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Cox Automotive dealer sentiment holds steady amid market uncertainty

While the market sentiment appears weak, the CADSI showed some positive indicators in Q2.

The latest Cox Automotive Dealer Sentiment Index (CADSI) for Q2 2024 remained stable compared to Q1, indicating a consistent outlook among U.S. auto dealers despite ongoing market and economic uncertainties. The Q2 current market index score of 42 suggests that most dealers perceive the market as weak, reflecting a trend observed over the past year.

Despite the stability in dealer sentiment, the market outlook index dropped from 51 in Q1 to 44 in Q2, signaling increased pessimism among dealers regarding future market conditions. Factors contributing to this outlook include a weaker-than-usual tax refund season and persistent political and economic uncertainties, leading to a cautious dealer outlook.

Jonathan Smoke, Chief Economist at Cox Automotive, highlighted the prevalent uncertainty, stating, “There is a lot of uncertainty in this market, leaving consumers and dealers alike unsure of the road ahead. On top of uncertainty about interest rates, we are heading into an election season, and this one is especially breeding more concern.”

While the market sentiment appears weak, the CADSI showed some positive indicators in Q2. The profit index increased for the first time since Q3 2021, although it remains below the 50 threshold at 36. Additionally, both online and in-person customer traffic improved from Q1, suggesting a slight uptick in consumer activity.

Despite the challenges and perceived market weakness, Smoke remains optimistic about the dealer business’s overall health. He emphasized that retail vehicle sales have been consistent, inventory levels are reasonable, and interest rates have likely stabilized. However, rising costs continue to pose challenges for dealers, with the cost index reaching a record high in Q2.

In terms of sales, new-vehicle sales sentiment improved slightly, while new-vehicle inventory levels are seen as growing. The incentive index also rose, albeit remaining below pre-pandemic levels. On the other hand, the used-vehicle sales index remained below 50, indicating a weak market.

A notable finding was the declining sentiment regarding EV sales, reflecting a broader industry trend. Dealers perceive EV sales as worse compared to a year ago, although there is some optimism about future EV market conditions due to existing tax credits.

As the U.S. presidential election approaches, the Political Climate emerges as a significant factor impacting business, with increasing concerns among dealers. The overall sentiment regarding the U.S. economy remained unchanged, with most dealers perceiving it as weak.

The CADSI, based on a quarterly survey of U.S. auto dealers, provides insights into dealer perceptions of current and future market conditions. Despite the challenges and uncertainties, dealers remain cautiously optimistic about navigating the evolving automotive landscape.

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