Wholesale Market InsightsThrough September 2018
J o n a t h a n S m o k e & Z o R a h i m
1
T R A N S F O R M I N G T H E W AY T H E W O R L D B U Y S , S E L L S & O W N S C A R S
Manheim Used Vehicle Value Index
All Manheim U.S. sales
Classify by market segment
Account for differences in mileage
Weight to provide unchanging segment mix
Seasonally adjust
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
Used Vehicle Values Set New Record for Third Straight Month
Source: Manheim/Cox Automotive
139.9
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
Prices in September increased 0.14% versus August 2018 and were up 3.7% compared to September 2017
5
Used Vehicle Values Set New Record for Third Straight Month
Year-over-year price performance has been much stronger than average over the last 12 months
3.7%
-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
Source: Manheim/Cox Automotive
6
Manheim Index versus Mix & Quality Adjusted New Vehicle Price with 3 ½ year Lag
After recent increases, used prices have shifted above the new vehicle price 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
Source: Bureau of Labor Statistics, Manheim/Cox Automotive
7
Wholesale Used Vehicle Prices vs. New Vehicle Prices
Source: Manheim/Cox Automotive
$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
Jan-1
2
Ma
r-1
2
Ma
y-1
2
Jul-1
2
Sep-1
2
No
v-1
2
Jan-1
3
Ma
r-1
3
Ma
y-1
3
Jul-1
3
Sep-1
3
No
v-1
3
Jan-1
4
Ma
r-1
4
Ma
y-1
4
Jul-1
4
Sep-1
4
No
v-1
4
Jan-1
5
Ma
r-1
5
Ma
y-1
5
Jul-1
5
Sep-1
5
No
v-1
5
Jan-1
6
Ma
r-1
6
Ma
y-1
6
Jul-1
6
Sep-1
6
No
v-1
6
Jan-1
7
Ma
r-1
7
Ma
y-1
7
Jul-1
7
Sep-1
7
No
v-1
7
Jan-1
8
Ma
r-1
8
Ma
y-1
8
Jul-1
8
Manheim Non-Adjusted Price (LHS) Average new vehicle transaction price per KBB (RHS)
8
Three-Year-Old Vehicles Seeing Much Stronger Prices
After 11 straight weeks of increases then normalization, prices are up 1% when normally would be down 3.6%
Source: Manheim/Cox Automotive
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
2015 2016 2017 2018
9
Three-Year-Old Non-Luxury Vehicles Now Seeing Much Stronger Prices
2018 spring bounce stronger than last 3 years followed by summer ramp up
Source: Manheim/Cox Automotive
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 Non-Luxury Model MMR Index by Week
2015 2016 2017 2018
10
Three-Year-Old Luxury Vehicles Were Seeing Normal Depreciation
Luxury vehicles moved later and less than non-luxury but also slightly ahead of last year
Source: Manheim/Cox Automotive
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 Luxury Model MMR Index by Week
2015 2016 2017 2018
11
One-Year-Old Vehicles Had Seen Little Depreciation This Year Until Recently
One-year-old vehicles now below last year but down only slightly from beginning of the year
Source: Manheim/Cox Automotive
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
12
Retention Values Have Been Trending Higher This Year Relative to Last Year
Adjusting for MSRP and fixing the basket of vehicles by what was sold showing 2 full points over last year
Source: Kelley Blue Book/Cox Automotive
45%
47%
49%
51%
53%
55%
57%
59%
61%
63%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
CY 2016 CY 2017 CY 2018
13
Percent Change in Wholesale Prices for Major Market Segments
All major segments saw year-over-year gains in September
Source: Manheim/Cox Automotive
3.7%
7.1%
4.4%
0.1%
2.4% 2.7%
1.2%
0%
5%
10%
15%
20%
25%
30%
35%
Industry Compact cars Midsize cars Luxury cars Pickups SUV/CUV Vans
1 year
2 years
3 years
4 years
14
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
Source: Manheim/Cox Automotive
51%
11%
33%
6%
0%
10%
20%
30%
40%
50%
60%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Manheim Sales by Category
CAR PICKUP SUV VAN
31%
16%
48%
5%
0%
10%
20%
30%
40%
50%
60%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
New Vehicle Sales by Category
CAR PICKUP SUV VAN
15
Average Auction Price – Rental Risk Units
Average price for rental risk units sold in September up 6% y/y and flat m/m
Source: Manheim/Cox Automotive
$13,500
$14,000
$14,500
$15,000
$15,500
$16,000
$16,500
$17,000
$17,500
1 2 3 4 5 6 7 8 9 10 11 12
2015
2016
2017
2018
16
Average Mileage – Rental Risk Units Sold at Auction
Average mileage for rental risk units in September was up 5% compared to a year ago and up 2% m/m
Source: Manheim/Cox Automotive
44,339
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
17
Distribution of Rental Risk Vehicles
Source: Manheim/Cox Automotive
2016 Q3 2017 Q3 2018 Q3
Number of unique
year, make, model,
body configurations
sold
3,352 2,404 2,980
Share accounted for
top 10 YMMB 15.7% 11.8% 11.1%
Share accounted for
top 25 YMMB 27.1% 21.2% 20.6%
Number of YMMB to
reach 50% share 97 117 132
18
Rental Risk Units Sold by Condition
Source: Manheim/Cox Automotive
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
2015 Q4 2016 Q1 2016 Q2 2016 Q3 2016 Q4 2017 Q1 2017 Q2 2017 Q3 2017 Q4 2018 Q1 2018 Q2 2018 Q3
0 - 1.9 2.0 - 2.9 3.0 - 3.9 4.0 - 4.9 5.0
19
Rental Risk Units Sold by Make
Source: Manheim/Cox Automotive
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
2015 Q4 2016 Q1 2016 Q2 2016 Q3 2016 Q4 2017 Q1 2017 Q2 2017 Q3 2017 Q4 2018 Q1 2018 Q2 2018 Q3
Chevrolet Ford Nissan Toyota Dodge Hyundai Chrysler VW Jeep Kia Mazda All other
20
Rental Risk Units Sold by Segment
Source: Manheim/Cox Automotive
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
2015 Q4 2016 Q1 2016 Q2 2016 Q3 2016 Q4 2017 Q1 2017 Q2 2017 Q3 2017 Q4 2018 Q1 2018 Q2 2018 Q3
Compact Car Midsize Car Luxury Car Pickup Sports Car SUV Van
21
Manheim Market Report (MMR) Vehicle Insights
Source: Manheim/Cox Automotive
Top selling vehicles in September at Manheim depreciated in the last 30 days (September 1 – October 1), while
prices year-over-year are mixed with the most affordable non-luxury cars outperforming other segments.
Rank Source(Rank) Category Subcategory Vehicle 1-Oct Past 30 Days Last Year Current Dep L12M Dep/Mo
1 All Midsize Car Midsize Car Premium 2015 NISSAN ALTIMA 4C 4D SEDAN S $10,550 $10,650 $10,650 -0.9% -0.1%2 All Luxury Luxury Car Premium 2015 MERCEDES-BENZ C CLASS 4D SEDAN C300 $19,500 $19,900 $23,100 -2.0% -1.3%
3 All Luxury Luxury Car Premium 2015 MERCEDES-BENZ C CLASS 4D SEDAN C300 4MATIC $20,400 $20,700 $23,200 -1.4% -1.0%
4 All Compact Car Compact Car Premium 2016 FORD FUSION FWD 4D SEDAN 2.5L SE $12,150 $12,300 -1.2%5 All Compact Car Compact Car Premium 2015 NISSAN SENTRA 4D SEDAN SV $9,225 $9,325 $8,875 -1.1% 0.3%
1 Dealer Dealer Pickup Pickup Lite Duty Full 2016 FORD F150 4WD V8 FFV CREW CAB 5.0L XLT $28,800 $29,000 $30,700 -0.7% -0.5%
1 Lease Lease Luxury Luxury Car Premium 2015 MERCEDES-BENZ C CLASS 4D SEDAN C300 $19,500 $19,900 $23,100 -2.0% -1.3%
1 Rental Rental Van Van Compact 2017 DODGE GRAND CARAVAN FFV 4D WAGON SXT $15,150 $15,500 $18,950 -2.3% -1.7%
22
Used Sales Have Fallen Slightly from 39.5 Million Annualized
Source: Cox Automotive estimates based on IHS Markit Registrations
33
34
35
36
37
38
39
40
Jan
-13
Mar
-13
May
-13
Jul-
13
Sep
-13
No
v-13
Jan
-14
Mar
-14
May
-14
Jul-
14
Sep
-14
No
v-14
Jan
-15
Mar
-15
May
-15
Jul-
15
Sep
-15
No
v-15
Jan
-16
Mar
-16
May
-16
Jul-
16
Sep
-16
No
v-16
Jan
-17
Mar
-17
May
-17
Jul-
17
Sep
-17
No
v-17
Jan
-18
Mar
-18
May
-18
Jul-
18
Sep
-18
Mill
ion
s
23
Q3 2018 Cox Automotive Dealer Sentiment Index
U.S. automobile dealers were more positive than
negative in describing the current market in the third
quarter according to the Q3 2018 Cox Automotive
Dealer Sentiment Index (CADSI). With an index score
of 51, the improvement relative to last year’s Q3 score
of 45 was statistically significant.
The index for the next three months is 57, indicating
dealers expecting conditions to be strong in the future
outnumber those who think conditions will be weak. The
difference from last year’s score of 52 shows that
dealers believe the market is strong and optimism is not
fading.
As seen consistently in the CADSI data, sentiment
skews more positive for franchised dealers compared to
independents. While the aggregate view of the current
market was a strong 51, franchised dealers were
positive at 59 and independents were weak at 48.
However, the gap in optimism about the next 90 days
closed this quarter as franchises saw a decline from
69 to a not-quite-as-positive 61. Independents, on
the other hand, saw a gain in optimism, rising to 55 in
Q3 from 52 in Q2.
In the Q3 2018 CADSI, we also explored dealers
expectations on the impact of proposed auto tariffs on
business profitability in the future.
More than a third of dealers in total and over half of
franchised dealers expect tariffs on imported vehicles
and parts to have a negative impact on their business’
profitability.
While only 11 percent of dealers indicated there
would be a positive impact if import tariffs are
imposed, the silver lining seems to be what
consumers will purchase more of instead of imports,
namely used vehicles and domestic vehicles.
24
Consumers Fear Higher Prices and Higher Interest Rates
Source: Cox Automotive and Morning Consult, August 2018
71% of consumers are following
news about new proposed tariffs on
autos
81% of consumers are following
news on interest rates
75% of vehicle owners report being
concerned about new auto tariffs
A whopping 84% of recent auto
buyers expect prices to increase
including on domestic and used
vehicles
More than half of recent vehicle
purchasers surveyed indicated that
news on tariffs on imported vehicles
and parts impacted their vehicle
shopping.
Consumers with a sensitivity to
potential payment inflation are likely
thinking twice about delaying any auto
purchase plans.
25
The US Market Is Heavily Dependent on a Global Supply Chain
Source: Cox Automotive estimates based on IHS Markit Registrations
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
COMPACT CAR LUXURY CUV VAN PICKUP MIDSIZE CAR SUV
Composition of New Vehicles Sold in the US by Major Segments and Major Regions of Origin
USA MEXICO+CANADA JAPAN SOUTH KOREA EUROPE
26
Growth of Off-Lease Is Decelerating and Nearing a Peak
Source: Cox Automotive
2.2
2.5
3.1
3.5
3.9
4.13.9
3.7 3.63.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Mill
ion U
nits
Estimated Lease Maturities
27
Auction Volumes Are Declining and No Longer Supporting Growth in Used Sales
Source: Cox Automotive
Absolute volumes peaked in 2017; growth remains limited to offsite online channels and growth in off-lease
0.0
2.0
4.0
6.0
8.0
10.0
12.0
2014 2015 2016 2017 2018F 2019F 2020F 2021F 2022F 2023F
Mill
ions
Total Auction Volumes (Physical and Offsite Online)
Factory/Fleet/Other* - Physical Factory/Fleet/Other* - Offsite Online Dealer Wholesale Units - Physical
Dealer Wholesale Units - Offsite Online Rental (Risk) - Physical Rental (Risk) - Offsite Online
Repos - Physical Repos - Offsite Online Off Lease - Physical
28
Thank You
Jonathan Smoke & Zo RahimEconomic Industry Insights
@SmokeonCars
@autosanalyst