BLACK BOOK – Market Insights: Week of 1/4/2022

Wholesale Prices, Week Ending January 1st

2021 was a wild ride, but the final two weeks of the year reported minimal declines in values after a year of record-breaking increases. Not only did values soften, but sales rates also dropped with buyers stepping back from the high floors set by the sellers.

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

Car segments                        -0.10%       -0.08%               -0.57%

Truck & SUV segments       +0.01%       +0.02%              -0.57%

Market                                 -0.03%       -0.01%              -0.57%

Car Segments

• On a volume-weighted basis, the overall Car segment decreased -0.10%. For reference, the previous week, cars decreased by -0.08%.

• Compact Cars decreased for a fifth consecutive week, -0.20% after the prior week’s decline of -0.32%.

• Mid-Size Cars continue to increase. This past week’s increase of +0.04% marks the twentieth week of gains for an average weekly increase of +0.59%.

• The Prestige Luxury Car (+0.18%) segment also reported an increase this past week. By comparison, in the same week in 2019 reported a decline of -0.63%.

Truck / SUV Segments

• The volume-weighted, overall Truck segment increased +0.01%, compared to the prior week’s increase of +0.02%.

• Full-Size Vans reported another week of gains, increasing +0.41%. This now marks the forty-eighth increase in the last forty-nine weeks.

• The other two van segments, Compact and Minivan, also reported increases of +0.28% and +0.49%, respectively.

• The smaller Sub-Compact (-0.14%) and Compact Crossover (-0.31%) segments declined last week, while Mid-Size (+0.03%) and Full-Size (+0.11%) Crossover/SUV segments continued to increase.

Weekly Wholesale Index

Calendar year 2020 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 year. We saw a similar picture in 2009, at the end of the Great Recession. Calendar year 2021 has not had typical seasonality patterns as the market has had rapid increases in wholesale values for the majority of the year. After reaching record heights at the end of June, wholesale prices began to decline at a rate higher than the typical seasonal decline through July and most of August. As we moved into the Fall season, wholesale prices began to show positive movement once again. As calendar year 2021 has ended, wholesale prices started to stabilize, however still at noticeably elevated levels compared to prior calendar years. The Wholesale Weekly Price Index reached the highest point of the year last week, once again, this time 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.

Retail (Used and New) Insights

• CES, the world’s largest annual technology trade show, kicked off this week and electric vehicles are expected to take center stage with the unveiling of many vehicles including the electric Chevrolet Silverado and Chrysler Airflow. In addition, Vietnamese EV maker, VinFast, and the Turkey Automobile Enterprise Group are expected to make their debut in the US.

• Ford has stopped taking reservations for the F-150 Lightning after they hit 200,000. The all-electric pick-up truck is expected to be assembled at the Rouge Electric Vehicle Center with shipments beginning in the coming months.

• Hyundai Motor Group closed their research and development center for combustion engines in South Korea as they look to shift their focus to electric powertrain development.

• BMW confirmed EPA range ratings for the i4 sedan and iX crossover – both EVs top 300 miles of range in at least some versions.

Used Retail Prices

With the proliferation of ‘no-haggle pricing’ for used-vehicle retailing, asking prices accurately measure trends in the retail space. Retail demand slowed down at the end of 2020, and thus resulted in declining retail asking prices for the last several weeks of the year. As demand rebounded, retail prices lagged slightly behind wholesale prices, but March had an accelerated growth in retail prices. In April and May, retail prices picked up speed as demand accelerated, 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 have since picked up. In Q4, prices on retail listings have steadily increased week after week. As 2021 ends, the retail listing price index closed 36% above where the year began. The scarcity of both new and used inventory in the market continues to fuel these consistent increases.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.

Inventory

Used Retail

Used retail listings ended at the lowest point recorded throughout year, around 16% below where 2021 started. As we head into 2022, we can hopefully only go up from here, as dealers start preparing for spring market.

Days-to-turn for used retail listings slightly increased over the last few months of 2021. Now in 2022, days-to-turn sits just above 38 days.

Wholesale

Generally, in the fourth quarter, auction lanes can be exciting, with incentives and plenty of inventory to choose from. As 2021 came to a close, auction lanes were a drastically different environment. A lack of lease returns, rentals, and repossessions has made for an extremely scarce market leading to high floor prices and hesitant buyers, fearful of being left holding the bag on high priced inventory. Hopefully, as we head into the new year, new vehicle inventory will begin flowing back in so there is some sense of normalcy.

The weekly estimated average sales rate dropped dramatically, now at 60%, after showing some stability at the end of 2021. This is similar to the drop seen at the end of calendar year 2020.

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