CBB Weekly Automotive Market Update 5/11/2021

May 11 2021
CBB

Wholesale Prices, Week Ending May 7th

The Canadian used vehicle wholesale market had yet another strong performance with an overall weekly increase of +0.46%, down slightly compared to the prior week (+0.48%). The weekly increases seen in both the Car and the Truck/SUV segments were well above average week-over-week price increases. Cars led the market with a strong up-tick in prices (+0.49%) although at a slightly slower pace than the prior week, while Truck/SUVs had a slight momentum up-tick in weekly increases at +0.43%.

Car Segments

• Used cars posted a strong weekly performance with a weekly change of +0.49%, albeit down compared to the preceding week’s increase of +0.54%.
• Most car segments showed a weekly increase, with Sporty Cars (+1.03%) leading the Car segments and the market overall.
• Near Luxury Cars (+1.00%) and Mid-Size Cars (+0.70%) also had strong performances with above average increases.
• The Prestige Luxury Car (-0.27%) and the Full-Size Car (-0.09%) segments had the weakest performance out of the Car segments and were the only 2 Car segments showing a weekly decline in prices.

Truck Segments

• Trucks posted a strong weekly performance, showing a weekly increase in values of +0.43%, slightly stronger performance than the preceding week.
• Most Truck/SUV segments saw positive weekly changes, with Full-Size Luxury Crossover/SUVs leading the Truck/SUV segments with a weekly increase at +0.96%, followed by Compact Luxury Crossover/SUVs (+0.68%), Mid-Size Crossover/SUVs (+0.63%), and Full-Size Crossovers/SUVs (+0.59%).
• Compact Crossover/SUVs (-0.02%) and Minivans (-0.04%) had the weakest performances this week on the Truck/SUV side of the market.

Monthly Retention Index

The Canadian Black Book Used Vehicle Retention Index has set yet another new all-time record in April 2021. The Index, which tracks the retained value performance of 2- to 6-year-old vehicles, hit 121.3 points, eclipsing the previous record by 2.2 points, which was just last month at 118.6 Index points. This is the tenth consecutive month of increases and eighth consecutive month with an all-time record high. Year-over-year, the Index is up 17% from 103.7 points in April of 2020, which is the largest year-over-year increase in the history of the Index. For April 2021, all segments that Canadian Black Book measures saw increases.

Used Retail Prices & Listing Volumes

Used vehicle average listing prices continued their upward trajectory this past week, with the 14-day moving average now at ~$25,655. The 28-day moving average also continued to see strong increases, closely mirroring the daily and 14-day trends, which have been experiencing a strong upswing in prices since late February. Analysis is based on approximately 130,000 vehicles listed for sale on Canadian dealer lots.

Active listing volume had a marginal increase this past week, with the 14-day moving average now at around 138,025, up from the prior week’s figure of ~137,230. Active listing volume began showing positive movement in early April and we are still seeing the trend continue.

Volume

Used Retail

Listing volume had a marginal increase last week, although the CBB Listing Volume Index reading remained at 1.078, the same as the prior week. The index is now showing that overall listing volume is at slightly higher levels than this time last year.

 Wholesale

The Canadian wholesale market strengthened further this week. While still in positive territory, the increases seen this week were similar to the previous week. Supply remains low with extremely high demand on both sides of the boarder. Upstream channels continue to tap supply before it can be available to wholesale markets.

Sell rates remain strong this week as buyers continue to demand inventory. They are willing to adjust to sellers' expectations, especially in the Truck segment. Some observed sell rates were as high as 79% this week - low supply and high demand keeps any saleable vehicle from returning to the auction block a second time. This high demand at auctions is expected to continue this week as the lack of new vehicle supply continues to increase demand for used vehicles.

The U.S. market exchange rate tightened but remains favourable for exportation when price and demand are taken into consideration. Buyers exporting vehicles to the U.S. continue to place pressure on Canadian vehicles, and supply is struggling to keep up with overall demand at auctions.

Canadian Black Book’s Market Insights

Economics & Government

• The Canadian dollar increased to 0.83, a level not seen since September 2017. Forecasts showed a loss of 175,000 jobs in the Canadian economy, as restrictions were reimposed to curb the latest wave of the virus and reduce the number of patients in ICU beds. On the pandemic front, new infections are stabilized while ICU patients have started to decrease in Ontario after admissions reached a record of 900 beds.
• The Consumer Price Index (CPI) rose 2.2% on a year-over-year basis in March, up from a 1.1% gain in February. A significant proportion of this increase was attributed to a steep decline in prices in March 2020, as the monthly CPI rose 0.5% in March 2021. On a seasonally adjusted monthly basis, the CPI increased 0.1% in March. Excluding energy, the CPI rose 1.1% on a year-over-year basis.
• Consumer Confidence is expected to be 51.9 points by the end of this quarter, according to Trading Economics global macro models and analysts' expectations. Looking forward, we estimate Consumer Confidence in Canada to stand at 52.00 in 12 months' time. In the long-term, Canadian Consumer Confidence is projected to trend around 55.00 points in 2022, according to econometric models.

U.S. Market

All U.S. Car and Truck segments reported increases this past week with the overall market gaining +1.07%, compared to +1.00% last week.

Car segment gains ticked up slightly this past week (+1.25%) compared to the week prior (+1.17%).
• Five of the nine car segments had gains exceeding +1.00%.
• Sporty Cars continue to see large week-over-week gains with an increase of +1.19% last week.
• The Luxury segment gains have slowed but are still large compared to normal seasonal patterns. Typically, these segments would be declining this time of year and rarely see increases, even during the spring market.

Truck segment gains increased this past week (+0.98%), compared to the previous week (+0.89%).
• All thirteen truck segments reported gains last week, with five exceeding +1.00%.
• Sub-Compact Crossovers (+1.56%) and Minivans (+1.46%) had the largest Truck segment gains.
• Small Pickups resumed greater than 1% weekly increases (+1.31%) after slowing down to 0.94% two weeks ago. Full-Size Trucks have averaged a weekly increase of +1.39% over the last nine weeks.

Industry News

• The SAAR for April hit 1.66 million - new car sales were up year over year, but time last year is when the auto industry was hardest hit.
• Rolls-Royce announced the discontinuation of the Dawn convertible and Wraith coupe after the completion of the 2021 model year. However, they do have plans to release all-electric models in the future.
• Ford estimated the microchip shortage will cost them $2.5B. Volkswagen revised their yearly earnings forecast after a strong Q1, but cautioned on the negative impact the reduced output as a result of the shortage will have on their second quarter profits.
• Full-Size Truck production will begin in Oshawa, Ontario much sooner than initially expected with General Motors announcing their $1.3 billion investment in the assembly plant to begin production in Q4.