New-vehicle sales picked up in February as fleet business grew and customers finally had access to the models they wanted. The renewed pace kept transaction prices high and incentives low as inventory shortages ease.

However, the higher-pace news is tempered by analysts' opinions that the industry is slowly returning to more historically normal conditions.

New-vehicle sales were a mixed bag among automakers in February. Ford Motor Co. and Hyundai-Kia saw double-digit gains. Mazda North America, Subaru of America and Volvo Car USA also posted sales increases. However, sales fell 2.4% at Toyota North America despite Lexus seeing its first year-over-year increase since January 2022.

Motor Intelligence estimates February’s seasonally adjusted, annualized sales rate at 15.19 million, up from 13.96 million a year ago. January’s rate was 16.21 million.

LMC Automotive reported February sales rose 9.5% industrywide to 1.14 million vehicles. The climb in February sales, along with strong demand from fleet customers, led the company to boost its 2023 outlook from 14.9 million to 15 million.

“There was a bit of a surprise on the upside; the industry did a little better than expected,” said Jeff Schuster, executive vice president for automotive at GlobalData, parent of LMC Automotive. “Still, a 15 million SAAR isn’t lighting the world on fire.”

The supplier disruptions that plagued the industry in 2022 remain, “but they’re down considerably from where they were," Schuster said. Strong fleet demand is making up for any softening consumer demand at the retail level, he added.

“As we saw in January, things are still gaining steam and we’re seeing availability increasing “as inventory levels recover, said Tyson Jominy, vice president of data and analytics at J.D. Power. Jominy noted demand remains very strong and that transaction prices set a record in February, growing another 5% to top $46,000.

Dealers are maintaining their pricing power, he said. In February about 31% of retail sales were above MSRP, showing demand continues to outpace supply. Still, that figure is about half of what it was over the summer, he said.

“Automakers aren’t going to start incentivizing sales until that number gets a lot closer to zero, or at least in single digits. So, things are going the right way, but they’re still not there,” Jominy added.

J.D. Power estimated February’s average incentive per new vehicle at $1,335, up from $1,275 over a year ago. Incentive spending as a percentage of average sticker remained nearly flat year-over-year at 2.8%, down 0.1 percentage point. TrueCar estimates incentives fell $135 from February 2022 to $1,522 in February but rose 9% from January’s $1,396.

Schuster predicts incentives will rise slowly this year.

“I think we will start to see incentives creep back in, but it may take a few months. We’re going to see a little more balancing from automakers and the discipline holding to not overbuild. But that balancing means the manufacturers are likely to start enticing consumers to come back in; I don’t think it’s tomorrow, but certainly within the next six months.”

Schuster points out that North American factory utilization is at about 65%, which means assembly plants are not operating at peak efficiency. Automakers may feel pressured to “open the valves on production,” he says, to maximize profits while fleet and retail demand remains high and prices are strong.

“It appears, at least as of now, that everyone will accept a smaller overall market” to keep profits strong for as long as possible, he said. “It suggests the automotive world is different now. Some trends that were accelerated by the pandemic have validated the model that you can be really profitable on lower volumes, and that’s OK.”