2024 Q3 IAA Industry Report

Economic Summary

Despite constant fears of a recession and countless predictions from 2022 and 2023 of an upcoming economic downturn, all current data shows a resilient U.S. economy. Inflation has cooled to relatively low levels in line with the Federal Reserve target range¹, unemployment has remained low by historical standards² and GDP growth is in line with pre-pandemic levels³. Gas prices remain above 2019 levels but averaged below $3.34 in September⁴. The Federal Reserve, in an effort to keep job numbers stable, has announced its first rate cuts in years, spurring economic and investment⁵. Despite implementing similar rate cuts within the last five months, Canada⁶ and the UK⁷ have seen greater struggle with ensuring adequate GDP growth after successfully lowering inflation rates.

Automotive Summary

The automotive industry has continued to see a strong incoming supply of new vehicles⁸, with 2024 vehicles comprising a larger percentage of inventories than in previous years⁹. This comes as most companies have raised incentives and are seeing strong demand, and as used car prices continue to trend downward amid a tougher than usual market for such vehicles¹⁰. The electric vehicle market has seen fair growth, but has shown signs of a slowdown from 2022 growth levels¹¹. Within that market, a clear trend has emerged¹².

Salvage Summary

Salvage metals showed mixed trends in the recent economic period, affected by different market factors. Steel and crushed car prices remained relatively stable for the year, albeit with regional variation¹³. The minor net change over 2024 came as manufacturing entered and left a stronger than expected summer lull, variably affecting the demand for scrap metals¹⁴. This contrasted with a volatile market for copper, which saw a mix of surges and declines largely attributed to speculation,¹⁵ and a surge in aluminum prices thought to be the result of sanctions on Russia¹⁶. For years, palladium cost significantly more than platinum but has now reached similar price levels, with the former dropping dramatically and the latter remaining constant¹⁷. Both are expected to see future price increases as some demand has shifted from fully electric to hybrid vehicles, a market mechanism that is also responsible for falling lithium, cobalt, and nickel prices along with strong slower EV market growth overall.¹⁸

Section One: U.S. Economy

2024: An Economic Soft Landing

While the economy has been worrying to many economists in the past few years since the pandemic, there have been positive trends in GDP throughout 2024. From a quarterly perspective, Real GDP growth was steady at an annualized 1.6% increase for Q1 and rose to 3.0% growth in Q2, and 2.8% for Q3 (advanced estimate). This is promising when compared to the overall 2.5% increase in 2023¹⁹. These increases in real GDP in Q3 were caused by a boost in consumer spending, exports, and federal government spending. The slight downtick in real GDP from Q2 is primarily the result of decreases in private inventory investment and residential fixed investment. The continued acceleration in Q3 and the general resiliency of the U.S. economy has coincided with an increase in retail car sales, which have been high in the month of August as well.²⁰

Callout:

Real GDP Growth:

Q1: +1.6% annualized
Q2: +3.0% annualized
Q3: + 2.8% annualized

Inflation

With record-breaking inflation and CPI (Consumer Price Index) numbers in 2021, the United States hoped for a substantial decrease in the CPI in 2024. It appears this has materialized after a year-over-year increase of 6.5% in 2022, prices grew by 3.4% in 2023. Inflation continued to slow in 2024 with an increase of 2.4% in September.²¹ The motor vehicle market saw some interesting changes as well, including a sizable increase in motor vehicle insurance of 16.3%.²² After the surge in used cars in 2021 and 2022, the 2024 market leaned more towards new vehicles again which should continue to stabilize the market. In addition, we saw a decrease in CPI of energy by 6.8%, with a notable decline in gasoline by 15.3% in 2024. In 2024, economists saw a 5.1% decrease in the CPI of used cars and a 1.3% decrease in new vehicles which is still a substantial decline from the forty-year highs of 9.1% in 2021.²³ With energy prices being in the headlines almost all of 2022, these decreases are fairly significant and gas prices may reach their pre-pandemic level in the near future. The Fed has started to lower interest rates in order to spur lending and investment in the economy, signaling that inflation has sufficiently cooled in the view of economists.²⁴

Callouts:

Consumer Goods Inflation: +2.4% YOY September
Used Car CPI: -5.1%
New Vehicle CPI: -1.3%

The Labor Market Remains Resilient

As in 2023, the unemployment rate remains resilient in the United States. What once sat at an astounding 14.8% unemployment rate at the peak of the pandemic now sits at 4.1% in September 2024.²⁵ Unemployment ended at 3.8% in September of 2023, with a +0.3-percentage point change year-over-year²⁶ In addition, the participation rate was last reported at 62.7%, which was a slight decrease from 62.8% a year prior.²⁷ However, there continues to be a decrease in the number of senior workers, with roughly 20% of the 65+ population still working.²⁸ Finally, some notable industries that saw a substantial increase in jobs were healthcare and government jobs to round out Q3 as it ends.

Callouts:

September Unemployment: 4.1%
Labor Force Participation Rate: 62.7%

Wage Growth Peaks

In September 2024, according to the Federal Reserve Bank of Atlanta's Wage Growth Tracker, there was a 4.7% increase in nominal wages over the course of the year, compared to the 5.2% in 2023.²⁹ Notably, while job switchers were still experiencing larger wage growth gains (+5.3%) relative to job stayers (+4.8%), this gap is continuing to converge as the labor market has moved on from the "Great Resignation" experience, and the labor market has tightened.³⁰ The number of unemployed persons per job opening is on a steady decline after an unexpected increase to 2.1% in August of 2020, it now sits at a 0.9% in August 2024 which is a significant improvement as it was a 0.8% in August 2019.³¹ Wage pressures have continued to cool since 2022 as the workforce stability improves.

Callouts:

YOY Wage Growth: 4.7%

Prices at the Pump

After seeing historically high averages for gas and diesel prices in 2022, things began to settle down in 2023 and even further in 2024. Compared to $4.06 and $4.99 for gas and diesel respectively in 2022, 2023 saw averages of $3.64 and $3.68.³² 2024 prices are continuing to settle at $3.34 and $3.56. While the 2024 spike was caused by increased prices in crude oil and a Midwest refinery outage, those prices continued to trend downward into 2025.³³ The U.S. Energy Information Administration anticipates new refinery capacity to continue to ease oil price pressure moving into 2025.³⁴

Callouts:

September Avg. Gasoline Price: $3.34
September Avg. Diesel Price: $3.56

Section Two: Automotive Industry

New Vehicle Sales and Prices Relatively Steady

In September 2024, new vehicles sales were around 16.25 million which was just over the 16.19 million from September 2023, putting sales up by 0.4% year-over-year.³⁵ A contributing factor to these increases was that most major car companies raised their incentives in July 2024, making this the best year of car sales since 2019. According to Cox Automotive, approximately 25% of showroom floor inventory are 2025 models, following an increase of 6,073 more units than in June.³⁶ This 25% starts to appear just as dealerships are beginning to anticipate an increase in demand due to holiday seasons, indicating that consumer confidence and purchasing power are expecting an increase in Q4. Cox Automative indicated the average price of a new vehicle in September was $48,397, showing a slight increase from August, but a slight decline of 0.4% year-over-year.sup>37

Callouts:

Year-Over-Year New Vehicle Prices: -0.4% increase YoY
September 2024 New Vehicle Sales: 16.25 million; +0.4% YoY

Used Vehicle Prices Continued to Decline

While used vehicle prices are still elevated relative to historical standards, they continued to trend downward in 2024 according to the Manheim Used Vehicle Value index, declining by 5.5% from the previous year in terms of wholesale prices.³⁸ Jeremy Robb, Cox Automotive, states "The new normal is likely to continue to see wholesale depreciation, but it may be more muted than the market is accustomed to for the rest of the year." Cox Automotive reported that the average listing price on used vehicles fell less than they normally do for the month of September.³⁹ The softness in the used car market aligns with the general feeling of consumers, as the Consumer Confidence Index for the U.S. reported a decline of 6.5% in September, still hovering below pre-pandemic levels.⁴⁰

Callout:

Manheim Index: -5.5 % year-over-year
Insurance Auto Prices Hold Steady Against the Trend

Insurance Auto Prices Hold Steady Against the Trend

While national wholesale prices have fallen year-over-year, as noted by the Manheim Used Vehicle Value Index, IAA insurance sale prices have increased. In Q3, prices were up 2.4% quarter-over-quarter and 1.0% year-over-year. While the Manheim Index captures trends regarding the wholesale prices for used cars across 20 market classes, the IAA sale prices we're reporting provide a narrower focus exclusively on the prices of insurance automobile sales [total loss/salvage] (excluding CATs, fire loss types, burn damage types, and bulk sales). The drivers of IAA's returns growth include rising buyer demand, particularly from foreign buyers, enhanced promotional efforts through the auction platform, and more accurate vehicle valuations.

Callout:

IAA ASP (Average Sale Price): +2.4 % quarter-over-quarter, +1.0% year-over-year.

Section Three: Economic Indicators of Automotive Salvage

Stable Steel & Chaotic Copper Costs

The average whole crushed auto-body price seems to have stabilized, only declining about 0.8% year-over-year; the average price of $224 per ton in Q3 2024 is in line with prices that have consistently hovered in the $220-$230 range since Q2 2023.⁴¹ Part of this stabilization has been the result of different regions of the U.S. balancing each other out on aggregate, with the southeast seeing higher prices that fell in previous quarters as most other regions saw smaller price increases from lower starting points.⁴² The producer price index for stainless steel and other alloy steel scrap has seen more quarterly variation, including a drop between Q2 and Q3, but has seen miniscule year-over-year change with just a 0.2% increase. This comes in the midst of a stronger than usual summer lull in the manufacturing industry that has kept metal demand lower than expected; manufacturing has recently been recovering from a recession and has only just started to pick up.⁴³

Copper prices have bucked the trend and have seen high volatility over the course of 2024; prices skyrocketed in the second quarter and seemed to be decreasing in July and August before increasing again in September⁴⁴ The recent rate cut by the Federal Reserve is partially responsible for this, as lower interest rates in the United States typically result in the weakening of the dollar, in turn incentivizing greater demand from international purchasers.⁴⁵ These variable costs were not well tied to economic fundamentals, and analysts believe that recent movement has been more the result of speculation than shifting geopolitical factors.⁴⁶

Callouts:

Average Crushed Whole Auto-Body Price: -0.7% Year-Over-Year
Stainless & Alloy Steel Scrap: -0.2% Year-Over-Year
Copper Price: +0.7%

Platinum, Palladium, and Aluminum: A Varied Experience

Aluminum saw a high year-over-year increase of 10% in Q3 2024, though quarter-over-quarter prices have dropped as most of the elevated price level came from a Q2 surge.⁴⁷ This is attributed to sanctions on Russian metals as a result of the Russo-Ukraine War, but also global growth and demand optimism⁴⁸. Platinum prices saw a smaller increase of 3.1% year-over-year and little change quarter over quarter, though that masks a significant drop in the price at the beginning of the year that has since fully recovered.⁴⁹ Part of this volatility is tied to the nature of EV demand; the 'green bubble' years prior meant higher demand for cars not as reliant on platinum, but the recent surge of hybrid vehicles caused a resurgence.⁵⁰ Meanwhile, Palladium prices have seen a significant year-over-year decline of 22.2%, but have remained stable for the last three quarters. The price of palladium is now similar to that of platinum, even though the former used to be significantly higher in nominal terms.⁵¹

Callouts:

Aluminum: +10% YOY
Platinum: +3.1% YOY
Palladium: -22.2% YOY

Section Four: Electric Vehicles

EV Demand Strong Despite Slowdown, Hybrids on the Rise

Electric vehicle sales rose by 22.9% in the second quarter of 2024, and 11% in the third quarter year-over-year⁵² The market has continued a trend of diversification, with Tesla falling below 50% market share for the first time in that same period.⁵³ The EV market continues to grow despite earlier fears of a demand drop, but at a much slower pace than took place in 2021 and in an unevenly distributed fashion. Double-digit growth has been observed in North America and Europe, but China has been recovering from a sharp 2022 decline and has seen more subdued gains. Available Q3 data has seen individual companies within the market have also seen variable success, with GM reporting a 60% year-over-year increase compared to a smaller 12% increase for Ford. The EV share of total sales hit a record 8.9% in the third quarter of 2024, noticeably up from 7.8% at that same point last year.⁵⁴ Policy incentives have kept EV's competitive in the market, but hybrid vehicles are currently witnessing faster growth than purely electric models worldwide. Data indicates that this has been occurring since 2021, with the hybrid adoption surge being led by China and Korea, and an emerging market gaining steam in India. However, demand for both hybrids and fully electric vehicles remain strong in the U.S. and the gap is smaller domestically.⁵⁵

Callouts:

EV Sales: +11% YOY
EV Share of Total Sales (Q3 2024): 8.9%
EV Battery Metal Devaluation Continues

EV Battery Metal Devaluation Continues

Both lithium and cobalt plummeted from the third quarter of 2023 to the third quarter of 2024, the former seeing its price decline by a staggering 63%⁵⁶ and the latter by 25%.⁵⁷ The decline between the second and third quarter of 2024 was 25% for lithium and 8% for cobalt. This downward price spiral has continued at heavy rates since the fourth quarter of 2022 and has brought both metals to pre-pandemic price levels, reversing the effects of the 2021-2022 spike. Much of that earlier decline was attributed to oversupply that did not match demand,⁵⁸ but prices have continued declining even as some firms have cut production⁵⁹

Callouts:

Lithium: -63% YOY
Cobalt: -25% YOY

Section Five: Looking Ahead

Economy

Having avoided a recession in 2023, real GDP growth is expected to continue a slow downward trend by the end of 2024 and in future years for the U.S. economy to pre-pandemic growth rates.⁶⁰ The unemployment rate is expected to rise slightly alongside this trend given the softening labor demand, and employment growth is expected to slowdown in the near-term and rebound to higher rates in 2025 according to the Congressional Budget Office.⁶¹ As part of the longer term targeting by the Federal Reserve, analysts at the CBO expect inflation to continue to slow towards the two percent target, while interest rates are expected to decline slowly across strategic rate cuts in the near term.⁶²

Uncertainty and Economic Risks

Conflicts like the Russia-Ukraine war and the Israel-Hamas war, fuel regional instability, and repeat attacks on Southern coastline states from hurricanes have impacted energy and food security, with higher prices leading to increased inflation rates.⁶³ Consumer price inflation rates continue to trend downward but are still above pre-pandemic norms. With both the Russia-Ukraine war and the Israel-Hamas war ongoing there have been global disruptions in supply chain and inflationary pressures. Governments are struggling against the issue of food security as they implement strategies to offer support such as price controls, subsidiaries, and strengthening buffer stocks.⁶⁴ A main concern this year for consumers in the U.S. has been the November elections, research has shown that there tends to be increases in economic policy uncertainty in the months leading up to a major election.⁶⁵ Increased domestic and global uncertainty poses potential risks for economic outlooks and future planning for consumers and businesses alike.

Automotive Industry

Cox Automotive is forecasting new vehicle sales to end the year at 15.7 million vehicles, up from 15.5 million vehicles in 2023, marking a 1.3% increase year-over-year.⁶⁶ Charlie Chesbrough, senior economist at Cox Automotive, noted: "Adding to the uncertainty in the market, many consumers likely believe things will be better, or at least more certain, after the November election, which adds to the hesitancy in buying".⁶⁷ He adds that these expectations are supported by more discounted and improved prices. Cox Automotive is positive about this slightly increased finish over 2023 but they are still worried about the uncertain economic outlook more broadly for the rest of the year.

EV Metals

Cobalt, lithium, and nickel are likely to see prices either fall or stagnate for the foreseeable future, with the bear market far from over; partially due to innovation that allows for greater energy density in individual batteries, reducing the amount required to power vehicles.⁶⁸ Lower battery prices due to low cost metal inputs could assist the EV market in profitability, but signal difficulty for startups entering the car battery market. These prices are also a sign of low demand, suggesting rapid-fire EV sales of the immediate post-pandemic period are unlikely to be replicated and that expansion of the market will be steadier over the next financial periods⁶⁹

Section Six: Canadian Commentary

Stagnant Economy Sparks Major Monetary Shift

Growth in Canada has remained sluggish over the course of 2024. Real GDP grew by an annualized 0.9% in Q2 2024⁷⁰ and is likely to fall somewhere between 1 and 1.5% in Q3.⁷¹ Unemployment has proven itself to be a stubborn issue at the same time, averaging 6.5% in Q3, up a percentage point from a year ago. After Covid, the Bank of Canada introduced high interest rates in an attempt to curb inflation, which traditionally puts upward pressure on unemployment.⁷² While they recently lowered the rate to 4.25% from its 5% peak, it had remained at that high for almost a year and all rate cuts have been within the last five months⁷³ Policymakers believe rates remain excessively high as inflation risks falling below the typical 2% target, harming those paying off debts and keeping GDP growth low. It is expected that their central bank will implement rapid rate cuts in order to tackle these economic issues, and investors believe rates will hit neutral levels (2.25-3.25%) by the end of 2025.⁷⁴

Section Seven: United Kingdom Commentary

Low Growth, Inflation, and Unemployment

The UK is seeing a slower 0.3% projected growth rate in Q3 2024 as compared to a 0.7% increase in Q2, continuing a trend of slower growth compared to other nations recovering from the pandemic.⁷⁵ Investors are convinced the Bank of England will lower rates from 5% to 4.75% in November, similar to cuts the U.S. Federal Reserve and Bank of Canada have already been implementing.⁷⁶ This is expected to spur investment, and the analysts do not expect a recession even if GDP growth is persistently low.⁷⁷ Q3 2024 has seen inflation stabilize at the low 2% rate, a stark contrast to 2023 which saw it plummet from over 10% amidst higher interest rates. Unlike in Canada, unemployment has been kept under control, dropping from 4.2% to 4.1% from June to July.⁷⁸

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DISCLAIMER

The statements made in this Q3 2024 RB Global Industry Report (the "Report") are based on the data obtained by IAA from the sources cited throughout this Report. These statements are not necessarily those of the RB Global, Inc. or its management. The facts and data provided in this Report should not be relied upon and are not intended to be predictions or expectations of future performance. The Report is provided for informational purposes only and shall not be considered a warranty or guarantee of any kind. You agree you are not relying on any information contained herein as advice whether or not to enter into a particular transaction or take any particular action. You should only make such decisions after your own diligence and upon your own judgment and advice from such advisers as you have deemed necessary.

FORWARD LOOKING STATEMENTS:

RB Global, Inc. (NYSE: RBA) (TSX: RBA) is a leading omnichannel marketplace that provides value-added insights, services, and transaction solutions for buyers and sellers of commercial assets and vehicles worldwide. This Q3 2024 RB Global Industry Report (the "Report") includes forward-looking information within the meaning of Canadian securities legislation and forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act") and Canadian securities laws. Forward-looking statements are typically identified by such words as "aim", "anticipate", "believe", "could", "continue", "estimate", "expect", "intend", "may", "ongoing", "plan", "potential", "predict", "will", "anticipates", "should", "would", "could", "likely", "generally", "future", "long-term", "foresees", "estimates", "opportunity" or the negative of these terms, and similar expressions intended to identify forward-looking statements. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties that may cause actual results to differ materially. These statements are based on our current expectations and estimates about our business and markets, and may include, among others, statements relating to the U.S. and global market, industry information and trends, our future strategy, objectives, targets, projections and performance and other statements that are not historical facts. It is uncertain whether any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do, what impact they will have on the results of operations and financial condition of the combined companies or the price of RB Global's common shares. Therefore, you should not place undue reliance on any such statements, and caution must be exercised in relying on forward-looking statements. While RB Global's management believes the assumptions underlying these forward-looking statements are reasonable, these forward-looking statements involve certain risks and uncertainties, many of which are beyond RB Global's control, that could cause actual results to differ materially from those indicated in such forward-looking statements, including but not limited to: our results of operations, strategy and plans; potential adverse reactions or changes to our business or employee relationships; our ability to integrate acquisitions (including IAA, Inc. ), the diversion of management time on transaction-related issues; the ability of RB Global to retain and hire key personnel and employees; the significant costs associated with the merger; the outcome of any legal proceedings that could be instituted against RB Global; changes in capital markets and the ability of the company to generate cash flow and/or finance operations in the manner expected or to de-lever in the timeframe expected; the failure of RB Global to meet financial forecasts and/or KPI targets; legislative, regulatory and economic developments affecting the business of RB Global; general economic and market developments and conditions; the evolving legal, regulatory and tax regimes under which RB Global operates; unpredictability and severity of catastrophic events, including, but not limited to, pandemics, acts of terrorism or outbreak of war or hostilities, as well as RB Global's response to any of the aforementioned factors. Other risks that could cause actual results to differ materially from those described in the forward-looking statements are included in RB Global's periodic reports and other filings with the Securities and Exchange Commission ("SEC") and/or applicable Canadian securities regulatory authorities, including the risk factors identified under Part I, Item 1A "Risk Factors" in RB Global's most recent Annual Report on Form 10-K for the year ended December 31, 2023, as such risk factors may be amended, supplemented or superseded from time to time by other reports we file with the SEC and/or applicable Canadian securities regulatory authorities, including subsequent Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K. The forward-looking statements included in this Report are made only as of the date hereof. While the list of factors presented here is considered representative, no such list should be considered to be a complete statement of all potential risks and uncertainties. Many of these risk factors are outside of our control, and as such, they involve risks which are not currently known that could cause actual results to differ materially from those discussed or implied herein. RB Global does not undertake any obligation to update any forward-looking statements to reflect actual results, new information, future events, changes in its expectations or other circumstances that exist after the date as of which the forward-looking statements were made, except as required by law.

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