Car Dealerships Expect Weak Q3 2022 Over Looming Recession
Sentiment among U.S. car dealerships in Q3 of 2022 is in decline, with tight inventory, inflation, and rising interest rates all significant factors in leading to an historically low market outlook.
According to the recent Cox Automotive Dealer Sentiment Index, the current market index is below the threshold of 50, recording the fifth quarter-over-quarter decline in overall market sentiment, falling five points from Q2 and 13 points year-over-year.
“Importantly, a drop in current-market sentiment is not typical in the third quarter,” said Cox Automotive Chief Economist Jonathan Smoke. “The third quarter is usually mostly stable and, for franchised dealers, is often improving. There is typically excitement building with new models rolling out and energy for the new-vehicle market through the fourth quarter and holiday seasons. That is just not the case this year.”
The Cox Automotive Dealer Sentiment Index is based on survey responses collected from U.S. car dealerships, with the latest Q3 2022 study based on responses from 1,040 auto dealers, including 574 franchised dealers and 466 independent dealers. The survey was conducted between July 26th and August 9th, 2022.
Responses were weighted by dealership type and sales volume for a more accurate depiction of the national dealer population, with each survey aspect evaluated as strong / increasing, average / stable, weak / decreasing, or simply “don’t know.” These responses were then used to calculate a mean score.
According to the report, sentiment among car dealerships with regard to new-vehicle inventory improved slightly compared to the previous quarter, and improved significantly year-over-year. However, the improvements were not seen across the board, with domestic brands fairing better than Asian import brands. Used-vehicle inventory is also slightly improved compared to the previous quarter, while profits remain historically strong for franchised dealers. Nevertheless, all index scores associated with vehicle inventory remain below the 50 threshold, which indicates dealers continue to face big challenges with regard to new- and used-vehicle inventory.
Finally, the report goes on to state that car dealerships are also concerned with factors related to the economy, with the economy index dropping to 45 from 50 in Q2. More specifically, the study indicates that dealers are worried about inflation, the possibility of a recession, and falling consumer confidence.
SOURCE: GM AUTHORITY