By Desiree Homer
It’s no secret that April’s wholesale numbers were in the tank. There isn’t much of the industry that COVID-19 and the subsequent shutdowns didn’t touch. But the numbers are rebounding as dealerships begin opening their doors to regular business again. Of course, much of the customer interactions are still happening online and in virtual capacities, but the customers are coming back. What the auctions are reporting, though, is that not many vehicles are finding their way back to the sale lanes. And it seems the wholesale market is overcorrecting itself.
What the Data Shows for May and June
J.D. Power is reporting wholesale prices surging 16% over the last seven weeks. A comeback is usually welcomed, but this is 4% higher than pre-virus forecasts. Cox Automotive also shared data that suggests the margins are tightening for dealers. Wholesale prices, according to Cox, rose 2.1% for the first week of June, while the retail price tags only inched up 0.5%. Jonathan Smoke, Chief Economist for Cox Automotive, says the “big disconnect between retail and wholesale prices is gone.”
Dealers Are Struggling to Get Cars & Staff
There is a trim supply of new inventory right now, meaning those comeback car buyers are choosing used vehicles instead. The supply and demand are tilting as a direct result. There are several sources sharing dealer sentiments that it is a real struggle to get cars, and especially pickups. But there’s another shortage, as well. People management and staffing efforts have presented their own challenges. Manheim, for example, furloughed almost 9,000 employees during the economic shutdown. Now, as they push to reopen, albeit still promoting mostly online sales, they’re also trying to bring back staff a few hundred at a time. Laura Wehunt, the vice president of vehicle valuations at Black Book, told Automotive News that there is an almost “bottleneck” effect getting the people back into the business. A slow return of workers means delays for reconditioning, vehicle check-ins, and general sale postings.
Predicting the Next Few Months of Wholesale Pricing
As of May, J.D. Power shared there was a surplus of over 860,000 deferred used vehicles that would eventually find their way back to wholesale in the coming months. Add to that the current rates of unemployment affecting the staffing side. Wholesale prices are high now, but many experts are predicting they’ll realign by the fall. Of course, the government-funded stimulus relief is expected to expire by the end of July and may become an incentive for workers to return to the job. With so many factors contributing, it may just be a day by day and week by week adjustment for dealers.
It’s clear how dealers used to predict pricing and sales may not be very useful in today’s post-Coronavirus economy. Tune in to a conversation with Mario Murgado, a 40 plus year veteran of the industry and mega-powerhouse in all things automotive, as he talks with Dave Cantin about making decisions. He talks about the days of relying on past performance to make current decisions isn’t viable. Today, it’s more about being ready, being adaptable, and being creative.