Black Book: Market Insights – Fixed Ops

Market Insights – 17.05.2022

Wholesale prices, the week ending May 14

Problems with supply chains continue to push for a “return to normal” levels of new car production in 2023. With this development, the growth of wholesale prices continued last week, while the common market is accelerating the positive movement of prices, which began three weeks ago. One noteworthy change in the segment was the return to positive territory for full-size trucks, for the first time since the last week of 2021.

This week Average last week 2017-2019 (same week)

Car segments + 0.44% + 0.31% -0.23%

Segments of trucks and SUVs + 0.10% + 0.05% -0.18%

Market + 0.21% + 0.13% -0.20%

Car segments

• Taking into account the volume, the total car segment increased by + 0.44%. For reference, over the previous week cars rose by + 0.31%.
• Eight of the nine car segments increased last week.
• Compact cars have been growing for eight consecutive weeks, averaging + 0.59%. Last week, the segment increased + 0.92%.
• Sports cars have finally felt the effects of warm weather, values ​​have increased over the past 3 weeks, with an average weekly increase of + 0.16%.
• The Premium Sporty was the only car segment to decline last week, down -0.23% from a -0.29% decline the previous week.

Segments of trucks / SUVs

• The total segment of trucks with a weighted volume increased by + 0.10% compared to an increase of 0.05% over the previous week.
• Eight of the thirteen truck segments reported an increase.
• Full-size trucks (+ 0.08%) returned to higher values ​​last week, for the first time since the last week of December 2021.
• With the exception of the Sub-Compact Luxury Crossover, all other segments of the Luxury Crossover / SUV reported declines last week. The biggest drop in mid-size luxury crossovers – -0.41%.
• Full-size vans returned to growth last week with an increase of + 0.36%. With the exception of a minimal decline of -0.01% last week, the segment is approaching 70 weeks of growth.

Weekly wholesale index

The calendar years 2020 and 2021 ended with increased wholesale prices at second-hand prices. Given the economic schemes (including the automotive market) caused by the pandemic, conventional seasonal models (e.g., 2019 calendar year) have not been observed in the wholesale market for most of the last 2 years. We saw a similar picture in 2009, at the end of the Great Recession. In the calendar year 2021, there was no typical seasonality, as the market saw rapid growth in wholesale prices for most of the year. The weekly wholesale price index peaked at the end of December at more than 1.51 points. Now, in calendar year 2022, the index has returned to 1.00, and overall wholesale prices continue to rise.

The chart below shows the trends in wholesale prices for cars aged 2 to 6 years, indexed to the first week of the year. The index is calculated by maintaining a constant average age of the mixture to determine market movement.

Retail (old and new) Insights

• Volkswagen will join the electric SUV market by creating a new company with the Scout sign that was once used by International Harvester; the Scout brand will begin production in 2026 with an electric pickup and a duo of SUVs.
• Bollinger Motors has joined forces with Roush Industries to manufacture electric platforms for commercial parks, in particular fully electric Class 3-6 platforms and chassis cabs.
• Volvo recently started taking orders for Volvo FH, Volvo FM and Volvo FMX; these heavy electric trucks will offer batteries up to 540 kW / h, and deliveries are expected to begin later this fall.
• After the headlines, Canoo spokesman Paul Zonef clarified that Canoo has the capital to begin production of its Lifestyle Vehicle this year at its Arkansas plant.
• Fisker is now taking orders for the Fisker Pear electric SUV. It will be the company’s second model after Fisker Ocean, and is expected to cost less than $ 30,000 and will be built in Ohio with deliveries in 2024.

Used retail prices

Retail prices in use have become more affordable than in previous years, due to the spread of prices without the sale of used cars. Transparent pricing makes the process of buying a car more enjoyable for customers and allows the Black Book to accurately measure retail market trends.

At the start of the pandemic, in 2020, second-hand retail prices rose slightly in line with typical seasonal traits and then began to decline in April, finally reaching lows in late spring. By the end of the summer of 2020, retail prices at second-hand prices increased as supply of new vehicles became scarce, but retail demand slowed at the end of 2020, leading to lower retail asking prices over the past few weeks of the year. When CY2021 began, demand resumed, and retail prices lagged slightly behind wholesale prices; March 2021 saw a sharp rise in second-hand retail prices due to stimulus payments, the tax season and a shortage of new inventories. During the third quarter, retail prices continued to grow at a slower pace, but soon regained momentum to begin the fourth quarter. In the 4th quarter, retail prices rose steadily from week to week. When CY2021 came to an end, the retail listing price index closed 36% higher than the beginning of the year.

So far in 2022, the retail price index has remained relatively unchanged (green curve in the chart below), the index is around 0.99, indicating a very slight decline in retail prices. As a rule, there is a lag between changes in wholesale and retail prices.

This analysis is based on approximately two million vehicles on sale at lots of U.S. dealers. The chart below shows cars aged 2-6 years. The index is calculated by keeping the average age of the mixture constant to determine market movement.

Inventory

Used Retail

The volume of retail listings used remained somewhat stagnant and is slightly below 1.00, indicating that the volume of retail listings used is approximately where CY22 began. The CY22 trend line has closely followed the CY20 trend line, but over the past few weeks the trend line has shifted to now follow the CY19 line.

Estimates of used retail days before the turn remain somewhat stagnant, sitting just below 35 days.

Wholesale

The launch of many new model years has been postponed until the second half of the year due to the same supply chain problems that have disrupted the automotive industry over the past 2 years. The shortage of new stocks continues to increase the wholesale prices of used cars, weighted by volume. Fuel prices have risen across the country – by almost 10% in the last month – and consumers may be beginning to consider the benefits that both hybrid and all-electric vehicles can offer. The volume on the band seems to have increased relatively, but some have suggested that this may be partly due to the return of repetitions. Large independent dealers and rental companies still want clean low-mileage cars, while other dealers focus on older high-mileage cars that can usually be purchased at a lower price. Most OEMs go on lease, indicating that franchise dealers no longer buy all the vehicles they can when grounded.

One thing is for sure today: there is no one-size-fits-all approach to buying inventory, and sellers need to consider that.

The estimated average weekly sales continues to grow and now stands at 72%.