Optimism among dealerships slides – Cox Automotive survey

Auto dealers are far less optimistic now than they were about last quarter.

Probably with good reasons.

“While dealers were more positive than negative in describing the current market, expectations for the future deteriorated substantially,” said Cox Automotive in a report on its latest Dealer Sentiment Index, which is gathered through a quarterly online survey of franchise and independent dealerships.




“Higher costs, inventory concerns and rising [consumer] interest rates are likely driving dealers to believe the best times in this cycle may soon be in the rearview mirror.”

Another contributor to the change was declining expectations of tax cuts, Cox said.

“Dealers shifted from a majority expecting a positive impact to their business from tax reform to a majority now indicating they have experienced no impact,” according to Cox.

The lower optimism among dealers appeared justified as new-vehicle sales for most automakers declined in July – although Fiat Chrysler, Subaru and Volkswagen bucked the trend – largely because of the continuing decline of passenger car sales in favor of SUVs and trucks.

Cox Automotive found that one of the most significant drops in optimism involved the new-car sales environment, which slipped about 10 percent to 59/100 from 65/100, although optimism for used-vehicle sales rose three points to 72/100 among franchise dealers. Independent dealers were split about 50/50 on whether the current used-vehicle sales environment is “good” or “poor.”

The expectation of a positive impact from tax cuts on profitability plunged to 61/100 from 77/100.

Despite the lower level of optimism, most industry analysts expect 2018 new-car sales around 17 million because of stronger-than-expected results in the first half of the year.

The Dealer Sentiment Index results are based on a survey of 1,053 franchise and independent dealer respondents April 30 to May 14, with responses weighted by dealership type (franchise or independent) and volume of sales to reflect the national dealer population.

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