Franchise dealers appear optimistic, but ‘euphoria’ of 2018 is gone

Auto dealers are an optimistic lot, it seems, even though sales for the first two months of 2019 were at their lowest level in five years.

And the outlook that new-car sales will fall short of recent years.

While describing a relatively “weak” market – 48 on a 100-point scale – in the first-quarter Cox Automotive Dealer Sentiment Index, those same dealers anticipate an uptick in business within the next three months – rating prospects a 63 on the same scale.

A slow start to 2019 has dealers pondering the future.

A slow start to 2019 has dealers pondering the future.

The overall expectations were about the same for franchise dealerships (62) as they are for independents (63), according to the Cox survey.

Both numbers were significantly higher than expectations reported last quarter.

But “gone is the euphoria we saw this time last year,” Cox reported, especially for new-car sales, which exceeded 17 million for the fourth consecutive year in 2018 despite earlier gloomy forecasts. Franchise dealers rated the current used-vehicle sales environment “good” at 66 on the 100-point scale, but the new-vehicle sales environment as pretty middling at only 53.

Still, franchise dealers were more positive about the current market than independent dealers, who anticipate used-car sales to be on the “poor” side of middling at 48 points.

Some caution would seem to be in order, though, as franchise dealerships are seeing inventories grow for both new and used cars creating pressure to lower prices, based on results of the Cox survey. Independent dealers indicate they also are feeling pressure to lower prices.

In fact, dealers are saddled with the most inventory since the Great Recession – more than four million new vehicles, a 79-day supply – Automotive News reports.

The quarterly survey is conducted online, with dealer responses weighted by dealership type and sales volume to reflect the national dealer population.

Nearly 1,200 dealers participated in the survey, which was conducted Jan. 28 to Feb. 8.

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