U.S. Dealer Sentiment Still Positive

By Staff Writer December 13, 2021 308

U.S. dealer sentiment waned slightly in the fourth quarter but remains mostly positive and well above levels recorded in Q4 2020 and Q4 2019. 

The current market index reading of 60 in the most recent Cox Automotive Dealer Sentiment Index (CADSI) indicates that more dealers feel that the automotive market is strong compared to the number who feel that the market is weak. The quarterly CADSI report was released today.

The new-vehicle sales index fell to 45 in Q4 – below the 50 threshold for only the second time since the survey was launched in 2017 – indicating that more dealers view new-vehicle sales as poor as opposed to good. Meanwhile, the used-vehicle sales index declined for the second straight quarter, but stayed above the 50 threshold at 53, indicating more dealers view used-vehicle sales as good as opposed to poor.

The key drivers of sentiment saw marginal shifts in Q4. The 3-month market outlook index was flat compared to the prior quarter. With a Q4 reading of 60, it represents that more dealers see the market in the next 3 months as strong than see it as weak. The overall profits index saw a modest decline compared to the prior quarter with a reading of 57, reflecting that dealers feel profits are strong, although not as strong as the previous quarter. The price pressure index saw a statistically significant decrease, falling below last quarter's reading to a record low 32. This Q4 reading indicates fewer dealers feel pressure to lower their prices.

“Dealer sentiment again saw modest declines in the fourth quarter as sales remain challenged by the ongoing inventory crunch,” said Cox Automotive Chief Economist Jonathan Smoke. “However, strong pricing power kept profits at near-record levels, especially for franchised dealers. Dealers view the economy as strong heading into the winter and are much more optimistic about the spring compared to their views a year ago. The biggest worry for dealers beyond inventory is the impact of rising costs.”

The Q4 index reading of 71 for costs indicates the majority of dealers feel that their costs of running a dealership are growing. This is the highest index score for the category in CADSI history, up 5 points quarter over quarter, and significantly higher year-over-year. In Q4 2020, the cost index stood at 61. For dealers who shared that the costs of running their dealership in the past 3 months are growing, they attributed that to spending more on reconditioning wholesale vehicles, paying more for wholesale vehicles and parts, and rising labor costs.

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Last modified on Friday, 17 December 2021 15:40