Auto Sales Spike in May

Automakers are reporting strong May sales, with the Toyota division ending a four-month losing streak, Honda Motor Co. sales soaring, and Hyundai and Kia posting double-digit increases for the tenth consecutive month.  

Industry experts speculate rising inventory and incentives, and sharply higher fleet deliveries were the reason behind the upward trends.

“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,” says 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 pandemic.”

Sales Reports by Automaker

The breakdown of sales by automaker is as follows. Subaru, Ford Motor Co. and Volvo sales expected by week's end.

• Toyota Corp.’s sales increased by 6.4% to 187,204, driven by a 3.7% increase in the Toyota brand and a notable 25% increase in Lexus sales. Sales of light trucks for the Toyota brand increased by 11%, which helped to counterbalance a 9% drop in car sales. Total sales of Tacoma and Tundra pickups rose 35% to 31,048 units.
• Honda Motor Co. sales increased 58%, buoyed by three core models—Accord, up 81%; Civic, up 98%; and CR-V, up 95%.  Honda division rose 53%, while Acura soared 146%. American Honda’s monthly sales increased for the third straight month as inventory shortages due to microchip and shipping issues eased. Honda division sold over 32,000 electrified models in May, setting a monthly record. According to American Honda, Honda had 34,000 vehicles on the ground at the end of the month, up from 12,000 year-over-year, while Acura had about 21,000 cars in stock at the start of June, up from 4,000 a year earlier.
• Hyundai deliveries jumped 18% to 70,001, alongside an 8% increase in retail volume to 64,070. The company reported that 8.5% of total sales in May, or 5,931 vehicles, were delivered to fleet customers. Hyundai’s U.S. inventory of light vehicles stood at 47,671 by the end of May, more than double units in stock in May 2022 but slightly lower than April’s 49,045.
• Kia has one of the industry’s lowest stockpiles but still saw a 23% increase in U.S. sales to 71,497, making it the company’s second-best month ever. The brand had significant gains in four of its core models: Soul, Seltos, Telluride and Carnival.
• Mazda sold 33,262 vehicles, marking the eighth straight month of growth and a 117% increase in volume.
• Genesis sold a record 5,605 vehicles in May, registering a 27% increase in sales, the GV70 and GV80 crossovers and electrified variants of G80 and GV70 contributing the most to the gain. Genesis sales have increased for seven consecutive months.

Forecasts by J.D. Power, LMC Automotive, TrueCar, Cox Automotive and S&P Global Mobility echo what automakers are reporting. The organizations predict U.S. light-vehicle sales will rise 18% to 20% in May.

Consumers are returning to showrooms as selection improves and incentives rise, causing a sharp rebound from 2022’s weakest month. Automakers are also fulfilling a backlog of orders from daily rental companies and commercial users, leading to strong fleet demand. J.D. Power and LMC Automotive estimated fleet sales increased 50% in May year-over-year.

Inventory & Incentives

According to J.D. Power and LMC Automotive predictions, retail inventory is expected to reach 1.3 million in May, an increase of 48% year-over-year. The automakers with the highest inventory levels included: Jeep, Infiniti, Jaguar, Buick, Ram, Chrysler, Dodge, Mini, Lincoln and Audi. 

Toyota, Kia, Honda, Lexus, BMW, Subaru, Land Rover, Hyundai, Cadillac and Nissan had the industry’s lowest inventory levels, according to Cox Automotive.

Inventory rebounds and higher interest rates have resulted in increased discounts throughout the industry as automakers seek to alleviate borrowing costs. TrueCar’s estimated incentives averaged $1,931 last month, showing a 64% increase year-over-year and a 13% increase from April. According to TrueCar, Toyota remained the only automaker offering incentives below $1,000 last month because of its lean stockpiles.

TrueCar shares discounts of $3,000 were offered by Stellantis, Daimler and BMW last month, while General Motors, Ford and Volkswagen Group had average incentives of $2,000-plus.

Qualified buyers who financed through GM Financial could get 1.9% financing on certain Chevrolet crossovers and SUVs, with a 90-day payment waiver. Some Stellantis dealerships offered discounts up to $12,000 on the Jeep Grand Wagoneer, reported Automotive News.

Leased car discounts have risen substantially in recent months, according to J.D. Power and LMC Automotive. Leasing may account for 21% of retail sales in May, an increase from a low of 16% in September but still lower than May 2019, when leased vehicles made up nearly 30% of all new-vehicle retail sales.

J.D. Power and LMC Automotive predict the average incentive per new light truck will be $1,698, up 74% year-over-year. The researchers also reported the average spending on cars would hit $1,421, up 66%.

According to J.D. Power and LMC Automotive, new-vehicle retail transaction prices will rise approximately 0.7% to $45,838 in May, but they have been declining since setting a record high of $47,362 in December.

“New-vehicle prices appear as if they are weakening. The average new vehicle listing price is around 5% above last year, but the rate of growth has weakened in recent weeks. It may reflect more discounting offered across the industry. This could increase over the summer,” says Charlie Chesbrough, senior economist at Cox Automotive.

TrueCar estimated the average interest rate for new vehicles in May was 7.1%, which is slightly higher than in April. The average loan term for a new vehicle was around 69 months.