Wholesale values are stabilizing and true market demand will make itself known in the weeks or months ahead.
These are the latest key observations from Canadian Black Book pulled from its weekly COVID-19 update released on July 21. Entering the month of July, CBB said wholesale prices in the Canadian marketplace are stabilizing following a months-long downward trend that started in March.
“At large, the nation remains cautiously optimistic in the battle against COVID-19,” said CBB in its update. “Each passing day brings to light healthcare results that show that Canada is moving in a positive direction with fewer cases of COVID-19 and fewer patients in critical care.”
Many provinces have imposed mandatory face masks, such as in Quebec (for interior public spaces). But CBB anticipates that, as the economy continues to open and some form of normalcy returns, there is a risk of a second wave of the pandemic. Examples of this can be seen in parts of Spain and in the Xinjiang region of China.
“If Canadians fail to adhere to social distancing, mask wearing, and other preventative measures, we could risk further COVID-19 spread and damage to our struggling economy,” said CBB.
On market demand, pent-up demand from earlier and more stagnant sales months (due to COVID-19) for new and used vehicles helped “prop-up” sales results for the months of May and June. True market demand will be easier to unravel as we move away from these main COVID months, according to CBB.
Wholesale prices continued their trend towards stability last week. Car segments were up a slight 0.10% in wholesale value, following a slight decrease of 0.03% the previous week. Five of the nine car segments were up and four showed declines. The full-size car segment revealed the largest improvement of all the car segments with an increase of 0.64%, while the luxury car segment represented the most significant decline with -0.23%.
As for trucks, these segments as a whole experienced a decline of 0.14%, and follows the previous week’s 0.05% decline. Only two of the 13 truck/crossover/SUV segments tracked by CBB managed to show an increase: compact crossover/SUV segments (up by 0.30%) and the sub-compact crossover segment (up by 0.29%). All others were down this week, with the most significant declines appearing in the minivan segment (-0.51%) and sub-compact luxury crossover (-0.48%).
“Canadian Black Book believes that the recent strengthening of the market, as it reopens, has created tight used vehicle supply in almost every segment,” said CBB. “This reduction of inventory levels, on dealers’ lots, and those available for wholesale, has caused prices to temporarily pause their weakening. In the coming weeks and months more repossessions, deferred lease returns, and fleets downsizing will raise supply levels.”
It is not yet clear how much demand there will be for the remainder of the year and even into 2021 when the economy presumably moves towards a lasting recovery. But the economy is showing positive signs towards recovery, with indications that commerce is resuming and pent-up demand for goods and services is leading to increased employment rates and GDP output. In fact, The Conference Board of Canada revealed employment rose by a record 952,900 in June.
Make no mistake, the recovery will be slow but it appears to be heading in the right direction — at least for now.
