Car dealerships are slowly gaining a more positive view of the U.S. automotive market in the second quarter (Q2) of 2023, per the Cox Automotive Dealer Sentiment Index published on June 7th, 2023.
Released quarterly by Cox Automotive, the Index shows improving sentiment among car dealerships for Q2 2023 even as profits continue to drop.
Car dealerships sentiment has a score of 45 overall on the Sentiment Index for the second quarter of 2023. This score places sentiment below the 50-point boundary at which the majority of dealers believe the U.S. automotive sector is strong.
The score of 45 indicates most dealers still believe the car market is weak, though it is up two points from the 43 market index in Q1 2023. As regards the American economy overall, car dealerships rate it at 44, down significantly from Q2 2022’s market index of 50.
The profit index measured by Cox is dropping even faster, down for the seventh quarter in a row to a rating of 41. While inventory and customer traffic improved according to the survey, the price pressure index is up sharply from 2022, showing car dealerships are under strong pressure to lower prices. The Index also points to new vehicle sales on the rise while used vehicles are growing less popular.
Turning to specific questions from the survey, Jonathan Smoke, chief economist at Cox, says “dealers are now facing an uncertain economy and high loan rates that are keeping many would-be buyers on the sidelines.” While the average dealership says it feels only moderate pressure to lower prices, several other factors are also at play.
Dealers identified “credit availability for consumers” and “political climate” as two significantly increased factors holding back their business. Dealers also reported that inflation was affecting staffing levels at their car dealerships more significantly than in previous quarters.
While the U.S. auto market may be weak overall in both Q1 and Q2 according to car dealerships, GM’s sales showed a strong rebound across all four of its major brands during the first quarter.
The biggest Q1 2023 sales rebound was registered by Buick, which saw its sales skyrocket approximately 100 percent year-over-year. The Buick Envision and the Buick Encore GX spearheaded the Tri-Shield’s gains, with Envision sales alone surging more than 241 percent. Cadillac sales jumped 29 percent in Q1, with the Cadillac XT5 selling the most units for the period.
Chevrolet generated the third highest sales gains at 16 percent, with the Chevy Silverado predictably coming in as the Bow Tie’s bestseller. GMC saw the most modest Q1 2023 gains at 7 percent sales growth, with the GMC Sierra as its top model by total units sold.
While inventories continue to improve and GM sales continued strong into the year’s first three months, Cox Automotive‘s Q2 Dealer Sentiment Index highlights how challenges remain for U.S. car dealerships moving forward into summer 2023.