BLACK BOOK – Market Insights – 6/28/2022

Wholesale Prices, Week Ending June 25th

For the first time since the week of April 18th, the overall market reported softening last week. However, not all segments reported declines; the Compact Car segment continues to increase as fuel prices remain at elevated levels.

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

Car segments                      +0.16%         +0.21%             -0.28%

Truck & SUV segments     -0.11%           +0.04%            -0.15%

Market                                -0.02%          +0.10%             -0.20%

Car Segments

• On a volume-weighted basis, the overall Car segment increased +0.16%. For reference, the previous week, cars increased by +0.21%.

• Five of the nine Car segments increased last week.

• Compact Cars continue to be the strongest performing Car segment, with the segment increasing another +0.62% last week. This now marks fourteen weeks of consecutive increases.

• The Sub-Compact (+0.09%) and Mid-Size (+0.04) are also still reporting gains, but the rate of gain is slowing.

• The only luxury Car segment to report an increase last week was the more affordable, Near Luxury segment, with a gain of +0.10%.

Truck / SUV Segments

• The volume-weighted, overall Truck segment decreased -0.11%, compared to the prior week’s increase of +0.04%.

• Nine out of the thirteen truck segments reported decreases.

• After twelve weeks of increases, the Compact Crossover segment reversed course and declined -0.15%.

• Full-Size Pickups only had six weeks of increases but have also resumed declines with a depreciation of -0.09% last week.

• Compact (+0.33%) and Full-Size (+0.06%) Van segments continue to see strength as a result of inventory shortages.

• Full-Size (-0.34%) and Full-Size Luxury (-0.36%) Crossover/SUV segments reported the largest declines 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 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. Overall wholesale prices have increased over the last several weeks and they now sit just above 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

• Hyundai Motor Group has partnered with Michelin to develop tire technologies specifically for electric vehicles.

• Alsym Energy unveiled their progress towards the development of a more cost effective and less flammable EV battery that doesn’t use lithium or cobalt.

• Tesla announced the production of the Cybertruck electric pickup truck will now start in mid-2023.

• General Motors announced a collaboration with UVeye to provide their dealer network access to automated vehicle inspection technology.

• Genesis is pushing back the launch of the Electrified G80 sedan, which was originally expected this spring; pricing is expected to be available late summer or early fall.

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, 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 again and is just below the 1.05 mark.

The Used Retail Days-to-Turn Estimate continues to increase, sitting below 38 days.

Wholesale

The wholesale market continues with the newer used vehicles (model year 2020-2021) dominating the lanes and still very few model year 2022 vehicles running through. More buyers seemed to be actively bidding in the lanes last week, but sales continue to decrease. Sellers are still holding on to their floors, but large independent dealers and rental companies made more of an appearance; they stepped up their game creating higher levels of competition for smaller independent and franchise dealers. Although inventory count was consistent, we anticipate that the decreasing sales rates correlate to the continual gas price hikes. With the gas prices continuing to go up, for the first time in a while, we have seen a turn in most segments going into negative territory. Compact Cars and Compact Vans are still on the rise; however, Full-Size Cars and Crossovers, both Luxury and non-Luxury, are decreasing along with Full-Size Pickups and even Mid-Size Crossovers. This will most likely be the trend of these segments until gas prices start going back down to normal.

The Estimated Average Weekly Sales Rate continues to slowly drop and is now at 68%, after several weeks of increases this spring.