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Industry Pacing at 14.5 Million Units Despite Sales Lag, CNW Reports

May 24, 2012

BANDON, Ore.  – Some of the steam seems to be out of the new-car market this month. As of May 18, sales look to be up around 6 percent vs. the year-ago period despite a dramatic slowdown in closing ratios. Floor traffic, however, continues to rise.

Based on data from the first half of May, the industry is on track to sell 1.125 million units, down about 50,000 units from April. The industry’s true delivery rate is currently tracking in the mid- to high-13 million range.

“For some mass-market brands, visitors to showrooms continue to be strong,” CNW’s Art Spinella wrote in his May retail automotive summary. “Chrysler, Toyota, Nissan are in the double-digits, while GM, Ford, Honda and virtually all of the second-tier Asian imports are lagging or barely ahead of their year-ago rates."

Spinella does believe things could change in the closing weeks of May when dealer incentives perk up. “Overall lighter floor traffic is worrisome this late in the month,” added Spinella.

Closing ratios is another area of concern, Spinella noted. “People are looking but are hesitant about taking the plunge,” he wrote. “The year-over-year increase of 3.7 percent is well below the 2012 trend line at this stage of the month. Many tax filers have already received their refund checks and are back to their paycheck-spending mode.”

Home-centric economic and social concerns continue to plague the pool of potential vehicle buyers, according to report. CNW’s Jitters Index is up more than 7 percent vs. a year ago, even though gasoline prices have stabilized. "Food prices, local taxes and federal tax policies that impact family economic decisions — especially those attached to a long-term finance contract — have a large share of consumers unwilling to pull the big-purchase trigger,” Spinella wrote.

With a few caveats attached, Spinella still believes the industry is still on track for a 14.5 million-unit year. “It will take increased marketing effort and incentives to reach that goal – more than was thought would be necessary just four months ago,” Spinella wrote. “Incentive spending by dealers and automakers must rise. That will have an impact on profits … those who are buying new vehicles are paying more even after incentives are deducted.”

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