08.08.2022

Market Insights – 8/9/2022

Wholesale Prices, Week Ending August 5th

Overall, the Canadian used wholesale market saw prices decline for the week (-0.26%). The Truck/SUV segments performed similarly with the Car segment with prices declining -0.18% and Truck/SUV segment prices declining -0.34% last week. Out of the 22 segments, 5 categories’ values have increased for the week, with the Compact Van segment leading the way at +0.70%. 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

• The overall car segments decreased similarly to the prior week at -0.18%.
• Seven of the nine segments saw decreases. The largest of these were Full-Size Cars (-0.71%), next was Luxury Cars (-0.44%) and Sporty Car was third (-0.28%).
• The two segments with positive changes were Sub-Compact Cars (+0.20%) and Compact Car (+0.12).

Truck Segments

• Overall, Truck segment values decreased -0.34%.
• There were 3 Truck segments showing the largest decreases this week. Sub-Compact Luxury Crossover saw the biggest drop (-.75%), followed by Compact Luxury Crossover (-0.51%) and Full-Size Luxury Crossover (-0.45%).
• The Compact Van segment was the only Truck/SUV segment that increased, with an increase of +0.70%.

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 similar to 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 this week. Some observed sell rates as low as 15%, but most were in the 40-50% range this week. 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

• The unemployment rate in Canada was unchanged at 4.9% in July of 2022, the lowest on record and below market expectations of 5%. The number of unemployed fell by 3,600 workers to 1,003,500, and long-term unemployment fell by 23,000 to 162,000. Still, employment in Canada unexpectedly declined by 30,600 pointing to the second consecutive month of job losses.
• Canada’s trade surplus widened to CAD 5.0 billion in June of 2022, from a downwardly revised 4.8 billion in the prior month and well above market expectations of CAD 4.8 billion. It was the largest monthly trade surplus since August of 2008, as exports rose 2.0 percent from a month earlier to a record high of CAD 69.9 billion, primarily driven by higher sales of energy and metals and non-metallic mineral products. Meanwhile, imports rose 1.7 percent to CAD 64.9 billion, mainly on refined petroleum products and aircraft.
• The Canadian dollar was trading around $0.76 on Thursday last week, its lowest in two weeks, pressured by a stronger dollar after a strong US jobs report raised expectations of continued tightening. By this Monday it has rebounded to $0.78.

U.S. Market

In the U.S., overall, Car and Truck segments (-0.89%) decreased for a seventh consecutive week; the prior week decreased by -0.86%.

Volume-weighted Car segments decreased -0.92%, compared to the prior week’s decrease of -0.91%:

• All nine Car segments decreased last week.
• The luxury segments reported the largest declines again last week. Near Luxury and Prestige Luxury reported the largest adjustments at -1.37% and -1.34%, respectively.
• Compact Cars broke the 1% mark with a decline of -1.06%.
• Sub-Compact Cars have been weathering the softening market better than many other segments, but last week, the declines accelerated to -0.48%, after the prior week’s -0.21% drop.

Volume-weighted Truck segments decreased by -0.88%; the previous week had a decrease of -0.84%:

• All thirteen truck segments reported decreases.
• The Full-Size Luxury Crossover/SUV segment had another large decline last week, down an additional -1.72% after the prior week’s decrease of -1.76%.
• The other luxury crossover segments, Sub-Compact (-1.90%), Compact (-1.27%), and Mid-Size (-1.34%) also had large declines last week that exceeded 1%.

Industry News

• Microchip shortages are surging again this week and North American factories are taking the worst of it, according to the latest estimate by AutoForecast Solutions. Worldwide, more than 180,000 vehicles will be cut from production schedules this week, the largest jump reported recently by AFS. About 100,400 of them will be dropped from North American plants.
• B.C. government is improving its rebate program for electric vehicles to make them more affordable and accessible; the maximum provincial rebate for battery-electric, fuel-cell electric and long-range plug-in hybrid electric vehicles climbs from $3,000 to $4,000. The maximum rebate for lower-range plug-in hybrid electric vehicles increases to $2,000 from the previous high of $1,500. Eligibility for rebate will be based on income levels, with an individual making up to $80,000, or a household with an income up to $125,000, eligible for the maximum rebate.
• Plans to expand a proposed U.S tax credit on electric vehicle purchases to cover North American-made cars is a boon for the auto sector, says Ontario’s economic development minister, but the province isn’t planning any buyer incentives for local drivers.