Public opinion is important for the automotive market, but what about the views of the car dealerships that make up part of the market? We often depend on people in the industry for expert insight into how changes, and this time we’re getting our information from dealerships.
Cox Automotive released its newest Dealer Sentiment Index, pointing to a positive outlook for the automotive industry despite lower profits for dealers.
But what is the Dealer Sentiments Index, why are there profit problems, and what can we expect from the next quarter based on what we know about this one?
What is the Dealer Sentiment Index?
The Dealer Sentiment Index (DSI) is a survey from Cox Automotive that measures car dealer perceptions about retail auto sales and expectations of sales and profits for each quarter.
When the newest survey results were released earlier in June 2023, it was found that the overall score was up to 45 – a two point increase from last quarter.
With 50 indicating the automotive sector is strong, 45 means that car dealerships are quickly regaining their confidence in the market.
But how can that be when there are so many issues to address and profits aren’t growing how they should?
Profit Changes and Other Problems for Car Dealerships
Profit measurements are down for the seventh quarter in a row, but customer traffic and inventory have improved recently. What’s causing this dip?
Price pressure – many car dealerships are feeling the need to lower their prices due to factors like high loan rates and an uncertain economy.
Dealers are even taking hits to their staff due to inflation problems, which means making sales is even harder these days.
Despite this, some car brands have seen more success in the first quarter of 2023 than they did last year.
What are the Actual Sales Numbers for Big Brands
For example, Buick has increased its sales by 100% year-over-year based on data from early 2022 to the beginning of 2023. Cadillac sales jumped up by 29%, and Chevrolet saw a sales increase of 16%.
As all of these brands operate under General Motors, the company has been able to enjoy a strong rebound in the first quarter, which brings hope to the rest of the market. The most modest sales growth for the company was still an encouraging 7%.
So what does all of this mean for the approaching summer?
Looking Forward to the Future for Car Dealers
While there are positives from the first quarter – increased inventory, more customer traffic, and better sales for GM – there are still challenges to overcome before the automotive market can fully recover and be considered strong again.
All of it boils down to prices for car dealerships – when interest rates and inflation are lower, prices can fall without causing profit problems.
Dealers and customers will be happier for it, so keep an eye on the changes during the new quarter to find out if we’ll hit that solid score of 50 soon!
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