On the Dash:
- Dealer sentiment fell sharply in Q4, with current and future market indexes below 50.
- Traffic, profitability, and both new- and used-vehicle sales weakened, pressuring dealers nationwide.
- EV optimism declined significantly for franchised dealers after the federal tax credit expired.
Caution among U.S. dealers is rapidly deepening amid economic uncertainty and persistent market challenges, according to the latest Cox Automotive Dealer Sentiment Index (CADSI). Both current and future market sentiment dipped below the 50 benchmark, with dealers reporting rising costs, higher prices, and weaker consumer demand as their primary concerns.
During the fourth quarter, market sentiment declined significantly, with the current market index falling to 38, down from 43 in the third quarter. The future outlook also dipped to 42, down from 46. Franchised dealers remained the most optimistic, scoring 47, while their independent dealers ranked notably lower at 35. Despite this difference, both groups showed a decrease in sentiment, indicating a general sense of caution across the retail automotive industry.
The traffic index dropped to 31, with in-person traffic falling to 29 and digital traffic to 40. The franchise dealer score fell for the second consecutive quarter to 34, the lowest in five years. While independent dealers saw a decline, it was less severe than that of franchise dealers.
In addition to a significant traffic decline, profitability is also under pressure as rising costs and softening consumer demand erode dealers’ bottom line. The overall profit index fell to 36, with franchised dealers at 44 and independents at 33. Franchised dealers experience the most significant pressure, dropping 5 points from Q3, while independents fell by a single point.
Sentiment for both new- and used-vehicle sales fell. For the first time in four years and one of three times in the survey’s seven-year history, dealer sentiment for new-vehicle sales fell below the 50 benchmark to 49. This dip continues the trend observed last quarter, in which sentiment dropped significantly from 62 in Q2 to 58 in Q3. Used-vehicle sentiment fell to 53 for franchise dealers and to 39 for independents.
While new-vehicle inventory is on the rise, used-vehicle inventory remains tight. The new-vehicle inventory index increased for the second consecutive quarter to 59. However, it’s still significantly below last year’s 73. Used-vehicle inventory improved slightly, rising one point from the previous quarter, but remains tight at 43.
Dealers across the country continue to express greater concern about the economy and macroeconomic headwinds. Over half (51%) of the surveyed dealers expressed it as their most profound business concern, up from less than half (44%) in the third quarter. The economy index fell to 39, down from 43 in the previous quarter. Franchise dealers remained more optimistic, at 44, compared to the independents at 37. The last time the index ranked above 50, indicating that dealers believed the economy was strong, was in 2021.
The electric vehicle outlook took the most significant tumble with the expiration of the federal tax incentive. Franchised dealers’ optimism about future EV sales nosedived to 24, down from 33 in the third quarter. Future EV leasing sentiment fell to 27, down from 36. Independent dealers weren’t impacted as significantly, continuing to show subdued sentiment for EVs in general.
