BLACK BOOK – Market Insights – 3/15/2022

Wholesale Prices, Week Ending March 12th

Overall market declines continued last week, but the rate of declined lessened. However, week-over-week adjustments are still larger than typically experienced this time of year, as the market still waits to see if we will see the “spring bump”.

                                       This Week     Last Week       2017-2019 Average (Same Week)

Car segments                     -0.81%          -0.97%              -0.12%

Truck & SUV segments    -0.56%          -0.85%               -0.34%

Market                               -0.64%          -0.89%               -0.25%

Car Segments

  • On a volume-weighted basis, the overall Car segment decreased -0.81%. For reference, the previous week, cars decreased by -0.97%.
  • All nine Car segments declined last week.
  • The Compact Car (-0.38%) segment slowed the rate of decline last week, compared with -0.72% the prior week. The same week in 2019 had a decline of -0.46%.
  •  Sporty Car (-1.33%) reported a third week of declines exceeding 1%.

Truck / SUV Segments

  • The volume-weighted, overall Truck segment decreased -0.56%, compared to the prior week’s decrease of -0.85%.
  • Eleven out of the thirteen Truck segments reported declines.
  • Full-Size Vans (+0.37%) increased for a fifty-ninth week, with an average weekly increase of +0.62%.
  • Despite rising fuel prices, Full-Size SUVs reported stability last week, with a minimal increase of +0.01%.
  • The smaller luxury crossover segments, Sub-Compact and Compact, had large declines, -1.02% and -1.11%, respectively.

Weekly Wholesale Index

Calendar year 2020 and 2021 ended with used wholesale prices at elevated levels. With economic patterns (including the automotive market) driven by the pandemic, normal seasonal patterns (e.g., 2019 calendar year) in the wholesale market were not observed for most of the last 2 years. We saw a similar picture in 2009, at the end of the Great Recession. Calendar year 2021 did not have typical seasonality patterns as the market had rapid increases in wholesale values for the majority of the year. The Wholesale Weekly Price Index reached the highest point of the year at the end of December, reporting over 1.51 points. Now, in calendar year 2022, the index has been reverted back to the 1.00 mark and overall wholesale prices have remained relatively stable in the month of January (green line). As we moved into March, the Wholesale Weekly Price Index continued to decline and is now just below the 2019 trend line, around 0.97.

The graph below looks at trends in wholesale prices of 2-6-year-old vehicles, indexed to the first week of the year. The index is computed keeping the average age of the mix constant to identify market movements.

Retail (Used and New) Insights

  • Volvo Cars began testing a new wireless charging technology for their electric XC40 Recharge in a live city environment in Sweden.
  • Volkswagen unveiled the ID Buzz passenger van and ID Buzz Cargo recently – orders are expected to open this year with deliveries in 2024.
  • Chevrolet teased the 2024 Blazer EV SS, which will become the brand’s first performance EV; the Blazer EV will go on sale in 2023.
  • Ford and its dealer council will launch “Electric University” -a multiday educational program– to give personnel a crash course in all things EV.
  • Mercedes announced that the Sprinter will be switching to an all-wheel-drive system with a four-cylinder lineup for 2023.
  • GM announced plans to build a $393M EV battery materials plant in Quebec with South Korean firm Posco Chemical with construction beginning immediately and scheduled productions starting in Q1 2025.

Used Retail Prices

Used Retail Prices are more accessible than in years past, due to the proliferation of ‘no-haggle pricing’ for used-vehicle retailing. Transparent pricing upfront makes the car buying process more enjoyable for customers and allows Black Book to accurately measure retail market trends.

At the on-set of the pandemic, in CY2020, used retail prices increased slightly, following typical seasonal patterns, and then began dropping in April, finally hitting a low point in the late spring months. By late summer of CY2020, Used Retail Prices increased as supply of new vehicle inventory started to become scarce, but retail demand slowed down at the end of CY2020, resulting in declining retail asking prices for the last several weeks of the year. When CY2021 kicked off, demand rebounded while retail prices lagged slightly behind wholesale prices; March of 2021 started the dramatic increases in Used Retail Prices, fueled by stimulus payments, tax season, and shortages of new inventory. During the third quarter, retail prices continued to rise at a slower rate but soon picked up the pace once again to start the fourth quarter. In Q4, prices on retail listings steadily increased week after week. As CY2021 came to an end, the retail listing price index closed 36% above where the year began.

In the two months of 2022, the Retail Listings Price Index remained relatively unchanged (green curve on the graph below), but as we head into March, the Index sits just above 0.99, indicating a very slight decrease in retail pricing. Typically, there is a lag between changes in wholesale prices and retail prices.

This analysis is based on approximately two million vehicles listed for sale on U.S. dealer lots. The graph below looks at 2-6-year-old vehicles. The index is computed keeping the average age of the mix constant to identify market movements.

Inventory

Used Retail

Used Retail Listing Volume has dropped slightly this week and now sits back around 1.00 – where we started the year.

Used Retail Days-to-Turn remains fairly stagnant this week and sits around 42 days.

Wholesale

The lanes are heating up as dealers plan for a spring / tax-season market. Franchise dealers have been somewhat absent as they continue to purchase upstream or at grounding, but large independent dealers and rental companies have been hot and heavy in lane. With several manufacturers freezing fleet sales, rental companies have struggled to meet demand and have been actively purchasing vehicles both in lane and at dealerships; it seems like rental companies have started being more active in lane as covid restrictions are rolled back and Americans prepare to travel. As wholesale values continue to decrease – this week at –0.64%, more than twice the depreciation seen this same week pre-pandemic – some sellers are still holding tight to their floors while others sell it all. With additional production constraints due to chip and raw material shortages, and OEMs warning against aggressive dealer market adjustments, used vehicles will be in the spotlight again as we head into the first big buying season of the year.

The Estimated Average Weekly Sales Rate has started picking up over the last few weeks and is at 65% this week. This is a positive indicator of a traditional spring / tax-season market. In March of 2021, the Estimated Average Weekly Sales Rate increased around 10 percentage points in a 6-week period, from around 64% to 75%.

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