The Q3 2024 Cox Automotive Dealer Sentiment Index (CADSI) shows automobile dealers in the U.S. continue to view the market as weak. The Sept. 6 report shows overall Q3 market sentiment index dropped to a score of 40, down from 42 in Q2 and 45 from a year ago, signaling a weakened market sentiment.
“For more than two years now, after reaching peak profits in 2021, U.S. automobile dealers have viewed the overall market as weak,” said Jonathan Smoke, chief economist at Cox Automotive. “The retail auto business today is working through a lot of uncertainty, with the coming national election front and center, and also expectations of shifting market dynamics. U.S. dealers are feeling the effects of these dynamics in the market today and their expectations for the future.”
Franchised Dealers Show Slightly Optimistic Outlook, but Independent Dealers Struggle
Franchised dealers’ sentiment increased by one point from Q2 to a score of 50 in Q3. However, independent dealers expressed a very negative outlook, achieving a score of 37, the second lowest in the survey’s history, behind only the score of 17 recorded during the global economic shutdown in Q2 2020. In the Q3 report, independent dealers showed a particularly pessimistic view on almost every aspect of the market, which dragged down the overall sentiment scores.
The market outlook index – which asks dealers about market expectations three months from now –dropped further in Q3, falling to 42 from 44, and remains below the year-ago level of 45. The score of 42 suggests a majority of U.S. auto dealers expect the auto market to weaken in the coming three months, not strengthen. Franchised dealers, who are historically more optimistic in their market outlook index, had an index score of 49 in the latest survey, marking just the third time in survey history – dating back to 2018 – that franchised dealers posted a market outlook index score below 50. For independent dealers, the market outlook score in Q3 was 39, down from 41 in Q2.
The cost index reached a new record high in Q3 at 77, indicating a majority of dealerships see the cost of running their business as growing, not decreasing, thereby impacting their profitability, which continues to be viewed as weak. The dealer profitability index score in Q3 was 34, lower than the score of 40 one year ago and down significantly from the index peak of 60 in Q3 2021. The profitability index for franchised dealers held steady from Q2 to Q3, at 43, exactly half of the peak score of 86 three years ago. For independent dealers, the profitability index of 30 marked the lowest point since the pandemic, suggesting that a vast majority of independent dealers see profits as weak, not strong.
“Dealer profitability is one of the central measures in our quarterly survey, as it showcases the core strength of the business,” added Smoke. “And the profitability index has generally declined for three straight years, particularly for independent dealers. Most dealers feel their profitability picture is weak, and that is likely impacting many sentiment measures, dragging the overall survey scores lower.”