Market Insights – 9/13/22

Wholesale Prices, Week Ending September 10th

The market continued to experience larger than normal seasonal declines last week, as well as continued softening of the conversion rates. Buyers are more particular on what they are willing to purchase, and sellers are holding firm to floors.

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

Car segments                     -0.84%          -0.95%              -0.22%

Truck & SUV segments    -0.97%          -0.93%              -0.97%

Market                               -0.93%          -0.93%             -0.18%

Car Segments

• On a volume-weighted basis, the overall Car segment decreased -0.84%. For reference, the previous week, cars decreased by -0.95%.

• All nine Car segments decreased last week.

• Full-Size Car had the largest decline last week at-1.21%.

• Luxury Car also had a greater than 1% decline at -1.06%.

• The Sub-Compact Car segment has consistently been the slowest declining segment, but last week the depreciation accelerated, with a single week decline of -0.55%, compared with the prior week’s decline of -0.36%.

Truck / SUV Segments

• The volume-weighted, overall Truck segment decreased -0.97%, compared to the prior week’s decrease of -0.93%.

• All thirteen truck segments reported decreases.

• Full-Size SUVs (-1.59%) reported the largest truck segment decline last week. The segment has now had nineteen consecutive weeks of declines, with an average weekly change rate of -0.58%.

• Compact and Full-Size Van segments are experiencing softening well below the overall market average, but both segments declined -0.35% 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 2021, 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. The index is computed keeping the average age of the mix constant to identify market movements.

Retail (Used and New) Insights

• Stellantis has announced Jeep’s plans for four all-electric models by 2025, 3 of which will come to North America, including the Wrangler-inspired four-door Recon and a luxury-leaning SUV carrying the Wagoneer S code name.

• Chevrolet unveiled the all-electric Equinox EV, an Ultium-based compact SUV, coming as a 2024 model year vehicle and starting at $30,000.

• Maserati teased the new electric GranTurismo Folgore with a 0-60 mph time of 2.6 seconds and a top speed exceeding 200 mph; it is set to join its internal-combustion sibling by 2025.

• Tesla’s CEO, Elon Musk, has hailed 2023 as the start of a new product cycle, promising to bring the Cybertruck, Roadster, and Semi to market in the next 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.

Now in 2022, the Retail Listings Price Index has remained relatively unchanged. In fact, retail price trends for this year look very similar to the pre-pandemic 2019’s trend.

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 continues to increase and is now around 1.07, the highest it has been this calendar year.

The Used Retail Days-to-Turn Estimate continues to drop and is now around 41 days.

Wholesale

Last week kicked off Labor Day weekend and the lanes were a bit slower, as expected. Newer model years (model year 2019 to model year 2021) were still dominating the lanes with great conditions. Overall, inventory was down last week, which could be due to Labor Day, with many people on vacation. Large independent dealers did not let Labor Day stop them from bidding, as they were active and competitive with franchise dealers in the lanes. Sales rates seemed to follow the trend of weeks prior, and sellers looked like they were still holding on to their floors. The national average price of gas decreased by $0.08; diesel decreased $0.04 from two weeks ago. Overall, both the Car and Truck segments followed a downward trend, with both reflecting decreasing values. In the Car segment, Full-Size Cars led the declines, with a drop of -1.21% and Luxury Cars were not too far behind, falling by -1%. In the Truck segment, Full-Size SUVs reported the largest drop of -1.59% last week, followed closely by Compact Luxury Crossovers, with a decline of –1.37%.

The Estimated Average Weekly Sales Rate continued its descent, hitting 58% last week. The Estimated Average Weekly Sales Rate hasn’t been below 60% since February of 2021.