Market Insights – 2/7/2023

Wholesale Prices, Week Ending February 4th

The reduction in weekly depreciation that started a couple of weeks ago continued again last week, with the market reporting the lowest overall depreciation we have seen since the end of June 2022. In addition to Sporty Cars continuing their upward momentum, the Compact Crossover segment also moved into positive territory, increasing for the first time since early June of last year.

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

Car segments                         -0.30%             -0.50%                  -0.32%

Truck & SUV segments        -0.23%             -0.50%                  -0.40%

Market                                   -0.25%             -0.50%                  -0.37%

Car Segments

• On a volume-weighted basis, the overall Car segment decreased -0.30%. For reference, the previous week, cars decreased by -0.50%.

• Eight of the nine Car segments decreased last week, with only one reporting a decline greater than 1% (Prestige Luxury, -1.17%).

• Mid-Size (-0.12%) and Full-Size (-0.14%) Car reported the smallest declines of the Car segments. Full-Size Car was in positive territory last week (+0.06%), but the segment has few players left so it is very sensitive to the movements of only a few models.

• Sporty Cars increased for a third consecutive week, for an average weekly increase of +0.12%.

Truck / SUV Segments

• The volume-weighted, overall Truck segment decreased -0.23%, compared with the prior week’s decline of -0.50%.

• Twelve of the thirteen Truck segments reported declines last week, with only one reporting a decline greater than 1% (Compact Van, -1.34%).

• Compact Crossovers (+0.14%) went positive last week for the first time since early June 2022. The segment has averaged a weekly rate of decline of -0.84% over the past 33 weeks.

• Full-Size Trucks reported minimal depreciation last week, only declining by -0.02%.

Weekly Wholesale Index

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.

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 three 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 most 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. In 2022, the price index was on a mild rollercoaster until July, after which point, prices were on a continuous decline until the end of the year.

Retail (Used and New) Insights

• Honda is planning a US produced hydrogen fuel cell CR-V crossover that will be available at the end of next year in the US. Honda’s new fuel cell system is a joint venture with General Motors.

• Mazda is releasing their first plug-in hybrid in the states with the 2024 CX-90, a three-row crossover. After the CX-90 will come a five-seater CX-70 that will also be available in a plug-in hybrid variant.

• Land Rover revealed the redesigned 2024 Range Rover Velar that not only has updated styling, but also a new eight-speed automatic transmission. The interior has also been updated, with the removal of all buttons and knobs. All controls are now located within the infotainment screen.

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. The index then remained relatively stagnant through most of CY2022. In the fourth quarter of 2022, the Retail Listings Price Index declines started, 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 index reverted back to one at the start of 2023. Currently, the index sits at 0.99 points.

The Used Retail Days-to-Turn estimate is around 50 days.

Wholesale

As we start off February, we’ve already seen sales rates and prices on some trucks and other segments increase from January. This is a positive sign that we may have hit the bottom of larger than normal declines and that the market may be on an upswing or rebound. This may still be too early to assume this, but there are several indicators out there showing this movement. For example, we are still seeing lower inventory volume at the auction, but the conversion rates are starting to increase from past weeks. As always, we will keep a close watch on the market and any developing trends. It will be interesting to see what sales rates do in the second week of February.

The Estimated Average Weekly Sales Rate increased to 47% last week.