Jonathan Smoke, Chief Economist at Cox Automotive breaks down the latest Cox Automotive Dealer Sentiment Index.
(You can find the Cox Automotive Dealer Sentiment Index – Second Quarter 2021 here and the full interview on CBT News here.)
The latest report had a lot of records worth noting, says Jonathan Smoke. In fact, he says, the bad, was very much a contributor to the good. He explains by stating that car dealers are telling us that the current market is the best market ever. The current market was rated at 67 and has been the highest score since the start of these surveys in 2017. Car dealers feel best when traffic is good, profits are strong, and when new and used vehicles are strong.
“The first two quarters of 2021 are
showing a strongly recovering market,
balancing on a perfect mix of pent-up demand,
rising prices, and low inventory.”
Smoke says the key drivers of dealer sentiment are the tight supply conditions that have enabled very strong pricing power. A key difference in this quarter is COVID essentially faded in the background. Now car dealers are faced with one problem: inventory.
” Despite tight inventory, vehicle sales have
been healthy in 2021. The Q2 new-vehicle
sales index of 65 was a record for Q2 and near
the all-time high of 66. The used-vehicle sales
index in Q2 reached 62, an all-time record high
and the first time the overall used-vehicle sales
index moved above 60. “
For franchises, Smoke says, they saw improved strength within fixed operations. The bottom line, he says, is that the data indicates that car dealers always have the right view. There has not been one time since doing the surveys, that Smoke says, he has seen anything different than what car dealers saw.
Smoke wraps up the conversation by stating what car dealers and independent dealers can focus on for the next quarter to set themselves up for success. He recommends continuing to focus on inventory especially in the back half of the year.
Derived from a quarterly survey that Cox Automotive issues to a representative sample of franchised and independent auto dealers from around the country, the Cox Automotive Dealer Sentiment Index (CADSI) measures dealer perceptions of current retail auto sales and sales expectations for the next three months as “strong,” “average” or “weak.” The survey also asks dealers to rate new-vehicle sales and used-vehicle sales separately along with a variety of key drivers including consumer traffic. Responses are used to calculate an index by which any number over 50 indicates that more dealers view conditions as strong rather than weak. When an index is below 50, the overall sentiment is negative.
