Though auto dealerships and groups have fared well this year despite numerous economic challenges, dealers have started to worry about how things play out from here.
Cox Automotive’s fourth-quarter Dealer Sentiment Index reflects a sector facing softening consumer demand and rising costs. After a year of brisk sales sparked by tariff-dodging, the end of the federal electric-vehicle tax credit, and big-ticket buyers buoyed by robust stock returns, many dealers foresee a reality reckoning.
More than 900 dealer survey responses show a significant drop in both current market sentiment and future outlook to well under the threshold of 50, the former falling from 43 to 38 and in the latter from 46 to 42, Cox reported. Scores under 50 indicate more dealers see conditions as weak than as strong.
The reasons for the drop-offs include falling customer traffic and thinning margins over the past three months. Franchised dealers, especially, have seen a decline in consumers in their stores, their in-person and online traffic falling to all-time lows, Cox said. That’s a stark statistic, given the historical context of the pandemic lockdowns and the Great Recession. The overall traffic index fell from 33 to 31.
“Persistent economic uncertainty and fading consumer confidence are weighing on sentiment,” said Cox Deputy Chief Economist Mark Strand. “Compared to the rest of the year, the current market feels like it’s running out of gas.”
Cox’s profitability index slipped from 38 to 36 as dealers meet rising costs and falling demand. Dealers see waning sales of both new and used units, according to survey results. Franchised dealers’ new-vehicle sales sentiment dropped from 58 to 49, and their used sales sentiment also fell from 60 to 53.
Dealers see larger economic conditions affecting sales, that index falling from 43 to 39.
Not surprisingly, EV sales outlook sharply declined due to the vanished tax incentive. For franchised dealers, the index fell from 33 to 24 while EV leasing sentiment dropped from 36 to 27.
Looking to potential interest rate relief when the Federal Reserve meets next week, Strand expressed hope that conditions will turn as the year winds down.
“… renewed market momentum is entirely possible,” he said, “especially if we get material interest-rate relief and a rebound in consumer confidence.”
