Declining COVID cases a cause for optimism among dealers

Auto dealers in the US are more optimistic about the short-term future in the automotive market. The Cox Automotive Dealer Sentiment Index Study revealed an impressive jump for the 90-day outlook, from 48 points to 59. The study’s results indicate that American dealerships have a positive outlook – the highest level of optimism since the pandemic began – as COVID-19 cases slide and vaccine rollouts ramp up.  

It isn’t uncommon for the CADSI 90-day outlook score to trend upward in the spring when most auto storefronts see an influx in customers coming out of retail hibernation. Those with the highest degree of optimism for the second quarter are franchised dealers who scored a 68. Amazingly, that’s a higher outlook than Q1 2020, shortly before the pandemic began running rampant in the US.  

Cox Automotive’s Chief Economist, Jonathan Smoke, said, “Current dealer sentiment was remarkably stable to start the year despite pandemic conditions reaching their worst level yet in the U.S. in January. Compared to a year ago, the economy is weaker, used-vehicle sales are not as strong, and used and new inventory levels are declining.” 

Current position slightly less upbeat 

The future expectations are tempered, however. As it stands now, the current market index remained relatively low with a score of 49. Although dealers feel that better days are coming, the perspective is that the auto market is susceptible right now.  

Fewer COVID cases and vaccine campaigns that have been surprisingly effective are components that have mitigated the inventory struggles that franchised auto dealers are once again faced with. New vehicle inventory index figures have dropped from 48 last quarter to 44 in Q1 2021. That’s 12 points lower than Q1 2020, the last point in time that inventory levels were normal and growing.  

Used car inventory also slid by 5 points in Q1 to 47, and used car retailers have soured on the market’s health.  

Biden administration receiving weak welcome 

The same Dealer Sentiment Index elicited responses about the Biden administration. Having shifted away from the election campaign and into the new administration’s plans for the future, a common theme seems to be concern. 

Dealers who responded to the survey expressed fear that rising gas prices could push car buyers away from their stores and into the arms of EV suppliers – and gas prices are almost certainly going to rise with the Keystone XL pipeline deal cancelled. Other dealers continue to feel that initiatives intended to lower emissions by encouraging EV purchases could lead to increased regulation, not to mention depress the used car market that has few EVs available, if any. 

A positive trend for sentiment 

Despite the uncertainty some dealers are feeling regarding EVs and the crude oil market, a look down the road remains one that appears to have fewer bumps and wild changes. If the US keeps on the path toward an economic uptick, fewer COVID cases, and less restrictions, dealers have good reason to be optimistic.  

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