BLACK BOOK – Market Insights: 7/19/2022

Wholesale Prices, Week Ending July 16th

The declines that started before the July 4th holiday weekend appear to not be holiday related anymore as the rate of decline increased last week. Consumers are starting to feel some relief at the gas pumps, but there are still concerns of a recession and the auto industry is starting to see the effects of low consumer confidence, rising repossessions, and higher interest rates.

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

Car segments                      -0.47%             -0.20%                 -0.39%

Truck & SUV segments      -0.44%             -0.43%                -0.28%

Market                                 -0.45%             -0.35%                -0.33%

Car Segments

  • On a volume-weighted basis, the overall Car segment decreased -0.47%. For reference, the previous week, cars decreased by -0.20%.
  • All nine Car segments decreased last week.
  • Sub-Compact Cars reported the smallest Car segment decline at -0.10%, similar to the prior week’s -0.13%.
  • Compact Cars dramatically increased the rate of depreciation last week, declining -0.72% compared to the prior week’s decline of -0.08%.
  • The Luxury Car segment also had a large adjustment last week with a decline of -0.50%.

Truck / SUV Segments

  • The volume-weighted, overall Truck segment decreased -0.44%, compared to the prior week’s decrease of -0.43%.
  • Twelve out of the thirteen truck segments reported decreases.
  • Full-Size Van was the only segment to increase last week with a minimal gain of +0.04%.
  • Full-Size Luxury Crossovers reported the largest Truck segment decline last week at -0.65%. The segment has now had twenty-seven weeks of softening prices.
  • Full-Pickups (-0.54%) declined for a fourth consecutive week, reporting an average weekly adjustment of -0.27%.

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

  • Nissan is expected to phase out the Leaf in the next few years; the Nissan Leaf was the first affordable, mass-marketed electric car and was originally launched in the U.S. in late 2010.
  • GM is partnering with Pilot and Flying J truck stops to build 2,000 EVgo DC fast-chargers along US highways, starting next year.
  • Volkswagen announced a partnership with Redwood Materials, an EV battery recycling company. Founded by former Tesla executive JB Straubel and funded by Amazon, Redwood Materials is already collaborating with other manufacturers in the US including Toyota, Ford, and Volvo.
  • Hyundai confirmed that they expect to offer an N version of the Ioniq 5, which will be the company’s first high-performance electric vehicle; pricing and release date information will come later 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. 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 slightly and is now reporting around the 1.03 mark.

The Used Retail Days-to-Turn Estimate has also increased, now above 38 days.

Wholesale

The wholesale market this week still has few model year 2022 vehicles; newer used vehicles (model year 2020 and 2021) continue to dominate the lanes. These lower mileage vehicles in the lanes are in clean condition with rarely any issues. Buyers are still active in the lanes, and it sellers are more open to negotiation. With floors starting to soften and the holiday week being over, sales rates have started taking a turn and slightly increased last week. Gas prices are coming down a little bit, but the market is still softening with lots of decreases across almost all segments. Similar to the trend two weeks ago, last week there was a decrease in all Car segments. Compact Cars decreased heavily followed by Luxury, Mid- Size, and Full-size Cars. In the truck segment, Full-Size Vans are the only vehicles increasing. Compact Vans took a turn and went into negative territory last week. Full-Size Luxury decreased heavily followed by Full-Size Pickup, Mid-Size Luxury, and Mid-Size Crossovers. With the market starting to soften up, we anticipate that these segments will continue to decrease.

The Estimated Average Weekly Sales Rate increased to 67%.

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