Well, maybe it was the bad winter.
Last week, automakers reported higher-than-expected US new car sales of 1.6 million in May, an increase of 11.3%. This marks the strongest annual sales rate since before the 2008 recession and goes a long way to confirm that the cold weather earlier this year had more to do with damping demand than a dip in consumer confidence.1
The top seven automakers beat analysts’ expectations, some by a wide margin. General Motors and Chrysler Group said May sales were the best for that month in seven years. Nissan set a sales record for May and Hyundai had its best month ever.2
Ford and Toyota Motor also topped forecasts.
The strong showings have also provided a lift to auto stocks. The That New Car Smell motif has risen 4.0% in the past month. The S&P 500 has gained 2.0% during that same time period.
Over the last 12 months, the motif has increased 15.1%; the S&P 500 has risen 20.4%.
Another point of strength for the monthly sales reports were that transaction prices remained strong and discounts did not increase, a Reuters report said. Average transaction price for a new vehicle in May was $32,307, according to research firm Kelley Blue Book, which said average new-car prices were up $653 from a year ago, but down slightly from April.
The results speak to pent-up consumer demand as sales in January and February were below expectations, with automakers having blamed the tepid results on the severe weather in the US North and East, an explanation – not accepted by everyone, naturally – that was also used to explain the economy’s slow growth in the first quarter.
However, car sales picked up in late March and April, building hopes for another strong showing in May.
Individually, of course, success varied. At one end of the spectrum, BMW said its May US sales were up 19% from a year ago, while Ford’s sales were up only 3%, with its key pickup sales down 4%. Ford also said it expects to lose market share in 2014 due to extended shutdowns at truck plants while it installs new equipment to make the next generation F-150.
Overall, however, the country’s move into warmer weather has lifted new car sales out of the deep freeze.
1Michael Calia and Mike Ramsey, “US Auto Sales Surged in May,” WSJ.com, June 3, 2014.
2Ben Klayman and Paul Lienert, “US May car sales jump to 1.6 million, beating expectations,” reuters.com, June 3, 2014, http://www.reuters.com/article/2014/06/03/us-autos-sales-usa-idUSKBN0EE18L20140603, (accessed June 11, 2014).