Black Book Market Insights – 8/2/2022

Wholesale Prices, Week Ending July 30th

The market experienced a significant decline last week, reminiscent of the declines experienced during Q3 of last year and the declines felt at the start of the pandemic. Auction lane conversion rates showed some slight improvement last week, as sellers have adjusted their floors to reflect the weakening consumer demand.

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

Car segments                       -0.91%         -0.45%                -0.31%

Truck & SUV segments      -0.84%         -0.48%                -0.19%

Market                                 -0.86%         -0.47%                -0.24%

Car Segments

  • On a volume-weighted basis, the overall Car segment decreased -0.91%. For reference, the previous week, cars decreased by -0.45%.
  • All nine Car segments decreased last week.
  • Sub-Compact Car (-0.21%) had the lowest level of declines last week across all reporting segments, but the rate of decline was the largest reported for the segment since early March.
  • The luxury segments are leading the declines with Near Luxury Car (-1.24%) and Prestige Luxury Car (-1.06%) having declines exceeding 1%.

Truck / SUV Segments

  • The volume-weighted, overall Truck segment decreased -0.84%, compared to the prior week’s decrease of -0.48%.
  • All thirteen truck segments reported decreases.
  • Full-Size Pickups (-0.84%) reported its largest single week decline since August 2021, when the segment had a decline of -1.48%.
  • The Full-Size Luxury Crossover/SUV and Sub-Compact Luxury Crossover segments reported the largest declines last week, of -1.76% and -1.67%, 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 2021, reporting over 1.51 points. Throughout 2022, the Index has remained stable compared to the beginning of the year.

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

  • MINI has reveals their new electric concept, the Aceman, which is positioned above the basic Cooper model, but below the Countryman and is slated to arrive in 2024.
  • Ford unveils the first electric pickup truck purpose-built for police departments: the 2023 Ford F-150 Lightning Pro Special Service Vehicle.
  • Bentley delays the launch of their first full-electric car to 2026 due to software delays.
  • Faraday Future has delayed the start of production and deliveries of their electric FF91 crossover to later this year.
  • South Korean automakers, Hyundai and Kia, will collaborate with a group of research institutes to develop “mobility solutions” for the moon.

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. The Index sits around 0.99, indicating a very slight decrease in retail pricing compared to the start of the year. 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 increased slightly and is just above where the year started.

The Used Retail Days-to-Turn Estimate has also increased and now sits just below 44 days.

Wholesale

The wholesale market last week did not change much, with still very few model year 2022 vehicles running through the lanes. Consistent with two weeks ago, older model years (model year 2017 to model year 2019) were still offered in the lanes with higher mileage and lower quality. Large independent dealers and franchise dealers were active in the lanes, and it looked as if sellers were softening their floors because sales rates were higher than they have been the last couple of weeks. Fuel prices for gas and diesel both decreased last week, and we can see the market continuing to soften. Overall, all car segment wholesale values had larger than average decreases last week. Luxury, Near Luxury, Prestige Luxury, and Compact Car segments had the highest declines. In the Truck segments, Full Size and Mid-Size Luxury Crossovers decreased the most. Compact Vans took a turn and are now in negative territory.

The Estimated Average Weekly Sales Rate remains somewhat stagnant, around the 67% mark.

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