Car dealerships’ market confidence falls by 50% in less than two years

Photo by Jannis Lucas on Unsplash

Car dealerships are finding market conditions tougher than ever, with their confidence in the market halving since 2018.

That’s according to a survey conducted by Cox Automotive Group, in conjunction with the Australian Automotive Dealer Association (AADA).

The half-yearly survey seeks to understand dealer perceptions of the current retail automotive market, with anything over 50 on an indexed scale of 0-100 deemed a positive outlook.

It found dealers’ market outlook fell to 18, down from 26 a year ago and from 36 in late 2018.

Dealers also hold a dim view for the future, with the next six months’ outlook index down to 20 from 41 in late 2018.

The news comes after it was reported new car sales took a nosedive in 2019 and again in January 2020.

Cox Director of Marketing and Communications Matt McAuley said strong pressure to lower prices, increased difficulty in obtaining credit, and falling profitability of dealership finance and insurance were the main drivers of falling confidence.

“It is easy to see why they (dealerships) have a poor view of both the last six months and the next six months given the numerous factors affecting their businesses,” Mr McAuley said.

The survey found the biggest driver of dealers’ low confidence was market conditions, with 81% ranking it their number one factor, compared to 51% just over a year ago.

Credit availability was also a big factor, moving from seventh spot in 2018 to fourth spot in the most recent results.

The survey was first conducted in the third quarter of 2018, and 2019’s fourth quarter survey results were based on 84 dealership respondents.

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Used car sales outlook better than new cars

Despite the dim outlook on new car sales, dealers held more positive views for their used car departments.

The used car sales environment has held firm with an indexed score of 44, which is in stark contrast to the new car sales environment score of 10,” Mr McAuley said.

Dealers also reported running costs of a dealership remaining steady, and fixed operations departments (parts and services) performing well, with most dealers rating those performances as ‘fair’ and ‘good’.

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