Wholesale Market Insights · Q4 2019 Cox Automotive Dealer Sentiment Index According to the Q4 2019 Cox Automotive Dealer Sentiment Index (CADSI), the current U.S. auto market is

Wholesale Market InsightsThrough December 2019

J o n a t h a n S m o k e & Z o R a h i m

1

INVENTORY

RETAIL

FINANCIAL

MOBILITY

Manheim Used Vehicle Value Index

All Manheim U.S. sales

Classify by market segment

Account for differences in mileage

Weight to provide smoother segment mix

Seasonally adjust

3

Steps:

A single measure of used vehicle price

change that is independent of underlying

segment shifts in the characteristics of

vehicles being sold

Concept:

4

Wholesale Prices Rebound To End The Year

Source: Manheim/Cox Automotive

141.1

90

95

100

105

110

115

120

125

130

135

140

145

Jan-95 Jan-98 Jan-01 Jan-04 Jan-07 Jan-10 Jan-13 Jan-16 Jan-19

January 1995 = 100

Prices in December increased 1.54% versus November 2019 and were up 2.5% compared to December 2018

5

Used Vehicle Values Bounce Back From Lows

Year-over-year price performance now stronger than average

2.5%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

Jan-96 Jan-99 Jan-02 Jan-05 Jan-08 Jan-11 Jan-14 Jan-17


6

Manheim Index versus Mix & Quality Adjusted New Vehicle Price with 3 ½ year Lag

Used vehicle prices stay above the historical new vehicle price relationship trend

30%

35%

40%

45%

50%

55%

60%

Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 Jan-17 Jan-19

Source: Bureau of Labor Statistics, Manheim/Cox Automotive

7

Wholesale Used Vehicle Prices vs. New Vehicle Prices


$25,000

$27,000

$29,000

$31,000

$33,000

$35,000

$37,000

$39,000

$9,500

$10,000

$10,500

$11,000

$11,500

$12,000

$12,500

$13,000

$13,500

$14,000

$14,500

Feb-12 Feb-13 Feb-14 Feb-15 Feb-16 Feb-17 Feb-18 Feb-19

Manheim Non-Adjusted Price (LHS) Average new vehicle transaction price per KBB (RHS)

8

2019 Weekly Price Trend Ended 2019 Stable

Depreciation accelerated to start the fall, but end of year trend normalized


80.0%

85.0%

90.0%

95.0%

100.0%

105.0%

110.0%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52

3-Year-Old Model MMR Index by Week

2014 2015 2016 2017 2018 2019

9

Weekly Price Trend Was Strong For Non-Luxury

Accelerating depreciation in the fall transitioned to stabilized values to end the year


80.0%

85.0%

90.0%

95.0%

100.0%

105.0%

110.0%

115.0%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52

Non-Luxury 3YO Model MMR Index by Week

2014 2015 2016 2017 2018 2019

10

Weekly Price Trend Weaker For Luxury

Luxury vehicles saw steep depreciation in first quarter and again in fall but ended stable


80.0%

85.0%

90.0%

95.0%

100.0%

105.0%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52

Luxury 3YO Model MMR Index by Week

2014 2015 2016 2017 2018 2019

11

Weekly Price Trend Strong for One-Year-Old Vehicles

One-year-old vehicle prices were very stable with little depreciation until the fall and ended stable


80.0%

85.0%

90.0%

95.0%

100.0%

105.0%

110.0%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52

1-Year-Old Model MMR Index by Week

2014 2015 2016 2017 2018 2019

12

Retention Values Ended 2019 Down 1.6% Relative to 2018

Relative to MSRP and fixing the basket of vehicles by what was sold leaves residuals flat with 2017

Source: Kelley Blue Book/Cox Automotive

(1 to 3 year-old models)

45%

47%

49%

51%

53%

55%

57%

59%

61%

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

CY 2017 CY 2018 CY 2019

13

Percent Change in Wholesale Prices for Major Market Segments

Only three major segments saw year-over-year gains in December


2.5%

-1.2%

4.8%

1.8%

-0.4%

1.8%

-3.0%

-8%

-3%

2%

7%

12%

17%

22%

Industry Compact cars Midsize cars Luxury cars Pickups SUV/CUV Vans

1 year

2 years

3 years

4 years

14

Luxury Ends Year on Upward Trend


Luxury prices in December were up 3.1% compared to Dec 2018, while non-luxury prices increased 1.9%

January 2000 = 100

117.8

138.0

80

90

100

110

120

130

140

150

Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14 Jan-16 Jan-18

Luxury Non-Luxury

15

110.3

0

20

40

60

80

100

120

Jan-15 Jan-16 Jan-17 Jan-18 Jan-19

Electric Car

Electric Car Prices Improved in 2019


Electric car prices in December were up 15.5% compared to December 2018

January 2015 = 100

16

Shifting Consumer Preferences Not Reflected in Wholesale Market Volumes

The SUV reigns supreme in new vehicle sales while cars still dominated the used car market


47%

12%

36%

5%

0%

10%

20%

30%

40%

50%

60%

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Manheim Sales by Category

CAR PICKUP SUV VAN

29%

17%

49%

5%0%

10%

20%

30%

40%

50%

60%

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

New Vehicle Sales by Category

CAR PICKUP SUV VAN

17

Average Auction Price – Rental Risk Units

Average price for rental risk units sold in December up 3.5% y/y and up 1.5% m/m


13,000

13,500

14,000

14,500

15,000

15,500

16,000

16,500

17,000

1 2 3 4 5 6 7 8 9 10 11 12

2015

2016

2017

2018

2019

18

Distribution of Rental Risk Vehicles


2017 Q4 2018 Q4 2019 Q4

Number of unique

year, make, model,

body configurations

sold

3,014 2,623 3,054

Share accounted for

top 10 YMMB 11.9% 12.0% 13.3%

Share accounted for

top 25 YMMB 22.5% 23.7% 23.1%

Number of YMMB to

reach 50% share 110 112 109

19

Average Mileage – Rental Risk Units Sold at Auction

Average mileage for rental risk units in December was up 6% compared to a year ago and up 5% m/m


51,395

20,000

25,000

30,000

35,000

40,000

45,000

50,000

55,000

60,000

Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 Jan-17 Jan-19

20

Rental Risk Units Sold by Condition


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2015Q4

2016Q1

2016Q2

2016Q3

2016Q4

2017Q1

2017Q2

2017Q3

2017Q4

2018Q1

2018Q2

2018Q3

2018Q4

2019Q1

2019Q2

2019Q3

2019Q4

5.0

4.0 - 4.9

3.0 - 3.9

2.0 - 2.9

0 - 1.9

21

Rental Risk Units Sold by Make


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2015Q4

2016Q1

2016Q2

2016Q3

2016Q4

2017Q1

2017Q2

2017Q3

2017Q4

2018Q1

2018Q2

2018Q3

2018Q4

2019Q1

2019Q2

2019Q3

2019Q4

All other

Mazda

Kia

Jeep

VW

Chrysler

Hyundai

Dodge

Toyota

Nissan

Ford

Chevrolet

22

Rental Risk Units Sold by Segment


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2015Q4

2016Q1

2016Q2

2016Q3

2016Q4

2017Q1

2017Q2

2017Q3

2017Q4

2018Q1

2018Q2

2018Q3

2018Q4

2019Q1

2019Q2

2019Q3

2019Q4

Van

SUV

Sports Car

Pickup

Luxury Car

Midsize Car

Compact Car

23

Manheim Market Report (MMR) Vehicle Insights


Top selling vehicles in December at Manheim saw broad range of depreciation rates in the last 30 days

(December 3 – January 2) as the top selling vehicles were again heavy in luxury vehicles. Prices year-over-year

also saw quite a range from appreciation to higher than normal depreciation.

Rank Source(Rank) Category Subcategory Vehicle 2-Jan Past 30 Days Last Year Current Dep L12M Dep/Mo

1 All Compact Car Compact Car Premium 2017 HYUNDAI ELANTRA 4D SEDAN SE $9,750 $9,725 $9,625 0.3% 0.1%2 All SUV SUV Entry 2017 FORD ESCAPE 4WD 4D SUV 1.5L SE $13,950 $13,800 $14,350 1.1% -0.2%

3 All Luxury Car Luxury Car Premium 2017 MERCEDES-BENZ E CLASS 4D SEDAN E300 $25,200 $25,700 $35,300 -1.9% -2.4%

4 All Midsize Car Midsize Car Premium 2017 TOYOTA CAMRY 4C 4D SEDAN SE $13,850 $13,750 $13,100 0.7% 0.5%5 All Luxury Car Luxury Car Premium 2016 MERCEDES-BENZ C CLASS 4D SEDAN C300 4MATIC $16,550 $17,000 $22,400 -2.6% -2.2%

1 Dealer Dealer Midsize Car Midsize Car Premium 2015 NISSAN ALTIMA 4C 4D SEDAN S $6,450 $6,450 $9,025 0.0% -2.4%

1 Lease Lease Compact Car Compact Car Premium 2017 HYUNDAI ELANTRA 4D SEDAN SE $9,750 $9,725 $9,625 0.3% 0.1%

1 Rental Rental Midsize Car Midsize Car Premium 2018 NISSAN ALTIMA 4C 4D SEDAN SL $12,650 $12,500 $14,850 1.2% -1.2%

24

Retail Sales Continue to Grow As Used Vehicle Sales Plateau

Source: Cox Automotive estimates based on IHS Markit Registrations

39.6

25

28

31

34

37

40

43

46

200

0

200

2

200

4

200

6

200

8

201

0

201

2

201

4

201

6

201

8

202

0

USED VEHICLE SALES OUTLOOK (MILLIONS)

COX AUTOMOTIVE

FULL-YEAR FORECASTS

2018

39.42019

39.62020*

39.4COX AUTOMOTIVE

USED RETAIL FORECASTS

2018

19.52019

20.02020*

20.3

25

Retail Inventory Trend Slide

Source: Cox Automotive/vAuto

60

65

70

75

80

85

90

95

January February March April May June July August September October November December

Average Used Days In Inventory

2017 2018 2019

26

Q4 2019 Cox Automotive Dealer Sentiment Index

According to the Q4 2019 Cox Automotive Dealer

Sentiment Index (CADSI), the current U.S. auto market

is mostly unchanged from Q3 and remains negative,

with an index score of 47. The slight decrease from

Q3’s 48 was not statistically significant.

Year-over-year, the current market index is up by three

points, a statistically significant improvement, but the

index remains below 50, which is considered negative.

The current market sentiment skews more positive for

franchised dealers compared to independents. The gap

narrowed this quarter, however, as franchised dealers

became less positive—decreasing from 56 in Q3 to 51

in Q4—while independents dealers remained negative

at 46, unchanged from Q3.

Franchised dealers’ lower current market sentiment is

likely tied to perceptions of used-vehicle sales, which

saw a statistically significant decline from last quarter,

dropping from 73 to 66. The new-vehicle market is

stable according to franchised dealers, down just one

point from Q3 and still in positive territory at 56.

When it comes to views of the future, franchised and

independent dealers moved closer together in Q4 as

well. Franchised dealers scored 54, down from Q3,

while independents increased from 49 to

51. Independents have seen a statistically significant

increase in their outlook for the future compared to last

year. The improvement likely relates to improved used-

vehicle inventory and increasing profits.

The factors holding back the business across all

dealers remained consistent in Q4, although “The

Economy” entered the Top 5 and pushed “Expenses” to

number 6. “Market Conditions” remained in the top

spot, with 35% of dealers citing it as holding back their

business, down from 38% in Q3. “Competition”

remained in second place, followed by “Credit

Availability for Consumers” and “Limited Inventory.”

“The Economy” rounded out the Top 5.

Notably, compared to last quarter, “Consumer

Confidence” and “The Political Climate” both saw

significant increases as factors holding back the

business.

27

Growth of Off-Lease Has Reached Its Peak

Source: Cox Automotive

1.5

1.8

2.2

2.5

3.0

3.4

3.9

4.1 4.1

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

2012 2013 2014 2015 2016 2017 2018 2019F 2020F

Millio

ns o

f V

eh

icle

s

Estimated Off-Lease Maturities

28

2020 Tax Season Should Be Similar to Last Year in Timing

Source: Cox Automotive Analysis of IRS Data

In week 9, cumulative refunds approach 50%; by week 16 refunds are above 90%

0

20000

40000

60000

80000

100000

120000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

Cumulative Tax Refunds by Calendar Week and Year

2018 2019

29

2020 Weekly Used Sales Should Also Look Like Last Year

Source: Cox Automotive

Weekly sales peak during peak tax refund season each year

0%

20%

40%

60%

80%

100%

120%

140%

160%

Week 1

Week 2

Week 3

Week 4

Week 5

Week 6

Week 7

Week 8

Week 9

Week 1

0

Week 1

1

Week 1

2

Week 1

3

Week 1

4

Week 1

5

Week 1

6

Week 1

7

Week 1

8

Week 1

9

Week 2

0

Week 2

1

Week 2

2

Week 2

3

Week 2

4

Week 2

5

Week 2

6

Week 2

7

Week 2

8

Week 2

9

Week 3

0

Week 3

1

Week 3

2

Week 3

3

Week 3

4

Week 3

5

Week 3

6

Week 3

7

Week 3

8

Week 3

9

Week 4

0

Week 4

1

Week 4

2

Week 4

3

Week 4

4

Week 4

5

Week 4

6

Week 4

7

Week 4

8

Week 4

9

Week 5

0

Week 5

1

Week 5

2

Used Retail Weekly Sales Index

Refunds 2018 2019

30

2020 Should See a More Normal Depreciation Pattern

Source: Manheim

A stable start to year, a normal spring bounce, stronger than normal summer, and a steadier fall expected

80%

85%

90%

95%

100%

105%

110%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52

3-Year-Old Model MMR Index and Forecast by Week

Ave 2014-2016 2017 2018 2019 2020 Forecast Rev

31

Thank You

Jonathan Smoke & Zo RahimEconomic Industry Insights

[email protected]

[email protected]

@SmokeonCars

@autosanalyst

Documents

Wholesale Market Insights · Q4 2019 Cox Automotive Dealer Sentiment Index According to the Q4 2019 Cox Automotive Dealer Sentiment Index (CADSI), the current U.S. auto market is