According to data from the Q3 2018 Cox Automotive Dealer Sentiment Index (CADSI), US automobile dealers are more positive than negative in describing the current market in the third quarter but are fearful that proposed auto tariffs could hurt profitability.
The survey found that only 11 percent of dealers believe auto tariffs on imported vehicles and parts would have a positive impact on their business, while 38 percent anticipate a negative impact. Fifty-one percent of dealers believe tariffs would have no impact. Franchised auto dealers – new-car dealers – are more pessimistic, with 56 percent suggesting new auto tariffs would impact their business negatively. Of the franchised dealers who feel negatively toward tariffs, 66 percent believe consumers will face higher prices on all new vehicles, not solely imports, as the market adjusts.
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"Dealers continue to report strong market conditions in the third quarter, with few material changes in key performance indicators from the spring, when we reported record-high sentiment," said Cox Automotive Chief Economist Jonathan Smoke. "While they are positive on today's business, the new looming threat is the negative impact of proposed tariffs on imported autos and parts. And, for the first time, dealers indicate that limited inventory is the No. 1 obstacle holding back business."
Factors holding back dealer business
The top five factors holding back business across all dealers remained the same in Q3 as Q2, but relative positions changed. Limited inventory gained the top spot from No. 2 last quarter. Market conditions fell to the second most cited negative factor. Credit availability for consumers slid into a tie with competition for the third most cited negative factor. The percentage of dealers reporting competition increased substantially from 28 percent last quarter to 35 percent this quarter. Expenses remained in the fifth position, even though it too saw a significant increase in the percentage of dealers citing it at 29 percent from 25 percent last quarter.
Interest rates were barely a factor in Q3 2017, as only 7 percent of dealers cited interest rates as a factor holding back business, ranking it No. 12 out of 14 possible negative factors.
