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Weekly Recap: The implications of strong new car sales

New car sales are on a roll in the United States this year, and analysts are optimistic the industry will maintain its torrid pace. Sales increased 1.6 percent in May and reached an eye-popping seasonally-adjusted selling rate of 17.8 million, the strongest pace since July 2005, according TrueCar research. That positions the industry for one of its strongest years ever, as consumer confidence, low interest rates, low fuel costs, and an influx of new products propel gains. In addition to the positive economic factors, May also featured warmer weather across much of the US, an extra weekend, and it came on the heels of relatively weak April sales. Analysts suggest income tax refunds and the promise of summer driving and vacations also traditionally help May sales. "While 2015 will be one of the best years in the history of the US industry, in some ways it may be the very best ever," IHS Automotive analyst Tom Libby wrote in a commentary. "Not only are new vehicle registration volumes approaching the record levels of the early 2000s, but now registrations and production capacity are much more closely aligned so the industry is much more healthy." Capacity, an indicator of the auto sector's health, is also expected to grow. Morgan Stanley predicts it will eventually hit at least 20 million units per year, as many companies, including General Motors, Ford, Tesla, and Volvo are investing in new or upgraded factories. "The best predictor of US auto sales is the growth in capacity, and frankly, we're losing count of all of the additions – there's literally something new and big every week," Morgan Stanley said in a research note. Transaction prices, another telling indicator, also continue to show strength. They rose four percent in May to $32,452 per vehicle, and incentives dropped $10 per vehicle to $2,661, TrueCar said. "New vehicle sector and segment preference indicates consumers are confident about the economy and their finances," TrueCar president John Krafcik said in a statement. Still, Morgan Stanley noted the robust sales did little to immediately impact automaker stock prices and suggested it might be a prime time to sell if sales reach the 18-million pace. "Perhaps the biggest reason may be that investors have seen this movie before," the firm wrote.

Fernando Alonso sputters in his Indy test

INDIANAPOLIS — Helio Castroneves and Fernando Alonso kept waiting around Wednesday. Now both international stars have some unfinished business to take care before qualifying for this year's Indianapolis 500. After enduring a rain delay of more than four hours then watching IndyCar regulars turn laps at Indianapolis Motor Speedway for two more hours, Castroneves and Alonso finally made it onto the track — but couldn't quite complete their refresher course. "Happy to be back here because this place is great," Alonso said after posting a fast lap of 218.690 mph — the slowest of the nine-driver evening session. "We were slow because the weather and some of the decisions people made on running time and things like that." He faced a bevy of problems in his first trip back to Indy since an impressive rookie performance in 2017. The rain delay forced organizers into rescheduling the one-day test, moving the rookie and refresher driver time from midday to the evening, cutting a significant amount of practice time for Alonso and the others. And when the green flag finally waved, Alonso's No. 66 car stalled in the warmup lane forcing the two-time Formula One champion from Spain to be towed back to pit lane where his crew worked feverishly to fix an electrical problem while sat in the cockpit. Eventually, he did get out and passed the first of two refresher phases. He'll have to wait until opening practice of the 500 on May 14 to pass the second. "It was frustrating for everyone because it was a brand new chassis and a brand new car, so we expected to run a lot," said Alonso, who drives for McLaren Racing. "If we could have had this at midday, you could work on your issues in the afternoon and then go out again." To put his day in perspective, Takuma Sato, the 2017 Indy winner from Japan, posted the fastest lap of the day at 226.993 mph and Colton Herta was the fastest rookie at 226.108. Castroneves, as usual, was good right from the start and posted a fast lap of 225.565. The three-time Indianapolis 500 winner looked smooth and fast on his favorite track and wasted no time passing the first phase. That much should have been expected from the popular Brazilian, who has recorded seven top-three finishes in 18 Indy starts and will make his season debut May 11 in the IndyCar Grand Prix. The weather and yellow flags prevented four of the five veterans — Castroneves, Alonso, Oriol Servia and JR Hildebrand — from passing phase two. Only Indy native Conor Daly made it.

Next-gen Chevy Volt will get 1.5-liter, four-cylinder engine

As General Motors gets ready to unveil the new Chevy Volt at the Detroit Auto Show in January, it's starting to reveal a few more details about the updated plug-in hybrid. Today should be fruitful on that front, thanks to an event GM is hosting today that focuses on the new Volt, and we've just had the first bit of new: a bigger engine is coming. Since the beginning, the Volt has used a 1.4-liter, four-cylinder engine as a range extender when the battery runs dry. The second-generation model will instead get a slightly larger 1.5-liter, four-cylinder engine that will be built in Flint, MI. That's a step up from the various engines that have been a part of the 2016 Volt's rumored mills, everything from a 1.0-liter or 1.2-liter three-cylinder to a 2.0-liter turbo. The confirmation about the new 1.5-liter powerplant was found in Automotive News, where we also heard again that GM is going to start building the new Volt's electric drive unit in Detroit, moving production up from Mexico. We will have more information on the 2016 Chevy Volt later today.