The Q3 2024 Cox Automotive Dealer Sentiment Index (CADSI) shows automobile dealers in the U.S. continue to view the market as weak. The overall Q3 market sentiment index dropped to a score of 40, down from 42 in Q2 and 45 from a year ago, signaling a weakened market sentiment.
“For more than two years now, after reaching peak profits in 2021, U.S. automobile dealers have viewed the overall market as weak,” said Jonathan Smoke, chief economist at Cox Automotive. “The retail auto business today is working through a lot of uncertainty, with the coming national election front and center, and also expectations of shifting market dynamics. U.S. dealers are feeling the effects of these dynamics in the market today and their expectations for the future.”
Franchised dealers’ sentiment increased by one point from Q2 to a score of 50 in Q3. However, independent dealers expressed a very negative outlook, achieving a score of 37, the second lowest in the survey’s history, behind only the score of 17 recorded during the global economic shutdown in Q2 2020. In the Q3 report, independent dealers showed a particularly pessimistic view on almost every aspect of the market, which dragged down the overall sentiment scores.
The market outlook index – which asks dealers about market expectations three months from now –dropped further in Q3, falling to 42 from 44, and remains below the year-ago level of 45. The score of 42 suggests a majority of U.S. auto dealers expect the auto market to weaken in the coming three months, not strengthen. Franchised dealers, who are historically more optimistic in their market outlook index, had an index score of 49 in the latest survey, marking just the third time in survey history – dating back to 2018 – that franchised dealers posted a market outlook index score below 50. For independent dealers, the market outlook score in Q3 was 39, down from 41 in Q2.
The cost index reached a new record high in Q3 at 77, indicating a majority of dealerships see the cost of running their business as growing, not decreasing, thereby impacting their profitability, which continues to be viewed as weak. The dealer profitability index score in Q3 was 34, lower than the score of 40 one year ago and down significantly from the index peak of 60 in Q3 2021. The profitability index for franchised dealers held steady from Q2 to Q3, at 43, exactly half of the peak score of 86 three years ago. For independent dealers, the profitability index of 30 marked the lowest point since the pandemic, suggesting that a vast majority of independent dealers see profits as weak, not strong.
Despite inventory levels not being a concern for dealerships, the sales environment remains muted, with franchised dealers scoring 51 for new vehicle sales, down from 59 in Q3 2023. The overall used vehicle sales index (combined franchise and independent) was 43 in Q3, a level suggesting dealers view the market as poor, not good.
Both franchised and independent dealers agree on the price pressure index, which is at 66, suggesting that all dealers feel more pressure to lower prices. After hitting a low point during the inventory shortages of late 2021 and most of 2022, price pressure has now fully returned to the U.S. market. The price pressure scores in 2024 have been consistent with those from before the pandemic.
While sentiment about electric vehicle (EV) sales improved in Q3 following a low point in Q2, a majority of dealers continue to report EV sales that are worse than one year ago. The overall score in Q3 was 44, up from 41 in Q2, but lower than the score of 49 reported one year ago. Expectations for future EV sales, however, fell in Q3, dropping to 37 from 39. The score indicates that a majority of dealers feel their EV sales will decline in the months ahead, not grow. The future EV sales index scores for both franchised and independent dealers were lower quarter over quarter and year over year in Q3.
Despite a pessimistic view of the current and future EV sales environment, a growing majority of dealers feel the government-supported EV sales incentives are having a positive impact on sales. A year ago, shortly after the Inflation Reduction Act incentives were confirmed, the EV tax credit index score was 53 – a score above 50, indicating a majority of dealers described the impact of the tax credit as positive, not negative. In the latest survey, the index score was 58, increasing for the fifth consecutive quarter.
The Top Three factors holding back dealers shifted slightly in Q3, with the Economy ranking first, Interest Rates falling to second, and Political Climate making a significant jump up into the third-place position.
When asked, 44 percent of dealers noted Political Climate was a factor holding back business, up from 36 percent in Q2 and 27 percent one year ago. The 44 percent in Q3 is the highest percentage recorded for Political Climate since the factor was added in 2019. Franchised dealers are particularly concerned about how the Political Climate is impacting their business, with 49 percent noting it is a factor holding them back.