Here’s What’s Happening To Used Car Values According To America’s Largest Wholesale Car Auction Network

Used car values kept dropping through September, Audi considers building cars in America, Renault and Nissan might shuffle some equity. All this and more in today’s issue of The Morning Dump.

Welcome to The Morning Dump, bite-sized stories corralled into a single article for your morning perusal. If your morning coffee’s working a little too well, pull up a throne and have a gander at the best of the rest of yesterday.

Used Car Wholesale Values Continue Slow Decline

It’s early in a new month, which means it’s time to check the Manheim used car wholesale value index to see if used car values are dropping. Sure enough, the slide continues through September, with seasonally-adjusted average used car wholesale values declining three percent month-over-month and one tenth of a percent year-over-year, enough for Manheim to call it a “large decline.” From the company’s report referencing its MMR values, which are its expected vehicle values (think of it a bit like Kelley Blue Book for wholesale units):

Over the month of September, daily MMR Retention, which is the average difference in price relative to current MMR, averaged 98.4%, meaning market prices were below MMR values. The average daily sales conversion rate decreased slightly to 49.2%, which was below normal for the time of year. For example, the sales conversion rate averaged 52.1% in September 2019. The lower conversion rate indicated that the month saw buyers with more bargaining power for the time of year.

Sales conversion rate is a fairly simple figure obtained by dividing sales by number of potential customers. A lower conversion rate means that buyers are more readily walking on used cars, often due to factors like better options in the marketplace. However, not all types of cars saw a year-over-year decline in value. The report goes on:

Only three of eight major market segments saw seasonally adjusted prices that were higher year over year in September. Compact cars had the largest increase, at 5.9%, followed by vans and pickups, both of which increased by 0.8%. The remaining five segments’ prices were well below the industry, with midsize cars only minimally lower. Compared to August, all eight major segments’ performances were down. Full-size cars lost more than 14%. Pickups and compact cars declined the least, at 1.4% and 2.6%, respectively. The remaining five segments (vans, SUVs, midsize, luxury, and sports cars) lost between 3.1% and 5.2%.

To cook up the used Vehicle Value Index, Manheim takes all the cars it puts through auction, finds mean transaction prices, eliminates outliers, then adjusts for mileage, season, and vehicle mix to come up with a single figure meant to represent overall used vehicle value. The index doesn’t translate perfectly to retail prices, but it’s a great indicator of overall trends in the used car marketplace due to the sheer number of car sold through wholesale auctions.

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While the index remained steadily between 135.4 and 139.6 for the first few months of 2020, it shot up like a firework starting in June of 2020, hitting peak silliness in January by topping out at 236.3. As of the end of September, the index sits at 204.5, down from 210.8 in August and just slightly down from 204.8 last September. According to Manheim, some of this slackening of the used car market can likely be attributed to stronger year-over-year new vehicle sales.

September’s total new-light-vehicle sales were up 9.5% year over year, with the same number of selling days as September 2021. By volume, September new-vehicle sales were down 1.0% from August. The September SAAR came in at 13.5 million, a 9.6% increase from last year’s 12.3 million and up 2.9% from August’s 13.1 million pace.

SAAR stands for seasonally adjusted annualized rate, or roughly the number of cars expected to be sold in a calendar year. While it’ll take a long time for used car values to return to anything resembling normal, it’s encouraging for buyers to see a steady trot back down the mountain. At the same time, if you’re looking to dump a vehicle, now might be the best time to do it. Barring any crisis, it seems that depreciation is well and truly back.

Audi Considers Its First American Assembly Plant

The Inflation Reduction Act’s updated EV tax credit program strikes again. Automotive News reports that Audi is considering American assembly to qualify for electric vehicle tax credits.

In an exclusive interview, Oliver Hoffmann, head of technical development for Audi, said the new rules “will have a huge impact on our strategy here” in North America.

“To be honest, we are looking right and left: What can be the opportunity for us to get together with a strong [Volkswagen Group] in the background,” said Hoffman, speaking from Audi’s design center in Malibu, Calif. “And now we are on the way, especially as the rules changed and as you know there is big spending of the government for EVs, with special circumstances, and we are looking forward to how we can meet these requirements.”

Some Audi models may be easier to build in America than others. The Q4 e-tron rides on the same MEB platform as the Volkswagen ID.4, and that Volkswagen is now built in Chattanooga, Tenn. However, the midsize e-tron crossover rides on the MLB platform and the e-tron GT is on the same J1 platform as the Porsche Taycan, so neither of those even have platform mates built in existing American facilities.

Stellantis Still Smells

While most new car assembly plants are fairly clean, not all are easy to live with. The Detroit News reports that Stellantis’ Mack Avenue plant has been under fire six times in roughly 13 months for air quality violations, most recently requiring an explanation of air pollution by Oct. 14.

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An EGLE official notified the plant’s manager via a violation notice earlier this week that during a Sept. 30 investigation, staff with the agency’s air quality division observed “persistent and objectionable paint/solvent and chemical odors of moderate intensity … impacting residential areas downwind of the facility which were determined to be emitting from” the plant.

The investigation was prompted by reports of “nuisance odors,” a persistent complaint of some residents who live near the facility on Saint Jean Street.

“Stellantis has been implementing corrective actions related to our Mack Assembly Plant as submitted to EGLE earlier this year,” company spokesperson Jodi Tinson said in a statement Friday. “We are investigating this recent incident and will work with EGLE to address this issue in a timely manner.”

The Mack Avenue complex, once known for building Vipers, now builds the Jeep Grand Cherokee. For the sake of area residents, Stellantis better fix this noxious odor business now. The company’s had five chances already, what will it actually take to get it right?

Renault And Nissan Might Shuffle Equity

While Renault and Nissan have been in a cozy alliance for quite some time now, it’s not always been easy or steady. The latest development is Reuters reporting that Nissan wants Renault to own less of the Japanese company.

The demands were made in exchange for Nissan agreeing to invest in Renault’s new unit being set up to house its electric vehicle (EV) assets, said the source, who sought anonymity as the talks are not public.

Renault owns about 43% of Nissan, which wants its French ally to wind down the stake to 15%, drawing level with Nissan’s share in the alliance partner, the source said.

The stake sale would not affect their business alliance and Nissan may need to raise funds to buy the shares back from Renault, the source added.

So what effect would Renault reducing its stake in Nissan have? Well, it could give Renault a liquidity injection that might be needed given the rocky European economy. It could also give Nissan the opportunity to raise funds elsewhere and carry a bigger stick in the Renault Nissan Mitsubishi Alliance. For now though, we’ll have to wait and see if and how this all plays out.

The Flush

Whelp, time to drop the lid on another edition of The Morning Dump. It’s Monday, so why don’t we play a little game? If you were given $5,000 to buy a car today, what would you get?

Lead photo credit: David Hilowitz is licensed under CC BY 2.0.

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