New vehicle sales expected to surge 15% in May on stronger inventory

New vehicle sales in the U.S. are expected to rise in May, on robust demand for personal transport and improving inventories at dealers, a report from industry consultants showed on Thursday.

U.S. new-vehicle sales, including retail and non-retail transactions, are estimated to reach 1.3 million units in May, up 15.6% from a year earlier, according to a J.D. Power and LMC Automotive report.

New-vehicle transaction prices continue to rise as consumers are estimated to spend $46.9 billion on new vehicles in May, 13% higher than the last year, the report said.

“Despite the challenges posed by elevated interest rates and pricing, sales volume and transaction prices have displayed remarkable resilience, enabled by the combination of improved vehicle availability and pent-up demand,” Thomas King, president of the data and analytics division at J.D. Power, said in a statement.

Retail inventories are expected to rise 48% compared to last year. Inventory pile-up could hurt dealers’ margins despite the incentives offered by manufacturers to lure customers.

“The primary reason for the decline in profit (for dealers) is that fewer vehicles are being sold for prices higher than the manufacturer’s suggested retail price (MSRP),” King said.

Retail sales of new vehicles in May are expected to be up 9.6% on strong demand from buyers who had to delay their purchases due to low inventory.

Globally, light-vehicle sales for the month are projected to increase 12.8% from last year, where growth stands akin to levels across major markets apart from Eastern Europe where sales are expected to be up nearly 20% despite the prolonged war in Ukraine.