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ADESA Canada: Strong Start for Wholesale Market in 2012

ADESA Canada spotted a somewhat slower, "steady at best" wholesale market in the first couple weeks of February – which isn't out of the ordinary – and then saw upward movement in last two weeks, continuing a relatively strong start to the year.

Though the complete set of wholesale data from February has not yet been released, ADESA Canada president and chief operating officer Stéphane St-Hilaire talked with Auto Remarketing Canada on Monday about what the company has observed in the first two months of the year and where the market could be headed.

"I think the market was trying to figure itself out. It was steady at best," said St-Hilaire, explaining the beginning of the month. He emphasized, however, that this is not uncommon.

"I've often seen where coming out of the gate in January, it will be real strong. And then it's not necessarily unusual to have a little bit of a winter slowdown," St-Hilaire shared, noting that it can be caused by anything from the weather to consumers "still digesting their Christmas bills."

Referring to the subsequent uptick in the last two weeks of February, he added: "If the last couple of weeks are any indication of what the spring will look like, it could be a very interesting spring."

2011 was solid year, St-Hilaire emphasized, noting that "seasonally adjusted and relatively speaking, January and February were still relatively strong."

When asked has been driving the wholesale strength, he pointed to the supply dynamic, while also briefly touching on the overall health of the used-car market.

"Without a doubt, the overall supply and demand (element) has got a lot to do with that. Overall, prices were pretty strong in '11. I think it was a function of supply starting to be scarcer. And this trend continues in the early part of this year," St-Hilaire noted.

January Trends

Delving into more specifics, the ADESA Canada Used Vehicle Price Index — which is updated through January — was released Wednesday. According to ADESA's data — powered by ALG Canada — there was roughly a 0.58-percentage-point month-over-month increase in the index during January.

The average sequential wholesale price increase was 6.5 percent.

"The Canadian economy continued to soldier on in January – consumer confidence rose four points to 73.9 (coming off its lowest level in more than two years), the unemployment rate increased another 0.1 percentage point to 7.6 percent and national gasoline prices climbed by approximately $0.03 per liter," officials noted.

They added that new-vehicle sales jumped 15.4 percent year-over-year in January, pushing the seasonally adjusted annualized rate to a four-year high of 1.7 million.

Segment Trends

Breaking some of the wholesale movements down by segment, each vehicle class jumped for the second straight month, officials pointed out.

Minivans had the strongest increase, as their prices climbed 13 percent. Mid-compacts were up 6.7 percent and compact SUV prices increased 6.5 percent.

There was a 5.7-percent uptick for the midsize segment, with the midsize SUV jumping 4.2 percent. Rounding out the increases was the full-size pickup segment, which moved ahead 3.6 percent.