BLACK BOOK – Wholesale Prices, Week Ending February 12th

The rate of week-over-week declines has accelerated, exceeding the typical seasonal expectations for this time of year. Last week, the market declined an additional -0.67%, compared to the pre-COVID average decline of -0.36%.

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

Car segments                    -0.84%         -0.53%                -0.35%

Truck & SUV segments   -0.58%          -0.47%               -0.36%

Market                              -0.67%          -0.49%               -0.36%

Car Segments

• On a volume-weighted basis, the overall Car segment decreased -0.84%. For reference, the previous week, cars decreased by -0.53%.

• All nine Car segments declined last week.

• The Prestige Luxury Car segment reported the largest decline last week, at -1.51%. Mid-Size (-1.08%) and Near Luxury (-1.02%) Car were not far behind with declines also exceeding 1%.

• Sub-Compact Car had the smallest decline last week, at -0.26% after the prior week’s decline of -0.23%.

Truck / SUV Segments

• The volume-weighted, overall Truck segment decreased -0.58%, compared to the prior week’s decrease of -0.47%.

• Twelve out of the thirteen Truck segments reported declines.

• Full-Size Vans (+1.00%) reported another increase last week. The segment has averaged an increase of +0.66% each week over the past year.

• Minivans declined -1.13% last week, compared to -0.30% the week prior.

• Compact Vans had a minimal decline of -0.23%.

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). Now, in 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

• Ford started delivering E-Transit electric vans over the last week to initial buyers; Ford has also added a 2022 Bronco Everglades variant for off-road family enthusiasts that will be equipped with a snorkel and front-bumper-mounted winch and starts at $54,495.

• Nissan unveiled 3 concept trucks based off the 2022 Frontier Crew Cab midsize pickup at the Chicago Auto Show, called Project 72X, Project Hardbody, and Project Adventure; they are expected to address “three different midsize truck audiences.”

• As is no surprise, the Super Bowl brought many automotive commercials including ads highlighting BMW’s iX, Polestar 2, Chevrolet’s Silverado EV, Toyota’s Tundra, Kia’s electric EV6, and Nissan’s Z, not to mention spots from Vroom, Carvana, and Wallbox.

• Mercedes-Benz will drop their entry-level A-Class compact sedan in the US market after the 2022 model 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 first part of 2022, the Retail Listings Price Index remains relatively unchanged.

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. While the listing volume has remained fairly stable over the last few weeks, we anticipate that used retail listings will increase soon as dealers prepare for the upcoming spring market.

Note: week 5’s index revised – error in computation that caused the index to drop.Used Retail Days-to-Turn now sits just below 45 days, up a day from last week. 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

Volume in the auction lanes seems to be picking up, but that could be due to the large number of no-sale vehicles over the last several weeks. Witnessed sell rates ranged from 13% to 85% last week. According to remarketers, floor prices have finally started to drop and will continue to at least for this upcoming week. Independent dealers, franchise dealers, and rental companies have all been competing for the best quality inventory that the downstream wholesale market has to offer. With floors dropping and competition increasing, it smells like a recipe for spring-market success, at least where auction houses are concerned.

The Estimated Average Weekly Sales Rate has remained stagnant at 62% this week, although we anticipate that this number will significantly rise in the coming weeks, as was the case in 2021.