BLACK BOOK – Market Insights – 4/26/2022

Wholesale Prices, Week Ending April 23rd

The car market continued its ascent last week, with the rate of gain accelerating to 0.23%, larger than the typical increase for this time of year. However, the overall market is still not seeing the increases that are traditionally experienced this time of year. Despite fuel prices softening from their peak, the Full-Size SUVs continue to experience heavy weekly depreciation and in contrast, the Compact Cars are continuing to see increasing levels of gains.

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

Car segments                      +0.23%         +0.05%            +0.17%

Truck & SUV segments     -0.14%          -0.33%             +0.02%

Market                                -0.03%          -0.20%             +0.08%

Car Segments

• On a volume-weighted basis, the overall Car segment increased +0.23%. For reference, the previous week, cars increased by +0.05%.

• Six of the nine Car segments increased last week.

• Compact Cars (+0.92%) reported the largest increase the segment has seen since November 2021. This marks the fifth consecutive week of increases for the segment. Similarly, Sub-Compact Car (+0.53%) increased for a sixth consecutive week.

• Luxury Car (-0.52%) and Premium Sporty Car (-0.31%) were the only Car segments to report notable declines. Sporty Car also declined, but it was a minimal -0.06%.

Truck / SUV Segments

• The volume-weighted, overall Truck segment decreased -0.14%, compared to the prior week’s decrease of -0.33%.

• Six out of the thirteen Truck segments reported increases.

• The more fuel-efficient Crossovers reported increases last week, with Compact Crossovers increasing +0.55%, followed by Sub-Compact and Sub-Compact Luxury Crossovers, both increasing by +0.26%.

• The gas-guzzling Full-Size Crossover/SUV segment had another large week of declines, -2.25% after the prior week’s decrease of -2.14%.

• Full-Size Vans slowed the rate of gain with an increase of only +0.01%, compared to +0.26% the prior week.

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 remained relatively stable after February’s declines.

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

• The new $4 billion Stellantis-LG EV battery plant construction is expected to begin by this summer; it is the largest single automotive investment in Canadian history and is expected to spark the country’s electric-vehicle revolution with a new supply chain and thousands of jobs.

• Lexus unveiled the new RZ crossover which is scheduled to go on sale in October, starting in China and Europe, and then roll into the U.S.

• Mercedes-Benz is scheduled to start production of the Mercedes-Benz EQS EV SUV in June at the automaker’s Alabama factory; the new three-row utility vehicle will arrive in the U.S. in late 2022.

• Nissan has ended global production of Datsun vehicles, which was revived in 2013 as a low-cost emerging market brand.

• Ford is ending production of the three-door variant of the Fiesta globally; in addition, Ford will further streamline the Fiesta lineup to accelerate output. The Fiesta remains discontinued in the US market.

• GM announced that they will launch an “electrified” version of the Corvette sports car in 2023, followed by a fully electric version later.

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 slightly increased this week, staying in close proximity to the CY20 trend line, and now sits around 0.98.

The Used Retail Days-to-Turn Estimate has continued to drop over the last few weeks and remains below 36 days.

Wholesale

The Spring market seems to be in full swing, with increasing values, lower used days to turn and increased sales rate estimates. In the lanes, both nearly new and 8+ year old models seem to be making splashes, as franchise dealers make up for the lack of new inventory, while independents search for sub-$10,000 inventory to meet the spring market demand. Rental companies still have some presence but are not as active as they have been in recent weeks. Large independents are showing up here and there but haven’t been consistent. A few sellers are still holding out with high floor prices since they know inventory will continue to be scarce, and other sellers are taking advantage of the recent increases in some segments’ wholesale values and letting it all go. Low mileage, clean vehicles are still bringing premium prices in lane but with new model launches right around the corner, it may not last too much longer.

The Estimated Average Weekly Sales Rate jumped up a bit last week and is now at 69% – it hasn’t been at this level since December of 2021.