Cox Automotive recently published the results of its Dealer Sentiment Index, which saw the forward-looking market outlook dip as many car dealerships expressed concern over inflation, dwindling vehicle inventories and rising costs.
Cox surveyed 1,040 U.S. car dealerships between July 26th and August 9th for this study. For each aspect of the market surveyed, respondents were given an option related to strong/increasing, average/stable, or weak/decreasing, the research firm says, along with a “don’t know” opt-out. This allows the company to gauge overall dealer sentiment regarding the industry and the challenges it’s currently facing.
The three-month forward-looking market outlook index “dropped sharply from the previous quarter,” according to Cox Automotive, falling to a record low for the index and returning to levels not seen since the height of the COVID-19 pandemic in the second quarter of 2020. Cox also found that inventory was the second leading factor impacting dealer business, however domestic brands are currently faring better with regards to production setbacks than most Asian brands. The economy was the second leading factor impacting dealer business, followed by market conditions, interest rates, and political climate. Dealers also expressed worry over the possibility of a recession and lagging consumer confidence.
Cox Automotive Chief Economist Jonathan Smoke said unique market conditions are causing worry among car dealerships at a time when sales are typically very strong.
“Importantly, a drop in current-market sentiment is not typical in the third quarter,” he said. “The third quarter is usually mostly stable and, for franchised dealers, is often improving. There is typically excitement building with new models rolling out and energy for the new-vehicle market through the fourth quarter and holiday seasons. That is just not the case this year.”
While dealers remain concerned about inventory and costs, supply chain shortages are slowly beginning to improve. Cox’s new-vehicle inventory level index improved was up significantly from one year ago in Q3 at 31, but still far behind the Q3 2019 index of 61.