Black Book Market Insights – 10/4/2022

Wholesale Prices, Week Ending October 1st

The market continued its descent last week, with the level of decline still exceeding what is typically experienced this time of year. However, the rate of decline did lessen slightly to an overall market decline of -0.77%, after multiple weeks that hovered around -0.90%.

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

Car segments                            -0.80%              -0.87%                    -0.42%

Truck & SUV segments           -0.75%              -0.90%                    -0.31%

Market                                      -0.77%              -0.89%                    -0.35%

Car Segments

• On a volume-weighted basis, the overall Car segment decreased -0.80%. For reference, the previous week, cars decreased by -0.87%.

• All nine Car segments decreased last week.

• Mid-Size Car reported the largest decline last week, at -1.01%. Prestige Luxury Car (-1.00%) and Sporty Car (-0.96%) also had large declines.

•  Sub-Compact Car reported the smallest decline last week, of -0.39%, which was a much smaller decline than the previous three weeks that averaged a weekly change rate of -0.60%.

Truck / SUV Segments

• The volume-weighted, overall Truck segment decreased -0.75%, compared to the prior week’s decrease of -0.90%.

• Twelve of the thirteen truck segments reported declines.

• The Sub-Compact Luxury (-1.34%) and Compact Luxury (-1.19%) Crossovers reported the largest declines last week. A change from the Mid-Size and Full-Size Luxury segments having the largest declines for numerous weeks.

• Full-Size Van continues to trend down, but the rate of decline last week was a minimal -0.02%.

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.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

• BMW announced an all-new plug-in hybrid SUV, the XM; pricing starts at $159,995 and deliveries are expected early next year.

• Pricing for the 2023 Audi Q4 e-tron has been released; the electric compact crossover will start under $50,000 including delivery, making this Audi’s entry level EV SUV.

• The 2024 Polestar 3 crossover is expected to be unveiled on October 12th; the all-electric CUV is expected to have 300+ miles of range.

• As part of a plan to shift to electric, Jaguar/ Land Rover has launched a training program to retrain employees and retailers globally over the next three years.

• Ford revealed their redesigned 2023 Super Duty lineup, which is expected to go on sale early next year – pricing is not yet available.

• Hertz announced a partnership with BP to build charging stations across the US with a goal of having 100,000 chargers by 2030.

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.

Now in the fourth quarter of 2022, the Retail Listings Price Index has started to decline, but not as steep as the wholesale price index.

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 active listing volume continued to increase last week, with the weekly index reaching 1.12 (meaning that the volume is about 12% higher than at the beginning of this year).

The Used Retail Days-to-Turn Estimate is around 43 days.

Wholesale

Given the circumstances of Hurricane Ian making landfall last week, and some auction locations temporarily closing, the overall sales rates were lower than prior weeks. Buyer count was still strong and there were competitive bids, but the sellers were still holding onto their floors in hopes that the market will move into positive territory. With inventory being down last week, this might be why sellers are holding tight to their floors because of the law of supply and demand. Large independent dealers and small franchise dealers dominated the lanes last week and were aggressive in casting their bids going back and forth. Conditions of these vehicles were not as great as we have seen in the past, and we can hypothesize that conditions might stay the same or get worse as we anticipate seeing some flood vehicles running through the lanes as an effect of the hurricane. The price of gas has been decreasing since the beginning of July, and it took a turn last week and increased 6 cents. Diesel decreased 7 cents and has been decreasing in small increments since the beginning of September. Overall, we had a week of decreases over all Car and Truck Segments.

The Estimated Average Weekly Sales Rate dropped to 55% last week.