Vehicle supply issues may have improved, but dealer concerns are still very much present — this time around economic uncertainty and high interest rates.
That is according to the quarterly Cox Automotive Dealer Sentiment Index, which found that dealer sentiment in the United States was up slightly (at 45) in the second quarter of 2023 but still below the 50 index threshold. The report suggests that more dealers see the current automotive market as weak rather than strong.
“Our latest dealer sentiment index clearly illustrates how the market has shifted in the past year,” said Jonathan Smoke, Chief Economist at Cox Automotive, in a statement. “The new-vehicle market’s most acute inventory issues are in the rearview mirror now. Dealers are now facing an uncertain economy and high loan rates that are keeping many would-be buyers on the sidelines.”
The latest survey shows that dealership profits are still on a downward trend after peaking in 2021. In Q2, Cox Automotive said the profit index declined to 41, representing the seventh straight quarterly decline. However, there is some good news: in-person and online customer traffic is up from Q1, with the Q2 index score at 37 — just one point below the six-year average.
Still, a number of factors continue to impact dealers, including inflation, interest rates, costs of operation, and the state of the U.S. economy. And based on the report, they feel more pressure to lower their prices so as to stimulate sales.
“When asked about factors holding back business, the economy (55 per cent) and interest rates (53 per cent) are the top two factors cited by both franchised and independent dealers,” said Cox Automotive in its report.
A year ago, limited Inventory was the leading factor. That has since dropped — not far down the list — to the third most-often mentioned factor.
