Car dealers positive, but less optimistic about next 3 months

Cox surveyed 591 franchised and 555 independent dealers from Jan. 24 to Feb. 7 for the first-quarter index and 568 franchisees and 531 independents from April 25 to May 9 for the second-quarter study. In addition to asking dealers their outlook on the three months ahead, Cox asks about the past 90 days and identifies factors affecting dealers’ optimism or pessimism. Cox weighs responses by dealership type and sales volume to calculate a diffusion index. An index number greater than 50 indicates that dealers view conditions as positive.

Smoke noted that the current three-month outlook is “still a very good number.” Franchised dealers are still more optimistic heading into summer than they were in 2019 before the coronavirus pandemic started, he said.

However, used-only dealers’ view of the market three months out plummeted 13 points to a score of 50. That dragged the overall second-quarter index down to a score of 53 in that category, compared with 64 the quarter before.

Franchised dealers’ view of their current markets scored a robust 67, up a point from the quarter before and better than any three-month period before the third quarter of 2020. Still, the metric was down from a historic high of 77 a year earlier. The overall current market index dropped to 54 from 57, the fourth-straight quarterly decline in sentiment.

Smoke attributed the reduction among franchised dealers to uncertainty about the economy and vehicle sales environment, plus other conditions less within dealers’ control.

“I feel like some of our customers are ‘waiting to see what happens’ with the situation in Russia and with upcoming midterm elections,” a BMW dealer in the South told Cox. “Inflation also seems to have an impact on buying decisions. A lot of uncertainty right now.”

Several key survey metrics held steady.

Franchised dealers scored the U.S. economy at 57, the same as last quarter. They viewed the new- and used-vehicle sales environments as slightly improved over the prior quarter, with the new-vehicle environment earning a 52, up 2 points, and the used market meriting a 65, up 1 point.

“With no large [inventory] improvement in the coming months, I expect the demand to remain high,” a Midwest Chevrolet dealer told Cox.

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