BLACK BOOK – Wholesale Prices, Week Ending April 9th

The overall market is still reporting declines, but the Car segments moved into positive territory last week. Older model years (8-to-16-year-olds) also had another week of outperforming newer model years. The spring / tax season market looks a little different this year: “sweat spot” for the buyers shifted toward older than normal vehicles. We are also starting to see the higher gas prices affecting the demand – all of the non-luxury car segments are appreciating in price and all larger crossover / SUV and pickup segments are depreciating at an accelerating rate.

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

Car segments                    +0.12%          -0.02%           +0.18%

Truck & SUV segments   -0.28%            -0.21%          +0.03%

Market                              -0.15%           -0.15%           +0.09%

Car Segments

• On a volume-weighted basis, the overall Car segment increased +0.12%. For reference, the previous week, cars decreased by -0.02%.

• Six of the nine Car segments increased last week.

• Compact (+0.45%) and Sub-Compact (+0.37%) Cars reported the largest increases last week, both increasing from the prior week’s increases of +0.30% and +0.01%, respectively.

• Premium Sporty Car reported the largest negative movement last week, with a decline of -0.13%.

• Near Luxury Car (-0.07%) and Luxury Car (-0.12%) also reported declines, but the decreases were much lower than the depreciation seen during any week this calendar year.

Truck / SUV Segments

• The volume-weighted, overall Truck segment decreased -0.28%, compared to the prior week’s decrease of -0.21%.

• Four out of the thirteen Truck segments reported increases.

• Compact Crossovers increased for a second consecutive week, up +0.24% after the prior week’s increase of +0.11%.

• The Full-Size Crossover/SUV (-1.70%) segment reported the largest decline last week, most likely due to elevated gas prices.

• Despite high fuel costs, Sub-Compact Crossovers continued to decline (-0.13%) last week, which marks sixteen consecutive weeks so far.

• The Mid-Size Crossover/SUV segment’s depreciation rate sped up this past week, declining -0.47% compared to the prior week’s declines of -0.22%.

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 in the month of January (green line). As we moved into March, the Wholesale Weekly Price Index continued to decline and is now just below the 2019 trend line, around 0.97.

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 York Auto Show begins later this week, after the pandemic canceled it for the past two years. The event opens to the public on April 15th.

• Tesla’s new factory in Austin, Texas officially opened last week. This location will be responsible for production of the Cybertruck, as well as other Tesla models. At the opening event, Elon confirmed production of the Cybertruck for 2023 and committed to a robotaxi next year as well.

• General Motors and Honda announced they are working together to create a line of “affordable” electric vehicles that will be under $30,000. The plan is to have these cheaper EVs into the market by 2027.

• Nissan announced their plans to bring solid-state battery technology to market by 2028 through a partnership with NASA.

• Porsche is pursuing electric vehicles but isn’t giving up on traditional ICE vehicles either. Last week, they made a $75 million investment in a company that develops “e-fuels”.

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 continues to drop and now sits just above 0.95. The Index for CY22 resembles pre-pandemic trends and is an indicator that there may be some seasonal normality this year.

The Used Retail Days-to-Turn Estimate also dropped this week, and is now just below 37 days.

Wholesale

The strength of the 8-to-16-year-old vehicles continued last week, with the overall segment average increasing 0.18%, compared with the 2-to-8-year-old vehicles reporting a decline of -0.15%. The car segments increased +0.45% on the older vehicles, compared with the +0.12% increase of the 2-to-8-year-olds. Supply on the lanes is being dominated by trucks and crossovers/SUVs and sellers are holding firm to floors. Typically, this time of year, we would already be seeing 2022 model year vehicles being offered for sale, but this year they are a rare sight. Rental companies are still having some difficulties acquiring inventory from manufacturers directly and have been extremely competitive in lane; with Americans gearing up for summer travels, increased competition from rental companies is anticipated to continue through the fall.

The Estimated Average Weekly Sales Rate decreased a little last week to 67%, with sellers holding firm to floor pricing.