Dealers are pessimistic about the retail auto market in the third quarter of the year as dealership inventory climbs and profits decline, according to a survey of dealer sentiment in the Cox Automotive Dealer Sentiment Index or CADSI by Cox Automotive.Â
The upcoming presidential elections in November are affecting sentiment, but other factors are in play, too, including “expectations of shifting market dynamics” affecting dealership profitability, Cox economist Jonathan Smoke said in the report.
For Q3 2024, dealers rated new vehicle inventory levels at their dealership at 71, trending toward the “growing strongly” side of the response. However, the respondents rated their profits over the past three months at 43, showing they consider profitability as “declining” and “weak.” Exactly three years ago in Q3 2021, dealers rated their profits at 86, double the current rating and indicating high and growing profits.
In practical terms, this means dealers feel pressure to lower prices even as profits are dropping, in an effort to move more inventory. Dealership owners also feel that new-vehicle incentives from OEM manufacturers are currently small, offering little help in selling new vehicles easily. The average dealer sentiment of 37 out of 100 for the size of incentives is once again down from 2021.
Other takeaways from the CADSI responses include a sharp decline in demand for EVs. Earlier this summer, a prominent auto market analyst predicted the market will be “EV-centric” no sooner than 2040. Meanwhile, GM competitor Toyota is reducing its EV production target from 1.5 million to 1 million for 2026. Dealer sentiment for EVs is down to 35 to 40, plunging from a cautiously optimistic 56 to 64 in mid-2022.
The condition of the overall U.S. economy is rated as the biggest factor in weak dealership profits by dealers at 61 percent, followed by interest rates (59 percent) and political climate (44 percent). This contrasts with Q3 2022 when dealers rated “limited inventory” as the most important factor holding back business and put the economy in second place.
Jonathan Smoke summed up the causes of negative dealer sentiment by remarking “the profitability index has generally declined for three straight years, particularly for independent dealers.”
The survey gathered data from 933 dealerships, consisting of 397 independent dealers and 536 franchised dealers.
Comments
Dealers weren’t complaining when they were charging over sticker price 3 years ago ether.
Nobody learned that better than Stellantis. I was literally in a dealership today in Calgary and the mood there is very somber to say the least. A Jeep Wrangler Rubicon 392 is $734 biweekly with $10,000 down!! Salesman said it’s a boat anchor along with the Grand Cherokees and Wagoneer’s that are collecting dust on the lot! People simply can’t afford the products anymore, and if they can they’re thinking wisely and not getting sucked into the hype of an overpriced vehicle that has so much unnecessary tech that major problems are arising, even from vehicles that were once viewed as super reliable. Sad times for sure.
Dealers make most of their money from the fixed end of their business….not selling cars.
yeah blame everything but your insane prices and 1000$ doc fees and 1600$ for tint fee and yea.. thats not the problem, its the election. you know.
Thanks for the good news.
No worries. They had record profits from a scam shortage the past 4 years. They should be fine provided they didn’t blow their earnings on a new yacht or private jet.
I hope they ALL TANK!! The past 4 years they had no problem GOUGING the public for every penny. People are waking up, and others are just flat BROKE, or they are getting their cars TOWED/REPOED back. I have absolutely no sympathy for STEALerships!!
Remember that if you ever have a warranty concern on a new car and can’t find a ‘STEALERship’ to help you out. Have you ever built a house with a home builder? Bought a steak at a 5-star restaurant? Purchased an airline ticket the day you had to leave due to a situation coming up last minute? Guess what all those business have in common? They need a profit to survive, and frankly they’re less transparent than most car dealerships. I’ve never had Delta Airlines provide me an invoice showing the costs associated with my flight. Certainly have never had a restaurant show me what my $100 steak cost them.
I called this 3 months ago when factory rebates on fullsize trucks were 1500- GM does not rebate fast sellers.now there is money, special financing and rebates on the whole line-up save Corvette/Escalade.And with all the hype over AI needing more than 3x the total US grid supply over the next 5-10years EV is a lame duck.
Since gm in their infinite wisdom, chose to discontinue the Camaro which was the only Chevy my wife liked/has liked for years, they’ve gotten their last dollar from us on vehicle sales. I seriously doubt that if/when they bring back the Camaro name, that it will be on a vehicle that we like or can afford.
hope all the dealers that in the past were scamming people have no repeat customers and go bankrupt.
if you bought from one of those dealers shop a different one.
A salesman only job is to try to manipulate you out of your money make him or her and dealership most money.the cost of new vehicles is out of control
I’ve heard that the franchise dealerships make most of their profit performing repairs. This lack of new car sales must be why my local Chevrolet dealership claimed I needed to replace the cylinder heads on my Camaro at a cost of $8,000; but when took my car to an independent mechanic, he said all I needed was one new fuel injector. My car has been running smooth ever since.