Black Book Market Insights – 11/22/2022

Wholesale Prices, Week Ending November 19th

The market continued to decline last week, but the rate of depreciation slightly slowed down; however, the declines are still outpacing what is typically experienced this time of year. Sales rates at the auctions are weak as sellers continue to hold firm on floors and buyers remain selective.

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

Car segments                       -0.94%          -1.02%             -0.65%

Truck & SUV segments      -0.87%          -0.92%             -0.46%

Market                                 -0.89%          -0.96%             -0.53%

Car Segments

• On a volume-weighted basis, the overall Car segment decreased -0.94%. For reference, the previous week, cars decreased by -1.02%.

• All nine Car segments decreased last week, and two of the nine had declines greater than -1%.

• The Car segments have declined on average -1.12% per week over the last six weeks.

• Mid-Size Car reported the largest Car segment decline last week at -1.28%. The segment has now had large declines for the last four weeks with an average weekly depreciation rate of -1.70%.

• Full-Size Car has slowed the level of decline last week to -1.14%, compared with the prior three weeks average change of -1.53%.

Truck / SUV Segments

• The volume-weighted, overall Truck segment decreased -0.87%, compared with the prior week’s decline of -0.92%.

• All thirteen Truck segments reported declines last week. Six of the nine segments had declines greater than 1%.

• Full-Size Van had the smallest decline at -0.06%.

• Sub-Compact Crossover had the largest decline last week at -1.34%. The segment has now averaged -1.54% per week for the past four weeks.

• Minivan had another large week of declines, but the -1.10% was lower than the average for the last three weeks of -1.90%.

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 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

• Hyundai Motor displayed their new 2023 Ioniq 6 at the LA Auto Show last week. This will be Hyundai’s first model with over-the-air update capabilities.

• Subaru announced that they will be dropping the Impreza sedan after the current model year, leaving only the hatchback variant in the US market. The RS trim will also be returning with special badging and other upgrades.

• Toyota unveiled the redesigned 5th generation Prius hybrid with increased horsepower, due to a bigger engine and new battery.

• Faraday Future, an EV startup, is looking to raise up to $350 million as they roll out their FF 91 luxury car.

• Porsche’s first electric crossover has arrived –- deliveries of the battery-powered Macan are expected to start at the beginning of 2024.

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 dropped to 1.13 this week.

The Used Retail Days-to-Turn estimate is just over 45 days.

Wholesale

As expected, lanes are slow, and we do not expect them to pick up too much for the rest of the year. With Thanksgiving this week and Christmas around the corner, there is not much movement in the auction lanes. Although buyers are still showing up, they are holding on to what they want to pay. Sales rates continue to fall as sellers are still holding tight to their floors. Vehicles running through the lanes are not up for negotiation and the lack of “If” sales reinforces that. Rental companies made more of an appearance last week and were very competitive among each other. Large independent dealers appeared to be less active, along with the franchise dealers. Inventory is overall still down, but we are seeing more model year 2022 vehicles coming through the lanes. Diesel has gone up and is at its highest since mid-July. Gas, on the other hand, is slowly coming back down. Overall, the wholesale market has not changed much and is still following the downward trend.

The Estimated Average Weekly Sales Rate continues to drop, hitting 51% last week.