Wholesale Prices, Week Ending July 24th

Used wholesale market prices continued their descent this week, but at a slightly lower rate than last week. Overall, used wholesale values declined -0.54% from the prior week; when comparing this to the same week in prior years, this week’s decrease is more than doubled. While this is the fourth consecutive week of declining wholesale values, decreases are still relatively modest compared to year-to-date gains.

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

Car segments                       -0.63%        -1.03%                  -0.29%

Truck & SUV segments      -0.49%         -0.41%                 -0.22%

Market                                 -0.54%         -0.62%               -0.25%

Car Segments

• On a volume-weighted basis, the overall Car segment decreased -0.63%. For reference, the previous week decreased by -1.03%.

• Sub-compact cars had the only weekly gain (+0.31%) and has increased for 24-consecutive weeks.

• Mid-size cars had the steepest decline at -1%.

• Eight of the nine segments declined this week.

Truck / SUV Segments

• On a volume-weighted basis, the overall Truck segment decreased -0.49% this past week. For reference, the previous week decreased by -0.41%.

• Compact & Full-size Vans had minor weekly gains at +0.07% and +0.09%, respectively.

• Sub-compact Luxury Crossover had the steepest decline at –0.94%, followed closely by Small Pickups (-0.85%) and Sub-compact Crossovers (-0.81%).

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 had rapid increases in wholesale values for the majority of the year so far. After reaching record heights at the end of June, wholesale prices started to come down in July.

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

• Tesla CEO, Elon Musk, announced that Tesla would open the Supercharger network to other automakers by the end of the year.

• Daimler announced its EV strategy this week, revealing plans to introduce only new EV platforms after 2025, and be all-electric after 2030.

• In addition to the Hummer, GMC announced another electric pickup is in the works – it will share many components with the Silverado.

• EV startup Rivian plans to build a second U.S. assembly plant that will also include battery cell production.

• Volkswagen’s Herbert Diess has confirmed that VW will roll out a VW ID.8, which will be comparable to the midsize VW Atlas.

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. In June, retail prices continued to rise. After 19 weeks of continuous increases, retail prices seemed to reach their peak last week; like wholesale prices, we saw a slight drop in retail listing prices. Currently, retail prices are just under 25% 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

Current used retail listing volume is about 11% below the start of the year. As retail demand softened in the last several weeks (both for new and used vehicles), used inventory remained relatively flat but is now starting to decrease again.

Days-to-turn started to increase last week, as retail demand has softened in the last several weeks.

Wholesale

As floor pricing remains strong and the availability of average and clean vehicles continues to be scarce, conversion rates have been going down over the last several weeks. The average sell rate now sits around 65%, which is the lowest average rate since the beginning of March. We anticipate sell rates will slowly fall until floor prices come down.

Despite the limited inventory on dealer lots, dealer lanes continue to have higher volume at auction, while manufacturers’ remarketing lanes are offering less and less in open sales channels. Dealers have found creative ways to diversify their source of inventory, and their innovation seems to be paying off, as some continue to have record-breaking sales months.

Sellers are becoming more flexible with their floors in the lanes as vehicle values start to decrease. With semiconductor chips still in short supply, the new inventory pipeline continues to be extremely limited. Because of the scarcity in the wholesale market, vehicles with slight damage or open recalls are still selling, if the price is right.