Black Book: Market Insights

BLACK BOOK – Wholesale Prices, Week Ending November 13th

The gains continued last week, but the rate of increase has slowed for both cars and trucks. ‘No sale’s increased on the lanes this past week due to sellers raising floors and buyers exercising caution around lower condition units. Full-Size Vans continue to be a standout segment with increases in forty-one out of the last forty-two weeks.

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

Car segments                         +0.58%          +0.83%             -0.65%

Truck & SUV segments        +0.55%          +0.56%              -0.62%

Market                                   +0.56%          +0.65%              -0.63%

Car Segments

• On a volume-weighted basis, the overall Car segment increased +0.58%. For reference, the previous week, cars increased by +0.83%.
• All nine car segments reported gains again last week.
• Compact Cars had another large increase last week, +1.27%, compared to the prior week’s increase of +1.45%. This marks the thirteenth consecutive week of gains.
• Mid-Size Cars continue to have large increases, but the rate of increase is slowing. This past week was +0.95%, compared to the week prior at +0.95%, and the week before that was +1.08%.

Truck / SUV Segments

• The volume-weighted, overall Truck segment increased +0.55%, compared to the prior week’s increase of +0.56%.
• All thirteen truck segments reported gains last week.
• Full-Size Vans are on a hot streak due to their limited new and used availability, reporting a gain of +1.31%, compared to the week prior at +1.02%.
• The Compact segments, both mainstream (+0.88%) and luxury (+1.02%), reported large gains. However, both were smaller increases than the week prior at +1.03% and +1.15%, respectively.

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 a positive movement once again and reached the highest point of the year last week again, at 1.47.

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

• Rivian had its Nasdaq debut on Wednesday, giving the Amazon-backed electric vehicle maker a market valuation of more than $100 billion after the world’s biggest initial public offering this year.
• Lordstown Motors has delayed their electric pickup launch again – the Endurance has been pushed to Q3 of 2022.
• Subaru revealed their first mass-market EV, the compact SUV 2023 Solterra, ahead of its appearance at the LA auto show.
• GM announced the removal of heated seats from their crossovers and pickups starting this week due to chip shortage.
• Hyundai’s Genesis brand is scheduled to open Genesis House New York later this week – the space will be a fine dining and cultural experience center with an upscale Korean restaurant, a Genesis showroom, and an event space.
• Mazda is set to unveil the new CX-50 this week – the compact-crossover is expected to be manufactured in Alabama and is touted to have more premium features and be more lifestyle-oriented than the CX-5.

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 last year, and thus resulted in declining retail asking prices for the last several weeks of 2020. As demand rebounded, retail prices have 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. After continued strong increases, the retail listing price index has increased to just over 32% above where we started the year.

This analysis is based on approximately two million vehicles listed for sale on US dealer lots. The graph below looks at 2-6-year-old vehicles.

Inventory

Used Retail

After some stabilization in October, used retail listings have declined to around 17% below where we started the year. This volume trend goes against what is considered typical. The graph below shows that this is lower than what was seen in both CY19 and CY20. With significantly reduced new inventory volume and decreasing used inventory, it is no surprise that there are less retail listings available overall.

Days-to-turn for used retail listings have slightly increased and now sit just above 37 days, which is still lower than what is typically expected in a normal year, but is higher than this time last year.

Wholesale

Volume in the lanes appears to be slightly up this week as dealers, fleet companies, and manufacturers work to clear out vehicles at increased prices before end of the year. More buyers are headed to the lanes to stock up for winter sales events and start preparing for the spring market. With new inventory essentially being presold due to build-to-order sales strategies, newer used inventory continues to be a hot commodity invoking consistently stiff competition among franchise dealers, independent dealers, and rental companies.

The weekly average sales rate has been fairly consistent over the last few weeks but is starting to drop because sellers have continued to raise floors, even on damaged or lower quality vehicles, and buyers have some hesitation since demand is unknown and parts for repairs are largely unavailable. Wholesale values continue to increase though.

The overall wholesale market for 2-8-year-old vehicles increased by +0.56% last week, and 0-2-year-old vehicles increased +0.66%.

Originally posted on F&I and Showroom