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May U.S. LV Inventory Dips More Than Expected

May U.S. LV Inventory Dips More Than Expected

Flat North American production, and additional selling days in June and July, will lift sales volumes, perhaps allowing the industry to avoid a huge summer sell-off.

U.S. light-vehicle inventory in May fell more than expected from April’s 11-year high, as North American production and estimated import shipments declined from a year ago.

The month-to-month drop was not much above the typical April-to-May falloff, but could be a sign the industry will avoid a big summer sell-down of ’16 models prior to the start of the ’17 model year in the fourth quarter.

May inventory declined 3.2% from April to 3.76 million units, 7.2% above year-ago. Days’ supply fell 11 days from the prior month to 59, but still was above year-ago’s 56.

North American production in May is estimated at 2% below year-ago, and estimated shipments of overseas-sourced vehicles to dealer lots in the period were down 10%. The slowdown in deliveries to dealers was particularly acute in cars.

Car stocks fell 5.3% from April to 1.48 million units, but were down from year-ago by an even bigger 8.8%, thanks to production slowdowns that started last year. Days’ supply ended May at 56, same as year-ago, but well below April’s 69.

Inventory of trucks fell 2.0% from April to 1.90 million units, but was 16.4% above year-ago. May days’ supply was 64, up from like-2015’s 58, but down from April’s 73.

By source, domestically made LVs fell 2.9% from April to 2.99 million units and imports dropped 4.4% to 772,000.

Another reason the industry might avoid a huge summer blow-out sale to rid dealers of excess stock is June and July will be high-volume months that should help pare any excess stocks. June will have one more selling day vs. a year ago, and July’s period will include an extra weekend, including the first business day of August. Regardless if SAARs fail to top year-ago levels, June-July combined raw volumes still should be higher.

A preliminary look has June’s sales results totaling a 17.4 million-unit seasonally adjusted annual rate, up from year-ago’s 17.0 million. At that rate, volume will roughly be 100,000 units above June 2015’s total.

Inventory will be limited in part because combined North American production in June-July is forecast to be flat with year-ago. However, after May’s sharp decline, import dealer shipments likely will resume above year-ago levels in the 2-month period, especially of CUVs. If total inventory is not close to year-ago levels heading into August, market incentives could get hefty.

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