08.16.2022

Market Insights – 8/17/2022

Wholesale Prices, Week Ending August 5th

Canadian used wholesale market saw prices decline for the week (-0.29%). The Car segment saw a decline of –0.14%, while the Truck/SUV segment prices declined -0.44%. Out of the 22 segments, 3 categories’ values have increased for the week, with the Sub-Compact Luxury Crossover segment leading the way at +0.28%. Value changes this week seem to continue to be returning to normal seasonality, as can be seen in the 2017-2019 average changes.

Car Segments

• Overall car segments decreased -0.14% last week.
• Segments with the largest decreases were Luxury Cars and Sporty Cars, both down by -0.30%. Next was Mid-Size Car (-0.24%) and Premium Sporty Car (-0.21%).
• Compact Car had a positive change with an increase of +0.27%.

Truck Segments

• Overall, Truck segment values decreased -0.44%.
• There were 3 Truck segments showing the largest decreases this week. Compact Van saw the biggest drop (-1.10%), followed by Small Pickup (-1.02%) and Full-Size Crossover (-0.82%).
• The Sub-Compact Luxury Crossover segment was the only Truck/SUV segment that increased, with an increase of +0.28%.

Used Retail Prices & Listing Volumes

The average listing price for used vehicles increased slightly week-over-week, as the 14-day moving average remains just above $37,000. Analysis is based on approximately 120,000 vehicles listed for sale on Canadian dealer lots.

Wholesale

The Canadian wholesale market decreased further this week. The overall decreases seen this week were slightly larger than the previous week’s declines. Supply remains low with high demand for newer good condition vehicles on both sides of the border. Upstream channels continue to tap supply before it can be available to wholesale markets.

Conversion rates continued to fluctuate last week. Some observed sell rates were as low as 25%, but most were in the 30-45% range. We are seeing more sellers holding floor prices higher than buyers are willing to go, which has been contributing to lanes with lower sell rates.

The U.S. market exchange rate remains favourable for exportation when price and demand are taken into consideration. Arbitrage opportunities have continued to bring in U.S. buyers, causing a steady flow of vehicles to exit Canada’s wholesale market.

Canadian Black Book’s Market Insights

Economics & Government

• Manufacturing sales in Canada fell 0.8 percent month-over-month in June of 2022, slightly below preliminary estimates of a 1 percent decline and following a downwardly revised 1.1 percent drop in the prior month. It marked the second monthly decline in manufacturing sales since September 2021, with lower sales in 8 of the 21 industries. Losses were pronounced for petroleum and coal products (-7.8 percent), marking the first decline in five months as recession concerns pressured energy prices.
• The yield on Canada’s 10-year government bond hovered around 2.7%, close to levels not seen in four months, as investors scaled back bets on interest rate hikes after data showed a bigger-than-expected slowdown in the US inflation rate. In Canada, the headline inflation rate went up to 8.1% in June, a new 4-decade high, but below market expectations and slowed more than expected monthly.
• The Canadian dollar broke past the $0.785 USD mark, its highest in two months, lifted by a weaker US dollar after a smaller-than-expected US inflation reading reduced bets on an aggressive interest rate hike by the Federal Reserve next month.

U.S. Market

In the U.S., overall, Car and Truck segments (-0.85%) decreased for an eighth consecutive week; the prior week decreased by -0.89%.

Volume-weighted Car segments decreased -0.90%, compared to the prior week’s decrease of -0.92%:

• All nine Car segments decreased last week.
• Luxury segments continued to experience large depreciation last week. The Prestige Luxury Car segment reported the largest decline at -2.00%, following the prior week’s already large decline of -1.34%.
• The Compact Car segment continued the declines last week, but the rate of decline lessened to a decrease of -0.67%, compared with the prior week’s -1.06%.

Volume-weighted Truck segments decreased by -0.82%; the previous week had a decrease of -0.88%:

• All thirteen truck segments reported decreases.
• Full-Size Vans have been on a downward slide after over a year of increases, but the rate of declines leveled off last week with the segment reporting a minimal decrease of -0.05%.
• Sub-Compact (-1.63%) and Full-Size (-1.60%) Luxury Crossover/SUV segments experienced the largest Truck market declines last week. Both segments however, slowed the rate of depreciation compared to the prior week with declines of -1.90% and -1.71%, respectively.

Industry News

• Electric cars’ turning point may be happening as U.S. sales numbers start climb in the first three months of 2022; EV registrations shot up a huge 60 percent even as the overall market was down 18 percent, according to a report by Automotive News.
• Automakers have cut 6,800 more vehicles out of their worldwide production schedules because of microchip shortages, according to the latest estimate by AutoForecast Solutions. The adjustment is one of the lowest weekly production cuts since the microchip crisis emerged early last year. All of last week’s cuts occurred at North American assembly plants.
• Canadian Black Book’s Yolanda Biswah, Senior Vice President & General Manager, has been selected as one of Automotive News Canada’s 2022 Canadians to Watch.
• Auto suppliers are asking for contract relief as parts shortages and heightened commodity prices are putting the squeeze on Tier 2 and Tier 3 suppliers, often forcing them to go to their Tier 1 customers to renegotiate pricing or ask for a cash infusion.