08.23.2022

Market Insights – 8/23/2022

Wholesale Prices, Week Ending August 20th

The market has now had four consecutive weeks of large declines, averaging greater than -0.84%. Lower consumer demand has impacted buyer behavior at auctions around the country, but this past week, sellers began to hold firm on floors and the sales rate reflected this change in behavior.

Car Segments

• On a volume-weighted basis, the overall Car segment decreased -0.87%. For reference, the previous week, cars decreased by -0.90%.
• All nine Car segments decreased last week.
• The Prestige Luxury Car segment reported the largest rate of decline last week of the nine Car segments, with a decrease of -1.34%, after the prior week’s -2.00%.
• Compact Cars have now experienced declines for eight consecutive weeks, for an average weekly depreciation of -0.63%. Last week, the segment had a larger than average decrease of 1.22%, the largest single week decline for this segment since the week ending on August 6th, 2021.

Truck / SUV Segments

• The volume-weighted, overall Truck segment decreased -0.96%, compared to the prior week’s decrease of -0.82%.
• All thirteen truck segments reported decreases.
• Fuel prices have been falling but are still higher than this same time last year. Despite the falling fuel prices, the Full-Size SUVs continue to report large week-over-week declines. Full-Size Luxury had the largest decline last week, at -1.87% and Full-Size SUV was not far behind, with a decline of -1.82%.
• Full-Size Vans are remaining in negative week-over-week territory, but the declines are lowest of all the Truck segments.

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 30% and as high 80%, but most were in the 40-50% 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 but slowing as markets cool on both sides of the boarder.

Canadian Black Book’s Market Insights

Economics & Government

• Canada’s annual inflation rate was at 7.6% in July of 2022, easing from the 39-year high of 8.1% hit in the prior month and in line with market estimates. Transportation costs grew at a much slower pace (14.4% vs 16.8% in June), amid a sharp retreat in gasoline (35.6% vs 54.6%). Also, inflation was lower for shelter (7% vs 7.1%), household operations, furnishings, and equipment (5% vs 5.6%), and clothing and footwear (1.4% vs 2.7%). In the meantime, inflation continued to pick up for food (9.2% vs 8.8%), weighed by groceries (9.9% vs 9.4%), while recreation costs stagnated (at 6.2%).
• Housing starts in Canada increased by 1.1% over a month earlier to 275,329 units in July of 2022, above market expectations of 262,100 units, according to the Canada Mortgage and Housing Corporation (CHMC). Urban starts decreased by 0.8% to 254,371 units, as single-detached urban starts fell 2.3% to 58,384 units and multi-unit urban starts went down 0.3% to 195,987 units. Rural starts were estimated at a seasonally adjusted annual rate of 20,958 units.
• The Canadian dollar has been trading in a range of 0.77 to 0.78 against the greenback, as fresh consumer price data backed investors’ bets that the Bank of Canada should continue to raise lending rates at an aggressive pace. U.S. Market

In the U.S., overall, Car and Truck segments (-0.93%) decreased for a ninth consecutive week; the prior week decreased by -0.85%.

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

• All nine Car segments decreased last week.
• The Prestige Luxury Car segment reported the largest rate of decline last week of the nine Car segments, with a decrease of -1.34%, after the prior week’s -2.00%.
• Compact Cars have now experienced declines for eight consecutive weeks, for an average weekly depreciation of -0.63%. Last week, the segment had a larger than average decrease of 1.22%, the largest single week decline for this segment since the week ending on August 6th, 2021.

Volume-weighted Truck segments decreased by -0.96%; the previous week had a decrease of -0.82%:

• All thirteen truck segments reported decreases.
• Fuel prices have been falling but are still higher than this same time last year. Despite the falling fuel prices, the Full-Size SUVs continue to report large week-over-week declines. Full-Size Luxury had the largest decline last week, at -1.87% and Full-Size SUV was not far behind, with a decline of -1.82%.
• Full-Size Vans are remaining in negative week-over-week territory, but the declines are lowest of all the Truck segments.

Industry News

• DesRosiers Automotive Consultants reported that Canadian light vehicle production was up approximately 15.4% in the first half of 2022 compared to the previous year, as Toyota continued to lead the Canadian industry in production despite a decline in production related to semiconductor shortages. Significant increases in overall production were recorded for GM, Stellantis, and Ford.
• Ford is cutting 2,000 salaried positions and 1,000 agency jobs. Affected employees are in the U.S., Canada and India.
• Volkswagen is expected to sign a tariff-friendly battery supplies deal with Canada, to secure access to raw materials such as nickel, cobalt and lithium for vehicle and battery production
• Dodge has unveiled their first plug-in hybrid variant, the compact crossover Hornet, which is expected to get more than 30 miles of electric range; the Hornet will be available as a conventional gasoline model as well and is expected to reach dealerships later this year.