Market Insights – 12/20/2022

Wholesale Prices, Week Ending December 17th

Sales rates continue to be lower than normal. Buyers are being cautious while prices continue to come down. That said, this past week, we saw a smaller price decline compared to the week prior.

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

Car segments                        -0.83%           -0.86%                  -0.53%

Truck & SUV segments       -0.81%           -0.90%                 -0.65%

Market                                  -0.82%           -0.88%                 -0.60%

Car Segments

• On a volume-weighted basis, the overall Car segment decreased -0.83%. For reference, the previous week, cars decreased by -0.86%.

• All nine Car segments decreased last week, with two of the nine reporting declines greater than 1% (Prestige Luxury, -1.26%; Near Luxury, -1.15%).

• Sub-Compact Car has averaged a decline of -1.08% per week over the past six weeks.

• In sharp contrast to the Sub-Compact Car segment, that has been showing regular large declines, the Premium Sporty Car segment has averaged a weekly depreciation of -0.53% over the past six weeks.

Truck / SUV Segments

• The volume-weighted, overall Truck segment decreased -0.81%, compared with the prior week’s decline of -0.90%.

• All thirteen Truck segments reported declines last week, with five of those reporting a decline of over 1%. The Sub Compact Luxury Crossovers had the largest decline at -1.17%.

• Full-Size Pickup depreciation went back to its more normal rate at –0.50%.

• Full-Size Vans had the smallest rate of depreciation of all the segments at –0.15%.

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 two 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 most of the year. The Wholesale Weekly Price Index reached the highest point of the year at the end of December 2021, reporting over 1.51 points. In 2022, the price index was on a mild rollercoaster until July after which point prices where on a continuous decline.

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

• Mazda announced that a new plug-in hybrid model, called CX-90, will be offered as a 2024 and ultimately be a replacement for the CX-9. In contrast to the MX-30 EV that only has limited US availability, the CX-90 will be available nationally.Lear announced plans to build a plant in Michigan to supply General Motor’s growing need for EV parts. In addition to their new 120,000-square-foot facility that will be utilizing half of the space for battery disconnect units, they are also upgrading their existing Michigan plant to increase production of battery assemblies.

• Panasonic announced an agreement to supply Lucid with lithium-ion batteries. Panasonic is also the supplier for Tesla.

• Ford announced the addition of a third shift to the F-150 Lightning assembly line to keep up with demand for the all-electric Full-Size Pickup.

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.

The index has remained relatively stagnant through most of CY2022. Now, in the fourth quarter of 2022, the Retail Listings Price Index has started to decline, but not as steep as the wholesale price index.

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 active listing volume was consistent at 1.10 last week.

The Used Retail Days-to-Turn estimate is around 47 days.

Wholesale

With the holidays approaching, auction lanes are following the trend of past weeks of being slow. Rental companies are consistent with weeks prior and are competitively bidding. Large independent dealers also made a very strong appearance in the lanes actively competing with rental companies. Franchise dealers are still active in the lanes but are overpowered by the large independent dealers and rental companies. With inventory still down, sales rates are following in a consistent declining pattern. Sellers floors are still high, but buyers are still there. Although floors are high, “If” sales are still common and buyers are in hopes of the market softening. Model year 2022 vehicles are now consistent in the lanes with Model year 2023 vehicles still trickling in. Overall, it was a slow week in the auction lanes and wholesale values are continuing to decline.

The Estimated Average Weekly Sales Rate dropped an additional 2%, hitting 46% last week.