inventories or consumer affordability issues will
emerge as the main determinant of auto sales trends in the
immediate term, new U.S. light vehicle demand in May is expected to
soldier on uneventfully and maintain its unsteady climb.

S&P Global Mobility projects new light vehicle sales volume
in May 2023 to reach 1.31 million units, up 18% year over year, and
representing the 10th consecutive month in which volume has
improved from the year-prior level. This volume would translate to
an estimated sales pace of 14.5 million units (seasonally adjusted
annual rate: SAAR), a step down from the month-prior result, but
reminiscent of ongoing monthly patterns in this metric.

On the supply side of the equation, supply chain issues have
continued the easing that began in the second half of 2022,
resulting in consistent increases in retail advertised inventory
levels. As we approach the summer months, vehicle listings have
plateaued at approximately 2 million units, 67% higher than a year
ago, according to S&P Global Mobility’s proprietary analysis of
advertised dealer inventory.

“With increased supply comes increased negotiating power for
consumers in the market for a new vehicle – as 40% of vehicle
listings now reflect a price below MSRP, compared to less than 25%
a year ago,” said Matt Trommer, associate director of Market
Reporting at S&P Global Mobility. “While certain models
continue to be difficult to find, savvy consumers are better
positioned to find a deal now than they have been since the

“Auto sales in May are expected to reflect the ongoing market
conditions running in opposition of each other; improving
inventory, but uncertain consumers,” said Chris Hopson, principal
analyst at S&P Global Mobility. “Potential upside to immediate
term sales remains as inventory levels progress. However, gathering
economic headwinds point to some volatility come the second half of
the year.”

Sales volumes over the next several months are not expected to
dynamically change from the current trend, according to the
analysis. That said, consumer choice buoyed by increased inventory
and sustained downward pricing pressure could be restrained by
affordability challenges by way of macroeconomic uncertainty,
rising interest rates, and tighter credit conditions.

Continued development of battery-electric vehicle (BEV) sales
remains a constant assumption for 2023. BEV sales are estimated to
be up more than 45% through April 2023, or approximately 110,000
incremental units, compared to the same timeframe in 2022. However,
with the implementation of the US federal EV incentive eligibility
as of April 18, 2023, and ongoing price adjustments from Tesla,
monthly BEV share could become a bit more volatile in the upcoming
months. On a projected level of 7.6% for May, BEV share is expected
to remain on trend. Beyond the pricing developments, a sustained
churn of new and refreshed BEVs will continue to promote BEV sales
as the year progresses.

This article was published by S&P Global Mobility and not by S&P Global Ratings, which is a separately managed division of S&P Global.

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