KBB: February Prices Rise; Toyota Values Stabilize After Dip
IRVINE, Calif. — Along with a significant discussion about how Toyota recalls affected the market, Kelley Blue Book shared details about the depth of strengthening wholesale vehicle values throughout February.
Analysts contend in the latest Blue Book Market Report that the rise in prices stem from dealers flocking to auction lanes in anticipation of the spring selling season.
KBB determined that 12 of the 21 vehicle segments it tracks either increased in value or stayed flat, contributing to an overall market uptick of 0.3 percent. Analysts indicated that full-size pickups, full-size crossovers and compact cars were among the best-performing segments for the month, each increasing more than 1 percent as compared to the opening month of 2010.
"These segments tend to be sensitive to fluctuations in the price of gasoline, so the current stability in fuel prices indicates that the appreciation in the marketplace is likely driven by typical seasonal patterns," noted Juan Flores, director of vehicle valuation at Kelley Blue Book.
Other segments that showed some sort of gain included full-size cars, SUVs, midsize cars and trucks, and hybrid trucks.
Looking at the opposing month-over-month trends, analysts revealed that prices for three segments — vans, midsize SUVs and hybrid SUVs — each slipped by more than 1 percent in February.
Segments that also slipped during the month were luxury and midsize crossovers, minivans, as well as luxury and subcompact cars.
Moving to a discussion about specific vehicles, KBB highlighted the value gains by trio of units in compact car segment — the Ford Focus (up 3.9 percent), Volkswagen Beetle (up 3.2 percent) and Hyundai Elantra (up 1.8 percent). Flores projected that pushing the demand for these vehicles was the lack of available Toyota products usually available at auction
"Consumers that may have been in the market for a Corolla will have to consider an alternative from a competing manufacturer since recalled units were pulled from the lanes at auction," Flores pointed out.
"In fact, values for the Toyota Corolla are down 1 percent on average, due to a lack of demand overshadowing any current supply constraints," he emphasized.
"A low supply of vehicles would typically cause values to firm up, so the depreciation that Kelley Blue Book is seeing thus far for the Corolla is a good indication of an overall reduction in demand," Flores added.
Another vehicle segment where Toyota competitors made strong price gains was in compact crossovers. KBB noted the rises for the Chevrolet Equinox (up 4.8 percent), Nissan Rogue (up 2.3 percent), and Ford Escape (up 1.9 percent), all outperformed the segment average by a healthy margin.
"Similarly to compact cars, the Toyota RAV4 underperformed the overall segment, dropping 1.5 percent, although it should be noted that toward the end of the month, values started to firm up," Flores explained.
"Consumer demand for the RAV4 is being redirected to Toyota's aforementioned competitors due to their lack of availability at auction and uncertainty in the minds of consumers," he went on to say.
"While a lack of Toyota vehicles has benefited the values of competitors in the short term, Kelley Blue Book expects that this substitution effect will wear off as repaired Toyotas return to auction," Flores added.
Taking a look at trends on a year-over-year perspective, KBB analysts found that all but five segments posted gains. The only ones to slip when looking back at data from February 2009 were hybrid trucks, and sports, compact, hybrid and subcompact cars.
Jumping by the largest percentage in the report was full-size SUVs, which climbed 13 percent. Other segments that rose by at least 7.5 percent on a year-over-year basis included midsize and luxury SUVs, luxury, midsize, full-size and compact crossovers, and minivans.
The brands that gained the most value year-over-year were Jeep, Acura, Land Rover, Isuzu and Infiniti and Buick according to KBB. Each nameplate climbed by at least 6.9 percent
Only seven brands suffered drops with Mini slipping the most by a wide margin at 15 percent.
More Discussion About Toyota
The industry headlines throughout February often mentioned Toyota and its recalls. Flores attempted to bring some clarity to what the circumstances mean not only to Toyota but other manufacturers and the sales climate.
"Toyota, a company that has been defined by their reputation for reliability and safety for decades, is currently experiencing one of the largest recalls in recent history," Flores recounted.
"Perhaps in an attempt to fly under the radar and avoid media scrutiny, other manufacturers such as Honda, GM, Mazda and Nissan have issued their own vehicle recalls; however, Toyota is taking the biggest hit in values," he added.
Flores went on to mention that the latest Kelley Blue Book Market Intelligence data indicated brand loyalty has significantly increased for Korean and domestic automakers such as Kia, Hyundai, Chevrolet and Ford. He stressed that while non-Toyota owners are becoming more loyal to their current brands, Toyota brand consideration and loyalty have declined.
Based on the initial auction activity KBB reviewed immediately following the recall, analysts found that Toyota vehicles affected by the recall were going to depreciate 1 to 3 percent.
"While depreciation of this magnitude is slightly in excess of traditional seasonal trends, the recall has not yet had a significant negative impact on the resale value of either recalled or non-recalled Toyota vehicles," Flores stated.
"This initial depreciation can be attributed to a drop in demand as those consumers that were in-market for a used Toyota either purchased an alternative brand or delayed their purchase until more news became available about a possible fix," he continued.
Flores then mentioned how inventories of unsellable Toyotas began to grow due to the National Auto Auction Association's recommendation that auctions pull used Toyota's from their lanes until the vehicles could be repaired.
"In addition to a growing glut of inventory at auction, dealer lots backed up as they were unable to sell either new or used recalled vehicles," Flores said.
"While this growing inventory of Toyotas has the potential to put additional downward pressure on the resale value of Toyotas, so far demand has proven to be sufficient to absorb the supply of fixed Toyotas being sold in the last few weeks," he added.
One of the earliest repairs Toyota offered was a shim that was meant to rectify issues with sticky accelerator pedals. Flores hesitated to make far-reaching value assessments since subsequent transactions with Toyota vehicles receiving this shim service have been somewhat limited.
"However, seasonality could be masking some of the effects of the Toyota recall since activity at auction has been strong for the past several weeks — at least on the West Coast while East Coast auctions have been limited by a relentlessly harsh winter — supported by dealers stocking up their inventories in anticipation of the spring selling season." Flores explained.
"If the pedal recall had been announced at a time when the market is typically soft, such as the fourth quarter, the effect on Toyota values could have been far more dramatic," he suspected.
"While it may be a few weeks before Kelley Blue Book has sufficient data on the long-term impact to Toyota residual values, it appears as though Toyota may have passed through the eye of the storm. Before any final conclusions, a number of events could still spell trouble for Toyota's values in the future," Flores went on to say.
A future-shaping example Flores offered was more hearings on Capitol Hill. President Akio Toyoda along with almost half dozen other top executives from the automaker already have been quizzed by lawmakers on more than one occasion.
"Further recalls, or worse yet, an unfavorable outcome to the congressional hearings currently being held on the safety of Toyota vehicles, could certainly disrupt the stability in Toyota's values," Flores stressed.
"If any of these events were to come to pass, Kelley Blue Book would not be surprised to see Toyota's values take another dip," he emphasized.
"However, if the fix currently in place addresses all of Toyota's problems and no additional recalls are announced, Toyota may be fortunate enough to save their reputation and regain their place of prominence in the hearts and minds of consumers," Flores indicated.
New-Vehicle Shopping Trends
Kelley Blue Book's Market Watch also offered some details about new-vehicle shopping activity in February. Analysts found that activity via their declined 8-percent month-over-month in February, which they said is fairly consistent with historical trends.
They went on to state that all segments experienced declines in shopper activity with the hybrid segment suffering the largest decline — down 18 percent. Trigging the decline was a drastic drop in Toyota Prius activity, which KBB contends is the most trafficked hybrid model. Activity generated for the Prius dropped 23 percent.
Analysts also mentioned a few exceptions though most brands experienced shopper activity declines in February. They found that Hyundai garnered the largest increase — a gain of 18 percent — driven primarily by the redesigned 2011 Sonata and 2010 Tucson.
KBB noted that Porsche made a notable gain, up 11 percent with the newly introduced 2010 Panamera. Furthermore, Kia traffic increased last month, up 4 percent.
"Sorento had the only shopper activity increase within Kia's lineup, driving the overall increase to the brand," Flores pointed out.
Among the steep declines, KBB revealed that Saturn and Pontiac activity plunged 49 percent and 36 percent, respectively, last month as the brands are phased out. Analysts also spotted a sharp decline for Saab at 35 percent despite the fact that its sale to Spyker recently was finalized. However, reports have surfaced that Saabs are in limited supply throughout the country.
Also dropping by double figures was Toyota. KBB attributed the 22-percent activity decline to ongoing recalls and the automaker's handling of the acceleration issues. The manufacturer's other brands, Lexus and Scion, also slipped. Lexus was down 24 percent and Scion dipped 19 percent.
Survey About Electric Vehicles
Company officials also shared some conclusions that came from a Kelley Blue Book Market Intelligence study on electric vehicles. They wanted to gauge consumer awareness, opinion and interest in this alternative fuel technology.
The summary points included:
—More than 2-in-5 shoppers are likely to consider an alternative fuel vehicle.
—Hybrid technology garners the most interest with nearly 3-in-5 shoppers interested in the technology.
—An equal percentage of shoppers are extremely interested in hydrogen fuel cell as they are in electric technology.
—Nearly three-quarters of shoppers are aware of electric vehicles, but have no personal experience with them.
—Interest in electric vehicle technology is driven mostly by environmental factors, followed by economical reasons.
—Disinterest in electric vehicle technology is related to practicality concerns — such as the drivable range on a charge and limited charging stations.
—Purchase consideration of electric vehicles can be impacted by government incentives and/or tax credits, with nearly one-third indicating they would be much more likely to purchase.
—With nearly half of shoppers planning to use an electric vehicle as their primary/everyday vehicle, it is extremely important to address the practicality concerns.
—Overall, electric vehicle perceptions are that they are expensive, innovative, zero emissions, environmentally friendly and quiet ride. More than half of shoppers wouldn't describe electric vehicles as sporty, snobby or loaded with options.