Auto Dealers Seeing Not So Happy - Cox Automotive
Atlanta June 15, 2022; Happy hump day! Halfway through the week, halfway through the month, and hopefully more than halfway through an uncomfortable stretch of economic potholes. The road of late has been a rough.
As our team reported on Monday, U.S. auto dealers are feeling it. Overall sentiment declined for the fourth straight quarter, according to the Q2 2022 Cox Automotive Dealer Sentiment Index. The current market index peaked at 67 a year ago and has been trending downward since. Franchised dealers continue to report that profits are strong, but the realities of inflation, high costs, and tight inventory are taking a toll. In the latest poll, the 3-month, forward-looking market outlook index sharply dropped from the previous quarter. As our team noted, U.S. auto are dealers are still positive on the market, but they are feeling less enthused about the future.
This afternoon, Jerome Powell and the Federal Reserve will be posting their thoughts on the future, as their June meeting wraps up. Buckle those seatbelts, folk: The report drops at 2:00 pm. Cox Automotive Chief Economist Jonathan Smoke will be watching carefully and share his commentary in the Smoke on Cars section of the Newsroom later today. As he has reported recently, auto credit in the U.S. remains healthy, but the signs are there. Credit availability tightened in May and loan performance was mixed, with severe delinquencies increasing but defaults declining. New-vehicle affordability, as reported this morning, fell further last month as well.
No matter the outcome of the Fed's move today, here's one thing we know: The next time you fill your gas tank, it's gonna to hurt. According to data sets developed by our Kelley Blue Book team, the average driver is now paying near $275 a month at the pump. That's up by $105 from the salad days of June 2021, when a gallon of gas was only $3.07, according to AAA. Shopping traffic for EVs and fuel efficient vehicles is up – no surprise – but good luck finding one. Inventory of smaller, more-efficient vehicles remains tight. We will have an update on new-vehicle inventory later this week. Spoiler alert: It's not getting noticeably better.
Right now, with consumer sentiment low, household finances under stress, and new-vehicle supply still historically tight, the questions is: Does the automobile market have a demand or supply problem? The Industry Insights team at Cox Automotive is beginning to believe the answer to that question is, “Yes.”
So is there any good news out there? Indeed, at least for our Kelley Blue Book team. We were happy to see this morning that the KBB brand is a top-ten on Morning Consult's "Most Trusted Brands 2022" list in the Auto & Mobility Industry. Hat tip to all our colleagues!
And, if you're ever pestered by an emu while cutting your lawn, good news: There is a solution.
Reminder: Join Us!
The annual Cox Automotive Mid-Year Review will be held Tuesday, June 28. There will certainly be no shortage of topics to covers, as our Industry Insights team reviews the auto market's performance through the first six months of 2022, ahead of the first-half close, Friday, July 1st. We hope you will virtually attend. You can RSVP here.
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