Black Book Market Insights – 5/24/2022

Wholesale Prices, Week Ending May 21st

The overall market continued to experience increases last week, with the more fuel-efficient segments reporting some of the largest gains. Despite high fuel prices, the Pickup segments, both Small and Full-Size, reported increases. Sales rates at the auctions continue to be strong as the potential for new vehicle inventory continues to look grim.

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

Car segments                     +0.37%       +0.44%               -0.22%

Truck & SUV segments    +0.11%        +0.10%               -0.11%

Market                               +0.20%        +0.21%               -0.16%

Car Segments

• On a volume-weighted basis, the overall Car segment increased +0.37%. For reference, the previous week, cars increased by +0.44%.

• Eight of the nine Car segments increased last week.

• Compact Cars increased for a ninth consecutive week. Last week, the segment gained another 0.68%.

• Near Luxury Car (+0.20%) and Prestige Luxury Car (+0.23%) accelerated the rate of gains last week, compared to the prior week’s increases of +0.13% and +0.11%, respectively.

• Premium Sporty Car continued to be the only Car segment to report a decline with the segment falling -0.35% last week. The segment has been declining for 24 consecutive weeks now.

Truck / SUV Segments

• The volume-weighted, overall Truck segment increased +0.11%, compared to the prior week’s increase of +0.10%.

• Nine out of the thirteen Truck segments reported increases.

• Full-Size Trucks increased for the second week, +0.11% compared to the prior week’s increase of +0.08%.

• The less fuel-efficient SUVs, Full-Size and Full-Size Luxury, reported the largest declines last week, of -0.16% and -0.30%, respectively.

• Full-Size Vans declined -0.06%, but this is interpreted as stability in this market, after a record setting streak of increases. It is expected that the Full-Size Van segment will return to gains soon though, as new supply has not improved.

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 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

• Hyundai Motor Group confirmed that their $5.5 billion EV factory will be located about 30 miles northwest of Savannah, Georgia; all vehicles produced there will be sold in the U.S.

• Honda unveiled their all-electric 2024 Prologue crossover, which will feature Honda’s exterior and interior design but will leverage GM’s Ultium platform and batteries.

• Tesla has stopped taking orders for the Cybertruck pickup truck outside of North America, due to high demand.

• Kia revealed plans to launch a lineup of electric purpose-built vehicles focused on commercial buyers including delivery vehicles, passenger shuttles, or even mobile shops.

• Mercedes presented the Vision AMG concept, providing a look into AMG’s all-electric future, which is expected to start in 2025.

• US Sales of Genesis’s new 2023 GV60 electric AWD compact crossover have begun; deliveries will be limited to California, Connecticut, New Jersey, and New York with the entry-level Advanced AWD model starting at $59,980.

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 increased in the last week and now is right at 1.00, where the calendar year began.

The Used Retail Days-to-Turn Estimate remains stagnant, sitting just below 35 days.

Wholesale

Model year 2022 vehicles are popping back up in lane – hopefully this is an indicator that OEMs are getting ready to launch more of their MY23 models. Rental companies continue to be active, both as sellers of high-mileage vehicles and as extremely competitive buyers. After some weeks of less participation, rental companies have really stepped up their bidding in the last week. It seems like OEMs are leaning towards closed sales lately, at least initially, to give priority to their franchise dealers. Large independent dealers are still looking to the auction lanes as a method of sourcing inventory. Newer used vehicles (0–2-year-old) continue to be coveted, especially with low mileage and a high CR, as a replacement for new vehicle inventory, but the high-mileage, older models may be starting to slow down after many weeks of increased interest.

The Estimated Average Weekly Sales Rate remains at 73% this week. This is the highest estimated average since October of 2021.