Cox Automotive has released its Dealer Sentiment Index for the second quarter, which was compiled from dealers’ responses from April 25th to May 9th. Dealer sentiment has now dropped for four consecutive quarters, which is reportedly due to increasing concerns about high costs, low inventory, and peaking inflation.
Despite a reduction in COVID-19 cases that have been impacting dealer sentiment greatly for over two years, the market index for Q2 reportedly ended up at 54, which is still 13 points lower than Q2 a year ago.
The ongoing inventory crunch is continuing to affect sales, as dealers all across the board report low inventory is currently the largest detriment to their businesses. Low inventory has led to higher prices, meaning new and used vehicles are out of reach financially for many would-be customers.
Cox Auto reported that after low inventory, operational costs are the next highest factor impacting dealer sentiment. Inflation is a major contributor to the cost concerns, as is the possibility of a recession. COVID-19 has dropped out of the top five concerns, as market conditions, expenses and political climate held the three-through-five spots.
The overall profit index dropped one point but remained higher than pre-pandemic levels. Independent dealers, however, report viewing profits as much weaker (index score of 44) compared to franchised dealers (index score of 82).
Ultimately, Cox Auto’s Chief Economist Jonathan Smoke reported that the recent Dealer Sentiment Index indicates dealers are collectively “less enthused about the future.”
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