Wholesale prices continued its slow decline in Canada while all car segments of 2-8 year-old vehicles declined by 0.58%, according to Canadian Black Book’s latest COVID-19 automotive market weekly update.
That decline is similar to last week’s 0.60% drop for car segments; wholesale car values have dipped 0.54% on average, each week, over the past eight weeks.
The truck/SUV/crossover segments decline 0.68% — less than the previous week’s 0.85% decline, and have on average dropped 0.61% over the past eight weeks.
These are weekly adjustments, according to CBB, which adds that “when you consider how much of a decline this would be over 52 weeks over a year, the numbers are daunting.”
CBB’s Value Index fell an additional 3.20 points for May, which is just shy of April’s 3.58 decline.
“It remains our outlook that wholesale prices will continue to decline, until we reach a total decline of 17% industry wide,” said CBB. “We have not yet seen retail asking prices follow the wholesale trends, but that is to be expected in the coming months.”
The systematic removal of large amounts of used vehicle exports/supply to the U.S. from the Canadian market is among the key reasons behind the rise in wholesale prices, according to CBB.
“This has also directly helped to keep Canadian residual values high and make leasing an affordable option for consumers,” said CBB.
On the economic recovery, CBB said it is unlikely to reach pre-pandemic levels until the end of 2021 or beyond. And during this period, unemployment is expected to remain high.
Another important topic worth reviewing is the new NAFTA agreement (or CUSMA in Canada), which comes into full effect on July 1 — with rules around automotive local country content that will become more severe with time.
“What this will mean at the border crossing on a day-to-day basis remains a little unclear. The tax on most vehicles entering the U.S. would be 2.5%, if the vehicle is not certified as compliant with the (CUSMA) rules,” said CBB. “This is not great news; however, it may just be the cost of doing business for certain vehicles. On the other hand, if the vehicle is a pickup truck or a two-seat cargo van, the rather steep 25% tariff, also known as the ‘chicken tax,’ could apply for certain vehicles.”
For more information, you can read the full CBB update here.
