BLACK BOOK – Wholesale Prices, Week Ending January 22nd

Weekly declines continued last week, but the rate of decline is still less than is typically experienced this time of year. Sellers are holding firm to floors, and we have yet to see conversion rates return to pre-holiday levels.

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

Car segments                         -0.26%       -0.19%              -0.49%

Truck & SUV segments        -0.13%       -0.11%              -0.39%

Market                                  -0.17%      -0.13%             -0.43%

Car Segments

• On a volume-weighted basis, the overall Car segment decreased -0.26%. For reference, the previous week, cars decreased by -0.19%.

• Eight of the nine Car segments declined last week.

• Mid-Size Car had the largest decline last week, at -0.43%.

• Sporty and Luxury Car segments also had large decreases, of -0.39% and -0.36%, respectively.

• Sub-Compact Car (+0.10%) reported a second week of gains. This same week in 2019, the segment reported a gain of +0.08%.

Truck / SUV Segments

• The volume-weighted, overall Truck segment decreased -0.13%, compared to the prior week’s decrease of -0.11%.

• Eleven out of the thirteen Truck segments reported declines.

• Full-Size Vans (+0.37%) reported another increase last week, marking a full-year of week-over-week increases for a +0.62% average weekly rate of gain.

• The Minivan (+0.10%) segment increased for a twenty-fourth consecutive week.

• Sub-Compact Crossovers had the largest decline last week, at -0.39%.

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 has 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 at 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.

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

• Bollinger Motors announced they will pivot away from their B1 and B2 consumer EVs to focus on commercial vehicles.

• BMW will halt the output of their V-12 engine this summer – ending a three decade-plus run – as the brand transitions to EVs.

• Ford plans to invest $63M over 3 years to form a joint venture with US security firm, ADT. The new AI-powered camera system will be called Canopy, and will offer vehicle surveillance systems for commercial and retail customers using cameras, sensors, and AI to alert owners of threats in real time.

• Ranault, Nissan, and Mitsubishi Motors plan to triple their investment to jointly develop electric vehicles. The “Alliance to 2030” plan to invest more than $23B over the next 5 years on EV development is expected to be announced this week.

• The Insurance Institute for Highway Safety (IIHS) released a new rating program for vehicles with partial automation that requires safeguards to help drivers stay focused and include ratings of “good,” “acceptable,” “marginal,” or “poor.”

• Sony unveiled the creation of a new mobility unit at CES that will focus on developing “entertaining” electric vehicles.

• Intel Corp plans to spend $20B on a massive chip making hub in the outskirts of Columbus, Ohio. The 2 fabrication plants on a 1,000–acre site should be operational by 2025 and will be used for research, development, and manufacturing.

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 also allows Black Book to accurately measure trends in the retail space.

During the on-set of the Covid-19 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. As 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 calendar year 2022, the index has been reverted back to the 1.00 mark. In the first several weeks of 2022, retail listing prices remain relatively unchanged as the market seems to be in wait-and-see mode.

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

As dealers prepare for the upcoming spring market, Used Retail Listings have started to increase in CY2022, following the trend of both CY2019 and CY2020. With some forecasted improvements on the semiconductor front, the number of listings is expected to continue increasing as we go into the spring market with more trade-ins and rental returns.

Used Retail Days-to-Turn has increased to over 40 days as consumer demand softened. Days-to-Turn has not been at this level since last year’s spring market – Days-to-turn went above 40 days in January 2021 and then dropped below the 40-day mark at the beginning of April and it has remained below that level ever since.

Wholesale

Auction lanes almost seem to be a secondary source for inventory for franchise and independent dealers as quality lease returns continue to be scarce. Franchise dealers are having more luck cherry-picking upstream while independents spend more advertising dollars to purchase direct from consumer. Rental companies are still in lane trying to pick up vehicles to better accommodate increasing demand due to an influx of travelers. Open recall units, damaged vehicles, and even repossessions are becoming normalized purchases as the semiconductor chip shortage continues to plague manufacturers. With such a limited supply of vehicles available, floor prices remain higher than many buyers are willing to pay. Whereas vehicle values continuously increased during the majority of the pandemic, in 2022, week-over-week values have been on the decline for a majority of segments, which is more typical of traditional seasonality expectations.

The Estimated Average Weekly Sales Rate has stayed fairly consistent over the last few weeks, in the low-60% range, after dropping during the last week of CY2021. This week, the Estimated Average Weekly Sales Rate at US Auctions sits at 63%. While we would like to see this improve, it may take some time as floors are being held high and buyers are hesitant to go all-in.