The Cox Automotive Dealer Sentiment Index for the first quarter of 2021 was recently published, showcasing how dealers feel about the current state of the automotive market. Today on CBT News, host Jim Fitzpatrick is joined by Jonathan Smoke, Chief Economist for Cox Automotive. Smoke joins the show to break down key findings from the index and provide some clarity on the future of the market.
Smoke begins the conversation by providing a refresher on the purpose of the index. He says that the index is used to measure how dealers feel about the state of the market and where they think it is headed. In economist terms, the report is called a “diffusion index,” meaning the numbers reported for each question tell if it’s either good or bad. For most questions, if the number is above 50 the outlook is good, and if it’s below 50 the outlook is bad.
Smoke says the overall market index score was 49, signifying that dealers are slightly pessimistic about the state of the market. Despite the low overall score, franchise dealers scored a noticeably higher 61 on the index. Independent dealers scored a 45.
Factors that drive dealer sentiment include strong profits, traffic is good, and new and used vehicle sales are strong. Smoke says that inventory also plays a major role in the sentiment. However, 2020 taught many dealers that low inventories can often incite strong gross profits.
Smoke concludes the conversation by looking ahead to the upcoming spring season. He says that Cox Automotive found many factors are setting up for automotive sales to potentially jump in the next few months. Many consumers have already received the latest round of stimulus money and will also receive their tax refunds in the near future. With millions of Americans being vaccinated every week, Dealers could be set up for a strong second quarter.
