BLACK BOOK – Market Insights

Wholesale Prices, Week Ending June 4th

The overall market continued to see positive movement last week, but some of the segments that have been catching our eye in recent weeks (Full-Size Trucks and Compact Cars) for their pricing movements are now doing so for different reasons. Full-Size Pickups and Compact Cars both slowed last week. Full-Size Pickups moved back into negative territory with a very slight decline of -0.002%. As for Compact Cars, the rate of gain was the lowest we have seen since the segment went positive (0.33%) the week of March 21.

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

Car segments                         +0.21%           +0.15%                  -0.31%

Truck & SUV segments        +0.06%            +0.10%                 -0.16%

Market                                   +0.11%            +0.12%                 -0.22%

Car Segments

• On a volume-weighted basis, the overall Car segment increased +0.21%. For reference, the previous week, cars increased by +0.15%.

• Seven of the nine Car segments increased last week.

• Increases for the Compact Car segment continue, but are slowing down, last week increasing +0.21% compared to the two most recent week’s gains of +0.54% and +0.68%. The segment has now increased for eleven weeks.

• Sporty Cars traditionally start to soften from their springtime strength by this point in the year, but they continued to increase last week with an additional gain of +0.62%.

Truck / SUV Segments

• The volume-weighted, overall Truck segment increased +0.06%, compared to the prior week’s increase of +0.10%.

• Eight out of the thirteen Truck segments reported increases.

• The Full-Size Luxury Crossover segment had the largest Truck segment decline for a second consecutive week, -0.38% compared to the prior week’s decline of -0.48%.

• Full-Size Pickups have been slowing down the rate of gains in recent weeks and this past week, the segment reported stability with the overall segment movements averaging out to -0.002%.

• Full-Size Vans continued to increase with an additional gain of +0.12% last 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 most 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 to the 1.00 mark. Overall wholesale prices have increased over the last several weeks, and it now sits just below where the year started.

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

• Volvo Cars and video game company Epic Games are partnering to improve driver-assistance technologies for Volvo’s next gen EVs.

• Lexus unveiled the completely redesigned 2023 Lexus RX midsize premium crossover with three electrified offerings in addition to the RX 350 gasoline model.

• Toyota announced Sienna Autono-MaaS, which combines ‘Autonomous’ with ‘Mobility-as-a-Service’ to create modified 2022 Sienna minivans with a new vehicle platform compatible with third-party autonomous driving kits and sensors.

• Buick previewed a new Wildcat 2+2 EV coupe concept as part of a plan to pivot to “Electra” battery-powered SUVs by 2030.

• Stellantis and Toyota Motor Europe announced their partnership on large-size commercial vans (ICE and EV) scheduled to hit the European market in mid-2024.

• Mobility platform DriveItAway Holdings launched a subscription program for Polestar 2 EVs that allows consumers to “test” an EV and put the subscription payments toward the purchase of the vehicle.

• Mercedes-Benz announced pricing for the EQB300; the electric crossover is expected to go on sale this summer starting at $56,800.

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 has increased to just over 1.03 for the first time since mid-January.

The Used Retail Days-to-Turn Estimate has increased to approximately 36 days.

Wholesale

Auction volume seems to be holding consistent over the last several weeks, although at a lower level than pre-pandemic. Wholesale vehicle value increases are slowing down, depending on segment, but sellers are still holding their floors in hopes of future increases. Holding floors with minimal room for negotiation is an indicator that there may not be a lot coming down the pipeline. Closed sales continue to pull in franchise dealers while independents and rental companies scour open sales for desirable inventory. It doesn’t seem like rental companies are having much luck getting new inventory directly from manufacturers, but they also have not been overly competitive in lane. Repossessions, recalls, and damaged vehicles are still making up a noticeable amount of the offered vehicles in lane. Until model year 2023 vehicles are launched en masse, these trends will most likely continue.

The Estimated Average Weekly Sales Rate has continued its descent and is now at 70% after several weeks of increases in April and May.