Black Book Market Insights – 6/21/2022

Wholesale Prices, Week Ending June 18th

The overall market was consistent last week, with gains persisting in many segments. However, the volume segments, Compact Car and Compact Crossover, slowed down their rate of gains.

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

Car segments                          +0.21%       +0.26%              -0.35% 

Truck & SUV segments         +0.04%       +0.03%               -0.22% 

Market                                   +0.10%       +0.10%             -0.27% 

Car Segments

  • On a volume-weighted basis, the overall Car segment increased +0.21%. For reference, the previous week, cars increased by +0.26%.
  • Seven of the nine Car segments increased last week.
  • Compact Cars continued to increase, but the gain was only +0.26%, compared to the prior week’s increase of +0.76%.
  • Luxury (-0.04%) and Prestige Luxury (-0.03%) were the only Car segments to report declines last week. Luxury has now been reporting declines for four consecutive weeks.
  • Sporty Cars traditionally decline during this time of year, but the segment is still reporting increases with an average weekly increase of +0.24% over the last eleven weeks.

Truck / SUV Segments

  • The volume-weighted, overall Truck segment increased +0.04%, compared to the prior week’s increase of +0.03%.
  • Eight out of the thirteen Truck segments reported increases.
  • Full-Size (-0.37%) and Full-Size Luxury (-0.40%) Crossover/SUVs aren’t showing any signs of slowing down the depreciation. The Full-Size Luxury Crossover/SUV segment has been on a downward slide for twenty-three consecutive weeks and has an average weekly decline of -0.46%.
  • Compact Crossovers have been increasing for the past twelve weeks, but the rate of increase slowed down last week to a very minimal +0.001% increase.

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. Overall wholesale prices have increased over the last several weeks and they now sit just above 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

  • Kia announced that they will debut 8 battery electric vehicles in the U.S. by 2029 including the EV6 compact crossover, a redesigned Niro EV, and the EV9 three-row SUV.
  • BMW’s prototype, the iX electric SUV, will incorporate Our Next Energy’s long-range battery technology, which expects to achieve 600 miles of range.
  • Honda has partnered with Sony to create Sony Honda Mobility Inc.; the new company plans to bring EVs to market in 2025 with a focus on safety, entertainment and adaptability.
  • Due to the increased cost of raw materials, Tesla raised prices once again for multiple models, with the Model X now starting at $122,440 – a $6,000 increase.
  • Rivian advised R1S reservation holders that their delivery dates have been delayed, from March–April 2022 to October–December 2022.
  • Cadillac teased their upcoming EV flagship sedan, the Celestiq, and advised that the vehicle will be hand-built at their Global Technical Center.

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 again and is creeping closer to the 1.05 mark.

The Used Retail Days-to-Turn Estimate continues to increase, sitting above 38 days for the first time since April.

Wholesale

The wholesale market has not changed much – newer used vehicles (MY20-MY21) continue running through the lanes at higher rates while few model year 2022 vehicles have been seen. Many of these newer used vehicles tend to be clean with low mileage. Sellers seem to be firm on their floor prices and are waiting for buyers to take interest and buy. Franchise and large independent dealers have been very competitive and are taking advantage of the opportunity to purchase inventory while rental companies seem to have taken a break and slowed down on bidding this week. The inventory count seems to have decreased overall this week, but the number of buyers in attendance has remained consistent in the lanes. With the price of gas going up, it has not seemed to affect sales rates in the lanes as much as one may expect. We can assume that because gas prices are continually on a price hike, it is causing the Full-Size, Full-Size Luxury, and Prestige Luxury cars to decrease while Sub-Compact Crossovers, Compact, and Sub Compact cars are on the rise. We will most likely continue to see these increases and decreases in these segments until gas prices begin to lower and stabilize.

The Estimated Average Weekly Sales Rate has declined a bit, now at 69%, after several weeks of increases.

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