Market Insights – 6/1/2022

Wholesale Prices, Week Ending May 28th

The overall market continued to increase last week, but the rate of gains slowed. All Luxury segments returned to negative territory last week with the Full-Size Luxury Crossover/SUV and Premium Sporty Cars reporting the largest declines.

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

Car segments                     +0.15%        +0.37%                -0.33%

Truck & SUV segments    +0.10%        +0.11%                -0.09%

Market                               +0.12%        +0.20%                -0.19%

Car Segments

  • On a volume-weighted basis, the overall Car segment increased +0.15%. For reference, the previous week, cars increased by +0.37%.
  • Five of the nine Car segments increased last week.
  • Compact Cars (+0.54%) increased for a tenth consecutive week for an average weekly increase of +0.60%.
  • Sporty Car slowed the rate of increases last week, +0.08% compared to +0.52% the week prior.
  • Premium Sporty Car declines have accelerated, -0.49% last week compared to -0.35% the week prior. This now marks twenty-five weeks of depreciation.

Truck / SUV Segments

  • The volume-weighted, overall Truck segment increased +0.10%, compared to the prior week’s increase of +0.11%.
  • Seven out of the thirteen Truck segments reported increases.
  • All Luxury Crossover/SUV segments declined last week with the Full-Size (-0.48%) segment reporting the largest decline.
  • Full-Size Pickups increased for a third consecutive week, but the rate of increase slowed to +0.09% after the prior week’s increase of +0.11%.
  • Full-Size Vans continue to be strong, with the segment increasing another +0.52% 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 and overall wholesale prices have increased over the last several weeks and now sits just below 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

  • Nissan Motor Co. has stopped taking preorders for its new Ariya electric crossover; the EV is expected to go on sale this fall in the US.
  • Acura confirmed that they will be bringing back the Integra as a 2023 model, replacing the ILX. Integra is expected to be Acura’s last gasoline-powered new vehicle.
  • Tesla is now offering auto insurance in 8 states with premiums based on real-time driving data including forward collision warnings, hard braking, aggressive turning, unsafe following and forced Autopilot disengagement.
  • Hyundai Motor Group is expected to drop the Sonata, K5, and Stinger from the US market in the next few years as sedans continue to fall out of favor.
  • Toyota is phasing out the Avalon with the 2022 model year being its last and production stopping in August of 2022.
  • Cadillac reportedly sold out of pre-order reservations for its upcoming electric Lyriq SUV. The EVs are scheduled to be delivered 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 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 (green curve on the graph below), 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 above the 1.00 line to approximately 1.02 for essentially the first time since the beginning of February.

The Used Retail Days-to-Turn Estimate has dropped some and now sits around 34 days.

Wholesale

Last week kicked off Memorial Day weekend and the lanes were a bit slower, as expected. We anticipate this week will be no different with some buyers and sellers taking some time off. Newer model year vehicles have continued to remain coveted by franchise dealers, independent dealers, and rental companies alike, especially those with lower mileage and higher CR grades. Older model year vehicles have also had higher than usual competition in lane as buyers try to find budget friendly options for their customers. Many buyers seem to still be supplementing their auction purchases with direct-from-consumer purchases. Now there are companies with a business model of purchasing directly from consumers and selling through auction lanes, taking out some of the legwork for companies that may not have the time or resources to do it themselves. As we head towards the summer months, closed sales are expected to remain a popular means for OEMs to get available inventory to franchise dealerships, leaving others to compete for the picked over vehicles, at least until new model year launches are underway.

The Estimated Average Weekly Sales Rate has dropped down to 71% after several weeks of increases.

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