US auto dealers continue to feel less optimistic about the outlook for sales, despite stronger customer traffic, while used car inventory levels are coming under pressure, Cox Automotive research has found.
According to data from the Q2 2019 Cox Automotive Dealer Sentiment Index (CADSI), auto dealer sentiment is similar to the first quarter as the overall current market index remained in negative territory, with more dealers feeling the market is weak compared to those who maintain it is strong.
This is despite customer traffic through showrooms reaching a record level and profits matching previous record highs, according to the index.
Independent dealers are the least optimistic, with a substantial drop in expectations for the next quarter, while franchised dealers’ expectations remain unchanged.
Researchers questioned whether strong used vehicle sales can continue as inventories tighten, while new vehicle inventory is expanding.
Cox Automotive chief economist Jonathan Smoke said: “[Dealers’] outlook has moderated substantially from the peak in optimism we saw last year as numerous negative factors continue to dampen future expectations. If market strength is being driven by used vehicles, can used vehicle sales remain strong considering declining inventory? That’s a concern to watch in the coming months.”
Tariffs on imported vehicles and parts are a concern, with 36% of dealers in total and more than half of franchised dealers expecting them to have a negative impact on business profitability next quarter, if they are imposed.