Black Book: Market Insights

BLACK BOOK – Market Insights – 6/14/2022

Wholesale Prices, Week Ending June 11th

Fuel prices appear to still be having a heavy influence on the demand in the wholesale marketplace. Compact Cars continue to perform very well along with Sub-Compact Crossovers, but the gas-guzzling Full-Size SUV segments continue to experience the heaviest depreciation, as demand in the lanes wanes for these vehicles.

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

Car segments                      +0.26%       +0.21%      -0.39%

Truck & SUV segments     +0.03%        +0.06%      -0.21%

Market                                +0.10%        +0.11%      -0.28%

Car Segments

• On a volume-weighted basis, the overall Car segment increased +0.26%. For reference, the previous week, cars increased by +0.21%.
• Seven of the nine Car segments increased last week.
• Compact Cars had another week of gains, with the segment increasing an additional +0.76%. The segment has now increased for twelve consecutive weeks, with an average weekly increase of +0.58%.
• Luxury and Premium Sporty were the only Car segments to report declines, -0.20% and -0.16%, respectively.
• Sporty Car had another impressive week, increasing +0.51% after the prior week’s +0.62% value jump.

Truck / SUV Segments

• The volume-weighted, overall Truck segment increased +0.03%, compared to the prior week’s increase of +0.06%.
• Eight out of the thirteen Truck segments reported increases.
• The Sub-Compact Luxury Crossover segment reported the largest Truck segment increase, with a gain of +0.41%. The mainstream Sub-Compact Crossover segment had the second highest gain at +0.28%.
• In sharp contrast, the Full-Size (-0.40%) and Full-Size Luxury (-0.26%) Crossover/SUV segments reported the largest declines.
• The Pickup segments, Small (+0.15%) and Full-Size (+0.14%), are continuing to report gains, despite high fuel prices.

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. Overall wholesale prices have increased over the last several weeks and now sits just below where the year started.

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

• Polestar is expected to launch the Polestar 3, a sporty electric midsize crossover with an expected range of 372 miles, in the U.S. in the first quarter of 2023.
• Through an expanded partnership with Bank of America, Lucid Group Inc. is adding 24-month, 36-month, and 48-month leasing options for its luxury EV Air sedan.
• Michigan-based EV-truck startup, Electric Last Mile, files for Chapter 7 bankruptcy almost one year after they went public.
• The U.S. federal government administration has proposed a rule that would set minimum standards and requirements for federally funded electric vehicle charging stations as part of their plan to build a nationwide network of 500,000 EV charging stations by 2030 with funding from the $1 trillion infrastructure law.
• European Union lawmakers voted to uphold a ban on new combustion engine cars from 2035, which effectively outlaws sales of new cars with internal-combustion engines after that date.

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.

So far in 2022, the Retail Listings Price Index has remained relatively unchanged (green curve on the graph below), The Index sits around 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 slightly decreased but is still over the 1.00 line at around 1.02.

The Used Retail Days-to-Turn Estimate is on the rise, sitting just below 38 days.

Wholesale

The wholesale channels have remained somewhat consistent as new vehicle inventory continues to be scarce. Some key trends have been identified including increases of clean MY22 vehicles going through the lanes, increase of closed sales for franchise dealers, increase of announced repossessions, and the noticeable absence of some large independent dealerships. Franchise dealers are most active in the closed sales and have not been overly competitive in other lanes. Rental companies are still actively buying inventory in the wholesale lanes. Sellers seem to be holding on to their floors, waiting for the right buyer or for prices to increase. Clean, low mileage vehicles continue to be desirable, especially for newer model years (MY20-MY22) and also some of the older models (MY14-MY16). It has been speculated that late federal income returns have some typical-spring market buyers still looking for affordable vehicles. The auction lanes will most likely continue these trends until the new MY23 vehicles start to launch in masse.

The Estimated Average Weekly Sales Rate are back on the rise, now at 71%, after a few weeks of declines.