Smoke says the key drivers of dealer sentiment are the tight supply conditions that have enabled very strong pricing power. - Image: Cox Automotive

Smoke says the key drivers of dealer sentiment are the tight supply conditions that have enabled very strong pricing power.

Image: Cox Automotive

Cox Automotive recently published its quarterly Cox Automotive Dealer Sentiment Index for Q2. The index measures dealer sales expectations and how they perceive current auto retail trends over the next 90 days. Jonathan Smoke, Chief Economist for Cox Automotive joined Jim Fitzpatrick on CBT News to discuss the findings of this latest index.

Smoke begins the conversation by first describing the Cox Automotive Dealer Sentiment Index. He says Cox surveys a large sample of car dealers every quarter to capture their views of the market. They design the survey in a way to quantifiably score car dealer sentiment. If the number is above 50, it usually means it’s good and below 50 is bad.

The latest report had a lot of records worth noting, Smoke says. In fact, the bad, was very much a contributor to the good, he says. He explains by stating that car dealers are telling us the current market is the best ever. The 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.

Smoke says the key drivers of dealer sentiment are the tight supply conditions that have enabled robust pricing power. A key difference in this quarter is COVID essentially faded in the background. Now car dealers are faced with one problem: inventory.

For franchises, they saw improved strength within fixed operations, Smoke says. The bottom line is the data indicates car dealers always have the right view. There has not been one time since doing the surveys that he has seen anything different than what car dealers saw, Smoke says.

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 focusing on inventory especially in the back half of the year.

See CBT news video interview here

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