US Auto Sales Drop In June, High Prices To Blame

Record-high new car prices during the first-half of the year slowed down total U.S. auto sales with weaker demand expected to continue for the rest of the year.

Despite the strong economy and consumer spending, total U.S. car sales are expected to fall 1.5 percent year-on-year to 1.47 million units in June. Retail sales of new vehicles are projected to drop 2.9 percent to 1.15 million units.

Total light-vehicle sales estimated at 16.9 million units in 2019 will represent a 2.1 percent reduction from 2018. As expected, truck sales continue to climb while passenger-car sales keep on tanking. Car sales were down 10.6 percent to about 2 million in May year-on-year, while truck sales rose 1.5 percent to 4.9 million units.

On the other hand, sales of used vehicles are expected to increase by nearly 9 percent in the first half, according to J.D. Power and LMC Automotive LLC.

J.D. Power is a global marketing information services company while LMC Automotive is forecasting and market intelligence services provider with a focus on the automotive industry.

“Average transaction prices set a record during the first half which has big implications for manufacturer revenues,” said Thomas King, senior vice president of the data and analytics division at J.D. Power.

The higher prices have been good to dealers' bottom line, however.

New vehicle prices are on pace to reach $33,346 for H1 and also the highest-ever for the first half of the year. Prices for the first half were nearly 4 percent more expensive year-on-year.

Despite this, average incentive spending per unit for the first six months fell some $130 to $3,788 compared to the first half of 2018.

“A much more dovish Fed is under pressure and is now expected to make a series of interest rate cuts," noted Jeff Schuster, president of LMC. "This will provide support for auto sales in the second half of the year and help offset rising vehicle prices and the current level of incentives."

Automakers in the U.S. are expected to report June auto sales results on July 2.