CBB Weekly Automotive Market Update 3/30/2021

March 30 2021
CBB

“CBB Weekly Automotive Market Update 3/2/2021” is locked CBB Weekly Automotive Market Update 3/2/2021

Wholesale Prices, Week Ending March 26th

This past week, the Canadian used car market and the USA market experienced record-breaking wholesale price increases as the industry continues to feel the impact of new vehicle production shortage and strong new and used vehicle demand. Both the Car and Truck/SUV segments saw record-breaking week-over-week price increases with the Truck/SUV segments again leading the strong market performance. Compared to the prior weeks, Car segments continued to pick up momentum with a stronger up-swing in prices.

Car Segments

• Used cars posted a record-breaking weekly change of +0.39%, an increase compared to the preceding week’s increase of +0.30%.
• All 9 car segments showed a weekly increase, with Full-Size Cars (+1.42%) and Sub-Compact Cars (+1.04%) leading the Car segments.
• Mid-Size Cars (+0.77%), Sporty Cars (+0.58%), and Prestige Luxury Cars (+0.42%) also had strong performances with above average increases.
• While the Near Luxury Car (+0.13%) and the Premium Sporty Car (+0.14%) segments trailed the rest of the Car segments, they still saw a weekly up-tick in prices.

Truck Segments

• Trucks also posted a record-breaking week, showing a weekly increase in values of +0.76%, following the prior week’s increase of +0.55%.
• All segments had positive weekly changes, with the Full-Size Crossovers/SUVs leading the Truck/SUV segments (and the
market) with the largest weekly increase at +1.51%, followed by Compact Crossover/SUVs (+1.19%), Minivans (+1.15%), and Sub- Compact Crossovers (+1.09%) – all top 4 segments with weekly changes exceeding 1%.
• Full-Size Pickups (+0.97%) also had a strong week with an above average weekly increase.

Used Retail Prices & Listing Volumes

Similar to the wholesale side of the market, average listing prices continued strengthening this past week (14-day moving average, now ~$24,930). The 28-day moving average is also seeing increases, catching up to the daily and 14-day trends which have been experiencing an upswing for the past few weeks. This analysis is based on approximately 130,000 vehicles listed for sale on Canadian dealer lots.

As we expected, retail prices are now catching up to the upswing in prices that we have been experiencing in the wholesale market. We are definitely not completely in the clear when it comes to the impact of the pandemic; however, the inventory shortage on the new and used vehicle market continues to drive wholesale and retail prices up.

Active listing volume declined this past week (daily, 14-day and 28-day moving average), with the 14-day moving average now at around 128,500, down from the prior week figure of ~129,500. The weekly decline in listing volume was not a significant drop, but combined with the increase in demand, any drop in listing volume will have an impact on prices.

Volume

Used Retail

Listing volume declined this week, with the CBB Listing Volume Index showing a decrease to 0.998 from 1.011 the prior week. Although the index continues to show that overall listing volume is at a higher level compared to this time in 2020, this week’s decline narrows the gap in volume compared to last year. The drop in listing volume is just another indication of the challenges the industry is facing with a supply shortage in both the new and used side of the market. Tight used vehicle inventory levels, relative to demand, will continue to be a key factor in the near-term.

Wholesale

The Canadian wholesale market strengthened further this week with Truck, SUV, and Car values all moving further in the positive week-over-week territory. The Car segments continued to trend deeper into the positive week-over-week adjustment territory by a more modest amount of approximately +0.4%. The Truck and SUVs increased its week-over-week adjustment by the largest margin we have seen in months just shy of +0.8%. Inventory remains tight while demand continues to grow, leading to these gains in value.

Sell rates remain strong this week as buyers continue to demand inventory and are appearing more willing to adjust to sellers' expectations especially in the Truck segment. This high demand at auctions is expected to continue this week as the warmer weather increases consumer demand, causing dealers to continue to replenish used inventory.

The U.S. market exchange rate remains favourable for exportation; buyers exporting vehicles to the U.S. continues to place pressure on Canadian vehicles as supply is struggling to keep up with overall demand at auctions. The Canadian dollar stabilized this past week; however, this will have little effect on demand with rising prices on both sides of the boarder.

Canadian Black Book’s Market Insights

Economics & Government

• The Canadian dollar is up +0.2% this past week as oil prices stabilize. The markets overall are mixed with equities looking up slightly while long term yields are once again moving up after declining some earlier in the week.
• Consumer Spending in Canada is expected to be C$1,176,978 million by the end of this quarter, according to Trading Economics global macro models and analysts' expectations. Looking forward, we estimate Consumer Spending in Canada to stand at C$1,164,255 million in 12 months' time. In the long-term, the Canada Consumer Spending is projected to trend around C$1,193,362 million in 2022 and C$1,216,036 million in 2023, according to our econometric models.
• The unemployment Rate in Canada is expected to be 8.20% by the end of this quarter, according to Trading Economics global macro models and analysts' expectations. Looking forward, we estimate Unemployment Rate in Canada to stand at 7.50% in 12 months' time. In the long-term, the Canada Unemployment Rate is projected to trend around 6.50% in 2022, according to econometric models.
• The Ever Given is now moving again in the Suez Canal after the nearly week long blockage it created. It is expected to take approximately 10 days to clear the backlog and give strained supply chains some relief.

U.S. Market

• All U.S. Car and Truck segments reported a fifth week in a row of increases, with the overall market increasing +1.49%, compared to +1.03% the previous week.
• Car segments had another week of large gains with the overall rate of increase rising to +1.58%, compared to +1.42% the previous week.
o All nine Car segments had gains exceeding +1.00% except Premium Sporty Cars (+0.32%).
o Sub-Compact Cars broke the 2% mark with an increase of +2.12%.
o The Prestige Luxury Car segment had its largest single week increase ever recorded and it was the first time this segment broke the 1% mark at a gain of +1.20%.
• Truck segments had a large gain this past week at +1.44%, compared to +0.82% the week prior.
o The mainstream Sub-Compact SUV segment had the largest Truck segment weekly gain at +2.03%.
o Full-Size Trucks gained additional momentum last week with an increase of +1.62%, compared to the prior week’s +1.04%.

Industry News

• The global microchip shortage continues to plague the auto industry with more discouraging news coming out from OEMs this past week:
o GM now has another plant impacted, this time in Missouri with their mid-size trucks, that will be down through April 12.
o Ford experienced shutdowns and shift reductions in their full-size truck and SUV plants last week. In some cases, they are assembling the vehicles and storing them until the necessary chips are available for completion.
o A fire at the Renesas Electronics plant, one of the microchip producers (responsible for roughly 30% of chip manufacturing), could put added strain on the already short supply of this critical input to auto production.
• The Canadian auto industry is looking at the potential for another new inventory supply disruptor, this time in the form of a dockworkers strike at the Port of Montreal. It is unclear at this time what the exact impact will be, but there is potential for this strike to further restrict vehicle supply.

About Canadian Black Book

For 60 years, Canadian Black Book has been the trusted and unbiased Canadian automotive industry source for vehicle values. Today the company has grown into a leading data provider of vehicle valuations, residual value forecast solutions and VIN decoding. Canadian Black Book tools and information are considered ‘The Authority’ for vehicle values, not only by car dealers and manufacturers, but also the leasing, finance, insurance, and wholesale sectors. In 2021, Canadian Black Book is bringing to market its Enhanced Vehicle Matching (EVM) solution, which will allow the industry to more consistently decode 17-digit VINs down to a specific trim package, allowing a more precise vehicle valuation.

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