WESTLAKE VILLAGE, Calif. — A slew of influences appear to be pushing July's new-vehicle retail sales ahead of rather sluggish numbers from May and June, but it would be a bit premature to celebrate, according to J.D. Power and Associates.

The company has moderately lowered its full-year guidance for both retail and total new-vehicle sales and one official said that it will be "at least another two years" before the overall new-vehicle market hits the 15 million to 16 million unit range again.

As far as July's expected retail sales increase, though, the market appears to be buoyed by consumers reacting to incentives, and perhaps the hike in lease terms wrapping up and a "less attractive" used market is having an impact, as well, according to Jeff Schuster, executive director of global forecasting at J.D. Power and Associates.

Specifically, there will likely be 928,000 new-vehicle retails sold in July, making the seasonally adjusted annualized rate 9.4 million vehicles. This compares to retail sales of 746,618 units in June, which had a SAAR of 8.4 million units.

J.D. Power stressed that July's projected results are stronger than the year-ago period, but because CARS caused a rather lopsided market in 2009, year-over-year comparisons have no real validity.

Schuster said it seems the incentive lift — albeit "slight" this year — that usually occurs during the summer "sell-down" has lured consumers into the market.

"Consumers appear to be responding to the slight increase in visible incentive spending, which is expected this time of year during typical model-year sell-down," explained Schuster.

"Even if the deals aren't as strong as they have been in the past, consumers may be grappling with the notion that these deals are as good as they're going to get," he continued. "In addition, an increase in maturing leases and a less attractive used-car market may be contributing to higher sales volumes."

Continuing on, fleet sales — although usually soft in July — will likely climb from the "extremely low" year-ago figures and push the total light vehicle sales total for the month up to near 1.08 million units. This compares with 995,977 vehicles in June.

The resulting SAAR would be 12.2 million vehicles, compared with 11.2 million in June.

"While a return to a higher selling rate in July is a relief after the pronounced instability during the past few months, it's not yet time to be overly optimistic," Schuster warned.

In fact, looking ahead to the rest of 2010, the market will likely remain topsy-turvy. In light of this, J.D. Power is offering a somewhat weaker forecast.

Expectations are for total new-vehicle sales to hit 11.7 million units and retail sales to reach 9.4 million vehicles, which is modestly softer than its prior forecasts of 11.8 million and 9.5 million, respectively.

"Given the inconsistent nature of the current sales environment and the hurdles the recovering economy has yet to face, the rate of the recovery in auto sales is expected to be slower than previously thought," Schuster suggested.

"This emphasizes the importance of the industry's new cost structure, as sales are projected to be below the normal range of 15 to 16 million units for at least another two years," he added.

Production Levels

Next up, J.D. Power examined vehicle production in North America through the first six months of the year, which showed a 72-percent boost. This increase stems from the fact there hasn't been the rampant plant closures that occurred last year.

Despite the early surge in production, it isn't likely to continue at this rate. The slope of production increase is expected to dip down to 9 percent when the second half of 2010 is put up against the same period of 2009.

Continuing on, officials noted that vehicle inventory levels are still "disciplined." At June's end, days' supply stood at 55 days. This was up moderately from the May level of 49 days.

As far as the rest of the year, J.D. Power is keeping its projection for full-year 2009 light-vehicle production intact. The firm is predicting production to reach 11.4 million units, which would be ahead of 2009 levels by more than a third (up 34 percent).

Thanks to a numbers boost on the production front and assembly consolidation, capacity utilization is likely to reach 65 percent this year, officials noted.

"In 2009, the utilization was at a very low 48 percent due to the weak sales and production environment," they added.