BLACK BOOK – Wholesale Prices, Week Ending January 29th

The overall market reported another week of softening wholesale prices, with nineteen out of the twenty-three reporting segments declining. The Van segments are the exception, with continual increases, particularly in the Full-Size Vans segment due to the ongoing low new and used supply.

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

Car segments.                    -0.35%         -0.26%              -0.42%

Truck & SUV segments    -0.34%         -0.13%              -0.37%

Market                               -0.34%         -0.17%              -0.39%

Car Segments

• On a volume-weighted basis, the overall Car segment decreased -0.35%. For reference, the previous week, cars decreased by -0.26%.

• Eight of the nine Car segments declined last week.

• Mid-Size Car had the largest decline last week, at -0.64%, compared with the prior week’s decline of -0.43%.

• Sporty and Full-Size Car segments also had large decreases, of -0.43% and -0.40%, respectively.

• Sub-Compact Car (+0.04%) reported a third week of gains. This same week in 2020, the segment reported a decline of -0.58%.

Truck / SUV Segments

• The volume-weighted, overall Truck segment decreased -0.34%, compared to the prior week’s decrease of -0.13%.

• Ten out of the thirteen Truck segments reported declines.

• Full-Size Vans (+1.36%) reported another increase last week. The segment has experienced an average weekly rate of increase of +0.65% over the last 52 weeks.

• The Compact Van (+0.25%) and Minivan (+0.05%) segments also reported increases last week.

• Full-Size Crossover/SUVs segment had the largest decline last week, at -0.63%. Full-Size Pickups were not too far behind with a decline of -0.52%.

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 has 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 have remained relatively stable in the month of January (green line).

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

• BMW announced that they will end production of their i3 full-electric compact hatchback in July.

• Tesla advised that the much-anticipated Cybertruck will not launch until at least 2023 due to the ongoing semiconductor chip shortage; CEO Musk also confirmed that they are not working on a less expensive Model 2 car but hope to in the future.

• Bentley plans to switch their entire model range over to full-electric by 2030 and will start production of their first full-electric car in 2025.

• On Jan. 27th, Ford suspended new customer orders for the hybrid compact pickup truck, the Maverick, due to rising backlog of orders.

• The National Automobile Dealers Association (NADA) has committed to hosting their March Las Vegas convention in person.

• Lamborghini will launch their first plug-in hybrid model in 2023 as they move to electrify their lineup by 2024.

• Cadillac has begun pre-production of the Lyric electric crossover, due to go on sale later this year as a 2023 model.

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 also allows Black Book to accurately measure trends in the retail space.

During the on-set of the Covid-19 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. As 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.

Now, in calendar year 2022, the index has been reverted back to the 1.00 mark. In the first month of 2022, the retail listing price index remains relatively unchanged, as the market seems to be in wait-and-see mode.

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 decreased slightly but still sits above where CY2022 began. We anticipate that used retail listings will increase in the coming weeks as dealers attempt to stock their lots.

Week numbering in the graph was adjusted to use ISO week numbering convention.

Used Retail Days-to-Turn now sits above 42 days. In the current atmosphere, this seems high, but pre-pandemic, 42 days would be considered normal. As dealers stock up on inventory, this number may continue to rise until consumer demand picks up.

Wholesale

Auction sales have been hit or miss with witnessed sell rates ranging from 22% to 90% last week. The higher sales rates came from closed sales and sales with newer model year vehicles (MY20-MY22) being offered. New inventory across the board is still fairly scarce as COVID cases increase and the chip shortage continues on. If-sales have become more common, even in OEM lanes, which may be an indicator that sellers are more willing to negotiate after the fact. Rental companies are still active in the lanes and independent dealers, especially those that primarily focus on near prime and sub-prime buyers, have started to ramp up in preparation for the upcoming tax season and spring market. Wholesale values are beginning to reflect typical seasonal patterns.

The Estimated Average Weekly Sales Rate has stayed fairly consistent over the last few weeks, in the low-60% range, after dropping during the last week of CY2021. This week, the Estimated Average Weekly Sales Rate at US Auctions rose a percent and now sits at 64%. This is in alignment with where the estimated average weekly sales rate was at around this time in 2021.