BLACK BOOK – Wholesale Prices, Week Ending June 26th

Another week of gains for the exceptionally strong wholesale market; however, that pace has slowed tremendously. In recent weeks, segments have begun hovering around their respective ceilings as those that have already peaked fluctuate with some depreciation.

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

Car segments                           +0.17%         +0.75%                     -0.28%

Truck & SUV segments          +0.44%         +0.68%                     -0.15%

Market                                    +0.35%         +0.70%                    -0.20%

Car Segments

• On a volume-weighted basis, the overall Car segment continued its trend of gains.

• Although with the lowest weekly rate in 22-weeks at +0.1%.

• For reference, the previous week’s increase was +0.75%.

• Full-size Cars had the highest gains for the week at +0.53%.

• The Compact car segment was the only car-segment to decrease (-0.16%).

Truck / SUV Segments

• On a volume-weighted basis, the overall Truck segment increased +0.44% this past week.

• For reference, the previous week’s increase was +0.68%.

• For the first week in 19 weeks, no segments increased more than +1.00%.

• The Compact Van segment had the largest gains for the week at +0.94%.

• The Small Pickup segment was the only truck segment to decrease (-0.41%).

Newer Used Vehicles (0-2-year-old)

Driven by an extreme shortage of rental returns and limited inventory of new vehicles, the prices of newer used vehicles have been experiencing large weekly gains. While wholesale prices are exceeding MSRP in some cases, the rate of increase has started to slow down in the last several weeks. The table below shows the average weekly price changes for 0-2-year-old vehicles.

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

Car segments                        +0.12%               +0.47%                   -0.23%

Truck & SUV segments       +0.43%                +0.52%                   -0.19%

Market                                  +0.35%                +0.51%                   -0.21%

Weekly Wholesale Index

Calendar year 2020 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 year. We saw a similar picture in 2009, at the end of the Great Recession. Calendar year 2021 has not had typical seasonality patterns as the market continues to have rapid increases in wholesale values. As we jump into summer, wholesale price increases have started to slow down and are around 37% higher compared to the beginning of the year (adjusted for the mix). The graph below looks at trends in wholesale prices of 2-6-year-old vehicles, indexed to the first week of the year. 

Retail (Used and New) Insights

• An all-electric successor to the Volvo XC90—likely called XC90 Recharge—will be unveiled next year,

• Volvo confirmed, adding that the electric SUV will feature advanced driver-assist tech including lidar sensors.

• Audi plans to only release new battery-electric models starting in 2026

• Gradually phasing out internal combustion engines until 2033

• Ferrari unveiled a new plug-in hybrid model.

• The 296 GTB, a mid-rear-engine Berlinetta sports car.

• Honda is developing a battery-electric crossover, Prologue, with General Motors that is expected to go on sale in early 2024.

Used Retail Prices

With the proliferation of ‘no-haggle pricing’ for used-vehicle retailing, asking prices accurately measure trends in the retail space. Retail demand slowed down at the end of last year, and thus resulted in declining retail asking prices for the last several weeks of 2020. As demand rebounded, retail prices have lagged slightly behind wholesale prices, but March had an accelerated growth in retail prices. In April and May, retail prices picked up speed as demand accelerated, fueled by stimulus payments, tax season, and shortages of new inventory. As June comes to an end, retail price increases have started to stall out. Currently, retail prices are more than 23% above where we started the year. This analysis is based on approximately two million vehicles listed for sale on US dealer lots. The graph below looks at 2-6-year-old vehicles.

Used Retail

Current used retail listing volume is about 10% below the start of the year. The inventory levels have been slowly but consistently increasing over the last two months, as we see some softening of retail demand.

Days-to-turn has continued to decrease since the middle of March as sourcing both new and used inventory continues to be a challenge; it now stands around 32 days, which as the graph below shows, is lower than we have seen in the recent past.

Wholesale  

As floor pricing remains strong and the availability of average and clean vehicles remains scarce, conversion rates have started to slow down. Average sell rate now sits around 71% and has hovered in the low 70% range since April.

Despite the limited inventory on dealer lots, dealer lanes continue to have higher volume at auction, while manufacturers’ remarketing lanes are offering less and less in open sales channels. Dealers have found creative ways to diversify their source of inventory, and their innovation seems to be paying off.

OEM remarketers are able to continue raising floors in the lanes for cleaner vehicles because of an extremely limited inventory pipeline. Because of the scarcity in the wholesale market, even vehicles with slight damages or open recalls are bringing top dollar.