BLACK BOOK: Weekly Market Report

BLACK BOOK – Wholesale Prices, Week Ending December 11th

The market continues to increase, but the rate of increase has slowed down. Newer used vehicles continue to be strong this past week, as 2-to-8-year-old vehicles increased by only +0.20%, while 0-2-year-old vehicles increased by +0.34%.

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

Car segments                           +0.01%            +0.25%                 -0.82%

Truck & SUV segments          +0.30%            +0.50%                 -0.66%

Market                                    +0.20%             +0.41%                 -0.72%

Car Segments

• On a volume-weighted basis, the overall Car segment increased +0.01%. For reference, the previous week, cars increased by +0.25%.
• Cars aged 2-to-8-years old are beginning to soften, but newer used vehicles (0-to-2-year-old) reported a larger increase, +0.10% last week.
• Compact Cars reported the largest decrease of –0.37%, compared to -0.15% the week prior.
• Near Luxury Cars (+0.35%) reported the largest increase last week.

Truck / SUV Segments

• The volume-weighted, overall Truck segment increased +0.30%, compared to the prior week’s increase of +0.50%.
• Full-Size Vans continue to see extreme strength, increasing another +1.20% last week. This now marks the forty-fifth increase in the last forty-six weeks.
• The Compact Luxury Crossover (-0.01%) segment was the only truck/SUV segment to report a decline this past week.Compact Crossovers have slowed their rate of increase, reporting +0.09% last week, compared to +0.90% the prior week.

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 has had rapid increases in wholesale values for the majority of the year. After reaching record heights at the end of June, wholesale prices began to decline at a rate higher than the typical seasonal decline through July and most of August. As we moved into the Fall season, wholesale prices began to show positive movement once again. As we get to the end of the year, wholesale prices continue to rise, and noticeable differences can be seen compared to prior calendar years.

The Wholesale Weekly Price Index reached the highest point of the year last week once again, this time reporting over 1.51 points.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

• GM’s Corvette manufacturing center, the Bowling Green Assembly Plant, sustained significant damage during the tornado in Kentucky last week.
• Impacts on production schedules for the Corvette are yet to be announced.
• Rivian is expected to announce plans to build an EV plant in Georgia, while GM looks to Michigan for a new battery cell plant.
• Ford announced delays to the Explorer and Lincoln Aviator EVs – now pushed to end of 2024 – to boost Mach-E output.
• Toyota rolled out a long-term forecast, along with plans to go ZEV-only by 2035 in Western Europe – Toyota’s first battery EV, the bZ4X, will arrive in the US next year, along with Lexus’s first US EV, the 2023 RZ.
• GM’s BrightDrop opens their first dealership with all-electric commercial vehicles in Fontana, California. They are expected to have a dealer-based sales approach, offering products and services to fleet customers, including charging solutions. BrightDrop has revealed 2 Ultium-based models – the BrightDrop EV600 and the smaller BrightDrop EV410.
• BMW signed an agreement with Munich-based microchip maker, INOVA Semiconductors, and US-based foundry, GlobalFoundries, to supply several million semiconductors per year, which will be used in the iX models to start then rolled out to other models.

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. During the third quarter, retail prices continued to rise at a slower rate but have since picked up. In Q4, prices on retail listings have steadily increased week after week and the retail listing price index now sits at around 35% above where we started the year. The scarcity of both new and used inventory in the market fuels these consistent increases.

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.

Inventory

Used Retail

Coming to the end of CY 2021, used retail listings have stabilized around 16% below where we started the year. We would typically expect retail listing volume to increase dramatically at this point, which can be seen in the graph for both CY 2019 and 2020. New inventory is slowly making its way to market, but not at the levels needed to boost used retail listings to the “normal” level.

Days-to-turn for used retail listings have dropped a bit and now sits around 38 days, which is still lower than the 42-day average seen in prior years.

Wholesale

As we continue through the holiday season, buyers are in lanes actively trying to fill their lots before the end of the year in preparation for the “13th month” at the end of December, as well as for the upcoming Spring market. The inventory coming through the lane continues to be a bit rougher than would be expected for lease returns, with lower condition report grades and a higher percentage of recalls, damages, and manufacturer buybacks. Floor prices are still holding steady at a record high level, even on less desirable units due to supply shortages.

The weekly estimated average sales rate remained at 69% this week, after dropping down to 67% during the Thanksgiving holiday. This time, last year, the estimated average weekly sales rate dropped to around 50%, so while some floor prices are higher than usual, buyers are purchasing vehicles at auction at a consistently higher rate.

The overall wholesale market for 2-8-year-old vehicles increased by +0.20% last week, and 0-2-year-old vehicles increased +0.34%.