BLACK BOOK – Wholesale Prices, Week Ending December 4th

After the Thanksgiving holiday, activity on the lanes resumed and prices and sales rates increased. As the shortage of new vehicles continues, vehicles with low miles continue to warrant the most attention.

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

Car segments                           +0.25%         +0.13%               -0.74%

Truck & SUV segments          +0.50%         +0.21%               -0.67%

Market                                     +0.41%        +0.18%                -0.70%

Car Segments

• On a volume-weighted basis, the overall Car segment increased +0.25%. For reference, the previous week, cars increased by +0.13%.

• Compact Cars had fifteen weeks of consecutive gains, but this past week they experienced some softening with a decline of -0.15%. However, newer (0-to-2-year-old) Compact Cars increased by +0.11%.

• Mid-Size (+0.34%) Cars continued to report a large increase for a sixteenth consecutive week.

Truck / SUV Segments

• The volume-weighted, overall Truck segment increased +0.50%, compared to the prior week’s increase of +0.21%.

• Compact Vans (+2.55%) reported a large increase again last week. This segment has now had increases in forty-two out of the last forty-four weeks, for an average weekly increase of +0.74%.

• Full-Size Vans have now increased for forty-four of the last forty-five weeks, with an average weekly increase of +0.62%. Last week, the segment had a gain of +0.82%.

Weekly Wholesale Index

Calendar year 2020 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 year. We saw a similar picture in 2009, at the end of the Great Recession. Calendar year 2021 has not had typical seasonality patterns as the market has had rapid increases in wholesale values for the majority of the year. After reaching record heights at the end of June, wholesale prices began to decline at a rate higher than the typical seasonal decline through July and most of August. As we moved into the Fall season, wholesale prices began to show positive movement once again haven’t slowed as we get to the end of the year. The Wholesale Weekly Price Index reached the highest point of the year last week again, at over 1.5.

The graph below looks at trends in wholesale prices of 2-6-year-old vehicles, indexed to the first week of the year.

Retail (Used and New) Insights

• Polestar revealed their newest model – the Polestar 3. The electric SUV is scheduled to be produced in the U.S. sometime in 2022.

• BMW began deliveries of their i4 in Germany three months ahead of schedule and deliveries of the iX are set to begin soon.

• Lexus teased their first EV to be sold in the US – the 2023 RZ electric crossover, which will look similar to the Toyota bZ4X.

• Vietnam’s EV maker VinFast announced plans to go public with a U.S. IPO in the second half of 2022.

• U.S. automotive sales continue to slip for many manufacturers including Toyota, Honda, Subaru, Mazda, and Hyundai.

• Nearly 115,000 model year 2021 and 2022 Ford Escapes and Bronco Sports have been recalled in the U.S. due to a braking issue.

• Ford is on pace to sell more battery-electric vehicles than General Motors this year, new report shows.

Used Retail Prices

With the proliferation of ‘no-haggle pricing’ for used-vehicle retailing, asking prices accurately measure trends in the retail space. Retail demand slowed down at the end of last year, and thus resulted in declining retail asking prices for the last several weeks of 2020. As demand rebounded, retail prices have lagged slightly behind wholesale prices, but March had an accelerated growth in retail prices. In April and May, retail prices picked up speed as demand accelerated, 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 have since picked up. After continued strong increases, the retail listing price index has increased to just over 34% above where we started the year.

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.

Inventory

Used Retail

As we head into the last month of the year, used retail listings have stabilized around 16% below where we started the year. Generally, at this time of year, used retail listing volume is expected to increase as new models are launched and incentive spend increases. The graph below shows that the current volume is less than what was seen in both CY19 and CY20. With significantly reduced new inventory volume and decreasing used inventory, it is no surprise that there are fewer retail listings available overall.

Days-to-turn for used retail listings have slightly increased and now sits around 38 days, which is still lower than what is typically expected.

Wholesale

December started off strong with slightly higher volume in the lanes. The inventory coming through seems to have lower condition report grades and a higher percentage of recalls, damages, and manufacturer buybacks. Rental companies haven’t slowed down their purchases and the presence of larger independent dealers has started to make a comeback in the lanes, increasing the level of competition for the few clean vehicles that run. Floor prices are holding steady at a record high level, even on less desirable units.

The weekly estimated average sales rate rebounded to 69% this week, after dropping down to 67% during the Thanksgiving holiday. This time, last year, the estimated average weekly sales rate was around 54%, so while floor prices have continued to rise, buyers are purchasing vehicles at auction at a higher rate.

The overall wholesale market for 2-8-year-old vehicles increased by +0.18% last week, and 0-2-year-old vehicles increased +0.14%.