BLACK BOOK – Wholesale Prices, Week Ending February 19th

Traditionally around this time of year, we start to see the market slowing in the week-over-week declines and some segments even starting to increase in preparation for the spring market, but not this year, with the overall market declines accelerating. The only segment that continues to increase is the Full-Size Vans.

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

Car segments                     -0.82%         -0.84%              -0.38%

Truck & SUV segments    -0.75%         -0.58%              -0.36%

Market                               -0.78%         -0.67%           -0.37%

Car Segments

• On a volume-weighted basis, the overall Car segment decreased -0.82%. For reference, the previous week, cars decreased by -0.84%.

• All nine Car segments declined last week.

• Mid-Size Cars reported the largest decline in values, with a single week depreciation of -1.36%, an acceleration in the already large decline from the prior week, of -1.08%.

• Sub-Compact Cars reported minimal declines at -0.01%, compared with the prior week’s decline of -0.26%.

Truck / SUV Segments

• The volume-weighted, overall Truck segment decreased -0.75%, compared to the prior week’s decrease of -0.58%.

• Twelve out of the thirteen Truck segments reported declines.

• Full-Size Vans (+0.24%) reported another increase last week, but only a minimal gain of +0.24%. This was the smallest week-over-week increase for the segment since the last week of September, 2021.

• Minivans declined -1.26%, marking the second consecutive week of declines exceeding 1%.

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 have remained relatively stable in the month of January (green line). As we move through February, the Wholesale Weekly Price Index has started declining.

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

• Fisker opened up reservations for their affordable, five-passenger EV PEAR – Personal Electric Automotive Revolution.

• Ford Motor Co. and Volvo Cars have announced a partnership with recycling startup, Redwood Materials, to recycle end-of-life EV batteries.

• Mercedes-Benz is expanding their EV line-up to include the AMG EQE – the EV version of the E-Class AMG models.

• GM plans to restart Chevrolet Bolt production on April 4, after being idled for nearly 6 months because of a sweeping fire-risk recall.

• It is estimated that the shutdown of the Ambassador Bridge last week, had direct industry losses amounting to $300M.

• The DeLorean Motor Co. has hinted at a new EV coupe, named DeLorean EVolved, to be revealed sometime this year.

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 two months of 2022 so far, the Retail Listings Price Index remains relatively unchanged (green curve on the graph below).

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 returned to where CY2022 began, as indicated by the green line. After a slight increase and then subsequent decrease, we are essentially back where the calendar year started at the 1.00 mark.

Used Retail Days-to-Turn has dropped slightly and now sits around 42 days. Consumer demand is still down, but as wholesale values continue to fall and new inventory keeps popping up, the future outlook indicates some normal seasonality and seems promising.

Wholesale

As COVID requirements start to change, auction lanes are showing some semblance of normalcy with increased buyers in lane. Auction volume continues to be on the upswing. New vehicle inventory is popping up, although the semiconductor chip shortage and transportation issues continue to have noticeable impacts. OEM remarketer lanes seem to have more lease returns to offer with the occasional repossession and dealers still have a large supply, but rental company lanes overall, are still below normal levels. Floor prices are expected to drop some, at least for MY19 and older models. All the typical buyers have been seen making bids – large independents, smaller independents, franchise, and rental companies – so expect strong competition for desirable units.

The Estimated Average Weekly Sales Rate has dropped to 61% this week, after a few weeks at 62%. This is not surprising as wholesale buyers try to anticipate consumer sentiment and wholesale seller behavior. Last year, March was when the sales rate significantly picked up – jumping approximately 10% in a month.