Market Insights – 9/7/2022
Wholesale Prices, Week Ending September 2nd
The Canadian used wholesale market saw prices decline for the week (-0.33%). The Car segment falls just below the Truck/SUV segments with a decline of -0.34%, while the Truck/SUV segment prices declined -0.33%. 7 of the 22 segments’ values have increased for the week, with the Sub-Compact Luxury Crossovers leading the way at +0.37%, followed by Near Luxury Cars at +0.23%. Canada’s wholesale market continues to slow down as markets cool on both sides of the border.
|This Week||Last Week||2017-2019 Average (Same Week)|
|Truck & SUV segments||-0.33%||-0.46%||-0.24%|
- Car segments decreased on average -0.34% last week.
- Premium Sporty Cars had the largest drop (-1.09%), followed by Luxury Cars (-0.62%), Sporty Cars (-0.44%) and finally Mid-Size Cars (-0.36%).
- There were five segments that had increases. Near Luxury had the highest (+0.23%), next was Sub-Compact Cars (+0.22%) followed by Full-Size Cars (+0.18%).
- Overall, Truck segment values decreased -0.33%.
- There were two segments that had increases last week. Full-Size Pickups increased by +0.06% and Sub Compact Luxury Crossovers by +0.37%
- Compact Vans had the largest decrease at -1.80%
Used Retail Prices & Listing Volumes
The average listing price for used vehicles increased slightly week-over-week, as the 14-day moving average remains stable at roughly $37,500. Analysis is based on approximately 120,000 vehicles listed for sale on Canadian dealer lots.
The Canadian wholesale market decreased further this week. The overall decreases seen this week were slightly less 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 10% but most were in the 30-40% 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
- The Canadian dollar weakened towards the $0.76 mark, a level not seen since November 2020, as lingering concerns about slowing economic growth domestically and in the United States, Canada’s primary trade partner, continued to weigh on the outlook for CAD.
- The Bank of Canada monetary policy meeting later this week has markets expecting another mammoth rate hike as the central bank seeks to tame sky-high inflation. Money markets are now pricing in a 75 bps rate increase, bringing borrowing costs to 3.25%. The aggressive tightening from the BoC combined with a high level of business and household debt in the economy has made the hope of a soft landing more elusive.
- Labor productivity for Canadian businesses rose 0.2% in the second quarter, after falling 0.5% in the previous quarter. This was the first increase in productivity since the second quarter of 2020, as the lifting of public health measures in almost all regions of the country during the second quarter led businesses to carry out their economic activities without any pandemic-related restrictions. For the first time since the beginning of the pandemic, business output rose faster than hours worked, but productivity is still 1.3% below pre-pandemic levels. Hours worked in the business sector rose 0.7%, much less than in each of the three previous quarters.
In the U.S., overall, Car and Truck segments decreased -0.93% last week; the prior week decreased by -0.89%.
Volume-weighted Car segments decreased -0.95%, compared to the prior week’s decrease of -0.77%:
- All nine Car segments decreased last week.
- Four of the nine Car segments reported declines greater than 1% last week. Sporty Car led the Car segment depreciation with a decline of -1.30%, but Prestige Luxury (-1.25%), Near Luxury (-1.21%) and Compact (-1.01%) were not far behind.
- The Sub-Compact Car segment has been experiencing declines, but the rate of decline has been well below the rest of the market. Last week the segment reported a decline of -0.36%, slightly more than the 10-week average decline of -0.24% for the segment.
Volume-weighted Truck segments decreased by -0.93%; the previous week had a decrease of -0.95%:
- All thirteen truck segments reported decreases.
- Six of the thirteen truck segments reported declines greater than 1% last week. The Compact Luxury Crossovers led the declines at -1.37%, after the prior week’s even larger -1.86% depreciation.
- The Full-Size Luxury Crossover/SUV segment has experienced some of the largest segment declines in recent weeks, averaging -1.63% over the last six weeks, but last week (-1.12%) the declines showed signs of slowing down.
- August new-vehicle sales were at their lowest in more than two decades, according to DesRosiers Automotive Consultants (DAC). Automakers sold an estimated 126,534 new light vehicles last month, down 13.9% when compared with the same month a year ago and the lowest August total since 1999, the consultancy said.
- Canadian luxury tax now in effect, which will add either a 10% charge to the full value of a $100,000 vehicle, or 20% tax on the value of the vehicle above $100,000.
- Canadian values for our August Market Index have come in and are down 0.3% to 159.8, with smaller car segments like Compact Car increasing in value while larger car/SUV and luxury segments in decline.
- BMW has started producing fuel-cell systems for its hydrogen-powered iX5 crossover; BMW will start delivering the limited iX5 hydrogen vehicles to selected partners in Europe, the U.S., and Asia at the end of 2022.