CBB Weekly Automotive Market Update 2/9/2021

February 09 2021
CBB

WHOLESALE PRICES

Average wholesale used vehicle prices in Canada softened again this past week, however, the decline in prices was much less than what we saw the prior week. This week’s performance marks yet another week of decreases for both segment groups, however, this week’s declines in prices were better than seasonal norms (2017-2019) for the overall market, as well as for the Car and Truck/SUV segments. Furthermore, this past week’s price decline is also much improved from the same week last year, which may be an early sign that dealers are beginning to stock up on product for the spring.

Car Segments

• Used cars posted a weekly change of -0.08% last week, much improved relative to the preceding week’s decline of -0.26%.
• Sporty Cars led the increases last week with an up-tick of +0.28%.
• The Full-Size Car (+0.17%) and Premium Sporty Car (+0.16%) segments also increased, while Prestige Luxury Cars (+0.0%) were basically flat for the week.
• The largest declines for the week were seen in the Sub-Compact Car (-0.50%) and the Luxury Car (-0.46%) segments.
• Compact Cars (-0.29%), Mid-Size Cars (-0.18%), and Near Luxury Cars (-0.13%) also declined for the week.

Truck Segments

• The average decline in Truck values for the week was -0.13%, slightly better than the decline from the prior week (-0.17%).
• Full-Size Luxury Crossover/SUVs posted the largest increase for the week at +0.29%.
• Two other segments saw positive, although smaller gains for the week, with Sub-Compact Luxury Crossovers increasing by +0.13% and Full-Size Crossover/SUVs increasing by +0.08%.
• The largest decline came from Full-Size Pickups, which declined by -0.49%, followed by Sub Compact Crossovers (-0.37%) and Mid- Size Crossover/SUVs (-0.31%).

Used Retail Prices & Listing Volumes

Listing prices took a slight dip last week after the strong run of increasing average retail listing prices that began in September 2020. Average listing prices had broken through $25,000 last week (28-day moving average), and after the slight decline, listing prices ended the week slightly below $25,000 (28-day moving average). This analysis is based on approximately 130,000 vehicles listed for sale on Canadian dealer lots.

As we head into the spring season, the seasonal trend would point to prices continuing to rise. There is still uncertainty around the impact of current stay-at-home orders and social distance measures, and the degree that these measures may cool the spring selling season. However, the potential impact from the chip shortage on new vehicle inventory would most likely continue to push used vehicle demand up, and therefore stronger retail prices in the short term.

While the general shortage of used product in the market remains, we have seen a steady increase in the number of vehicles listed for sale as shown in the graph below (right). Active listing volume continues its upward trend that began in the fall of 2020 and is currently above 130,000 units, well above the trough in late August of 110,000 units.

VOLUME

Used Retail

The CBB Listing Volume Index continues to show that the market is at a higher level compared to this time in 2020, yet far below the stock levels available in 2019. Given the potential softening in the new vehicle market (chip shortage), we expect slower February new vehicle sales, which will reduce the number of used trade-ins, further depleting the influx of used inventory. Tight used vehicle inventory levels will continue to be a key factor in the near-term.

Wholesale

Auction activity, both in rate of sales and bidding activity, has been stable in recent weeks. Buyers are showing that they are not impulse buying. The lower kilometer, cleaner vehicles are garnering the most attention while higher kilometer, rougher units are not receiving any attention.

The CBB analyst team continued to see variability in success among lanes last week, with some lanes surpassing the 50% conversion mark, while others did not make it past 30%. They are also continuing to note fewer active bidders in attendance.

The team continued to see sellers holding firm to floors last week. However, there were a few more if-bids noted than seen in recent weeks so this may be a sign of higher conversion rates on the horizon if buyers are starting to get closer to sellers’ floors.

CANADIAN BLACK BOOK'S MARKET INSIGHTS

Economics & Government

• The CAD to USD exchange rate has decreased to the $0.78 range off a January 21st high of $0.79. US auction buyers will be pleased as the rate remains below the roughly $0.82 threshold that limits arbitrage opportunity.
• The Canadian unemployment rate in January rose to the highest level since August, rising by 0.6% to 9.4%, equating to Canada losing 212,800 jobs. According to Statistics Canada, these losses were entirely in part-time work and were concentrated in the Ontario and Quebec retail trade sectors. Employment is currently down 858,000 jobs when compared to February 2020.
• Next week, Ontario Premier will announce details of reopening the economy; the, health minister has asked Toronto, Peel and York to remain in lockdown.

U.S. Market

• This past week, both U.S. Car and Truck segments saw values increase as auction activity continued to gain strength in what is starting to look like an early Spring market.
• Car segments increased in wholesale value by 0.23% for the second week in a row.
o Compact Cars increased for a third week in a row with this past week being the largest of those increases at 0.77%, compared to 0.23% the week prior.
o Sporty Cars, both mainstream and Premium, continued to show signs of Spring with another week of gains. The Sporty Car segment increased the rate of appreciation to 0.48%, compared to 0.35% the week prior. Premium Sporty Cars saw a slowing in the rate of increase to only 0.07% this past week.
• The Truck segments increased by 0.09%, after stability of 0.00% the week prior.
o All of the Van and Pickup segments, both Full-Size and Compact/Small, increased this past week. Full-Size Vans are showing considerable strength as the volume in the segment remains low.
o The Full-Size Pickup segment continues to gain strength each week, with the rate of growth increasing to 0.30% this past week, compared to 0.09% the prior week.

Industry News

• The news of the global microchip shortage’s impact on the automotive industry continues to cause problems for OEMs.
o Ford announced the reduction in shifts from three to one at two of their US based plants for three weeks. These plants are responsible for producing Ford’s high-volume F150
o Stellantis is shuttering their minivan production in Ontario for three weeks, impacting the Chrysler Pacifica, Grand Caravan and Voyager models.
o General Motors announced the production stoppage at four of their assembly plants for one week. Their strategy is to prioritize chip allocation to their highest-profit models, full-size trucks, SUVs, and the Corvette.
• After much anticipation, the redesigned model year 2022 Nissan Frontier and Pathfinder were unveiled last week. Look for these redesigned models to come loaded with safety and technology features and expect to see them in showrooms this summer.

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 Enhance 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.

Contact
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