The survey showed that dealers “hold a poor view of the current market conditions and are less than optimistic with how the market will fare over the next six months”.

In late 2018, when the last survey was conducted, the dealer view of market conditions showed an index of 36 out of 100 which was quite weak, but in the latest survey period the index was at 25, which is down significantly.

Dealers were also more pessimistic about their view of the market in six months’ time, with an indexed score of 30 out of 100 compared to 41 for the previous survey period.

The half-yearly survey, conducted by Cox Automotive in conjunction with the Australian Automotive Dealer Association (AADA), seeks to understand dealer perceptions of the current retail automotive market and sales expectations for the next six months as “strong”, “average” or “weak”.

The survey also asks dealers to rate business conditions with a focus on new and used car sales as well as parts and service. It looks at a variety of key drivers including consumer traffic, inventory levels and price pressures.

Responses are used to calculate an index where any number over 50 indicates that more dealers view conditions as strong rather than weak.

Key survey takeaways show:

• Dealers responding to the survey had a low to moderate reaction to the market over the last six months, with an indexed score of 25. Future projections (next six months) are only slightly higher with an indexed score of 30. More than half the dealers surveyed described market conditions as ‘weak’ overall.
• Both the current and future perceptions are significantly lower than the last survey results from the third quarter of 2018 which saw scores of 36 and 41 respectively, compared to scores of 25 and 30 in the latest survey results.
• One of the biggest falls compared to the last survey was in relation to dealership profitability, with 70 per cent of respondents describing profits as ‘weak’, resulting in an indexed score of only 19 out of 100. This was a significant drop from the score of 30 recorded in the last survey.
• Customer traffic to dealerships was rated as below average with a score of 24, with 53 per cent of the dealers who responded rating dealership traffic as ‘weak’. This category fell from a score of 32 in the last survey.
• The view of the new-car sales environment was particularly bleak with an indexed score of 15, with 71 per cent of dealers who responded describing it as ‘weak’. This category fell from a score of 28 in the last survey.

Cox Automotive Australia’s director of marketing and communications, Matt McAuley, said: “In every survey category bar one, the indexed results were lower for this survey period compared to last year.

“In some cases they were significantly lower which really illustrates just how challenging the market is and how many serious issues dealers are facing on a day-to-day basis.

“Surveyed dealers cited continued strong pressure to lower prices (index score of 82), combined with an increased difficulty in obtaining credit and declining staffing levels.

“This survey also looks at profit levels within different departments at the dealership and we found dealers had a more negative view of their F&I profitability over the last six months compared to the last survey. With an indexed score of 26, 56 per cent of the surveyed dealers rated F&I profitability as ‘poor’.

“In the previous survey the indexed score was 33 and the decline clearly reflects the impact of the ASIC changes to finance rules introduced in November last year,” he said.

Survey respondents had a more positive view of parts (index score of 55) and service (index score of 60), and even though these scores fell slightly compared to the last survey, Mr McAuley said dealers are viewing their fixed operations more optimistically than the new and used car departments when it comes to overall profitability.

The survey also asked dealers to rate the top factors holding back their businesses over the previous six months. They rated consumer confidence, market conditions and margin compression as the top three factors holding the business back.

While the percentage of dealers citing margin compression as a top factor remained stable compared to last survey (72 per cent this survey compared to 73 per cent last survey), there were large increases in the percentage of dealers citing consumer confidence and market conditions as factors holding back their business.

In fact, concerns about consumer confidence and poor market conditions have risen to become the two most worrying elements affecting dealers, with worries about margin compression falling from the major concern in the 2018 survey to third place in the latest survey.

Coming in at fourth spot and with the biggest increase compared to the last survey was credit availability for consumers. In the previous survey only 40 per cent of dealers cited it as a negative factor, however this grew to 70 per cent in the current survey.

This result also highlights the impact of the ASIC changes to finance rules.

Data for the CAADSI research is gathered via an online survey of privately owned and publicly listed franchised automotive dealers.

The first-quarter 2019 results were based on 115 dealer respondents across the country. This is the second published report.

By John Mellor