U.S. auto dealers’ view of the current automotive market has improved and mostly recovered from a historic decline in the second quarter that was propelled by the COVID-19 pandemic.
That is according to a Q3 2020 Cox Automotive Dealer Sentiment Index (CADSI) study released on September 8. The overall market index shifted towards a more positive sentiment in Q3 with a score of 56 — a 36-point increase from last quarter and the largest quarter-over-quarter jump in CADSI history.
“Dealer sentiment improved dramatically in Q3 as the economy improved and dealers enjoyed strong sales,” said Jonathan Smoke, Chief Economist at Cox Automotive. “Improved traffic, less price pressure, and stronger profits lifted sentiment higher than a year ago.” The current market index is typically up eight points year-over-year.
The survey indicates that for 51 per cent of independent dealers finding and buying inventory is their top priority. During the last quarter, their top priority was staying in business.
The survey also shows that franchise dealers are feeling more positive than independent dealers. Franchise dealers are anticipating a strong fourth quarter due to consumer pent-up demand, returning employment, and the potential for a second stimulus check. The majority independent dealers expect the market to be weak in the months ahead, according to Cox Automotive.
With the rise of the used vehicle sales index, from 26 in Q2 to 55, the view from independent dealers improved from last quarter. However, the used vehicle index score of 47 remained below the positive threshold.
“The used-vehicle sales index for franchised dealers was also higher from Q2 to Q3, moving from 43 to 77, an all-time high,” said Cox Automotive. “The used vehicle inventory index declined in Q3, reflecting shrinking inventory. The reading of 21 was also a record low.”
The top five factors holding back business among U.S. dealers are: limited inventory (moving from 5th in Q2 to the top spot in Q3), followed by business impacts from COVID-19 (down to 2nd from the top spot last quarter), market conditions, the economy (down from 2nd to 4th), and political climate (rising to the top 5).
The survey is conducted quarterly by Cox Automotive with this latest one measured in late July to early August. The full report can be viewed here.
