The optimistic view of the market is revealed in the fourth Cox Automotive Australia dealer sentiment index (CAADSI), conducted in conjunction with the Australian Automotive Dealers Association (AADA). It said that despite more than 18 months of trading conditions impacted by COVID and related lockdowns and restrictions, things are bright in dealer land.

Because of COVID, this latest report – normally released on a bi-annual basis – is the first published from Cox in more than 18 months.

Much of the current upbeat reaction by dealers is by way of contrast to the third survey, published in early 2020. That survey showed market conditions were poor and the outlook was weak. That report reflected a downward trend of continuous month-on-month new vehicle sales declines.

“However, in a stunning turnaround, dealer views of the current market are at their highest; as are their projections for the next six months,” the CAADSI stated.

David Colwell

Cox Automotive Australia’s CEO, David Colwell said: “It is a real credit to Australian dealers and their ability to pivot quickly to changing conditions in order to capitalise on market factors and continue to meet the needs of their customers.

“Surveyed dealers report strong conditions for new and used-car sales and they also believe that these conditions will continue for at least the next six months. 

“Tempering this however, is concern for both new and used-vehicle stock availability with the indexed results citing a very poor view with both categories recording their lowest scores in our series of surveys.”

AADA CEO James Voortman said: “Dealers came into this pandemic on the back of a few lean years, so it is pleasing to see the dramatic turnaround in our industry since the last survey. 

“Even more pleasing is the fact that so many dealers expect the conditions to continue over the medium term.

“There are clearly concerns around inventory, the impacts of COVID-19 and OEM restrictions, but overall, this survey shows that dealers are enjoying favourable conditions and are optimistic for the future,” Mr Voortman said.

The survey also asked dealers to rate the top factors holding back their businesses over the past six months. 

“Not surprisingly they rated inventory availability as the top factor holding their business back, followed by COVID impacts and OEM mandates and restrictions,” the survey said.

Mr Colwell said that the top three concerns for dealers in the last survey were market conditions, consumer confidence and margin compression. 

In this latest survey, he said, those concerns “dropped to ninth, eighth and tenth respectively which makes sense in the current market conditions”.

“One factor which has diminished in ranking, but is still an issue, is the ongoing availability of consumer credit.

“However, with recent ownership changes in the finance space, the entry of some new players and the increasing automation of finance applications through dealer and financier connectivity, we expect this concern will be abated over time.” 

Key Survey Takeaways:

• Dealers responding to the survey rated their sentiment to the current market as extremely high, with an indexed score of 76 (compared to an index of only 18 in Q4 2019). 
• Future projections (six months from now) are also high with an indexed score of 66 (significantly higher than Q4 2019 at 20).
• Customer traffic, profits, and new and used-vehicle sales environment all improved dramatically since the last survey and are at the highest levels seen since the inception of the study.
• With an indexed score of 86, dealer profit was ranked drastically higher than the last study, which recorded an indexed score of only 15.
• New and used-vehicle inventory levels hit all-time lows this wave, falling below the threshold of 50. 
• Limited inventory available for sale is the top concern for dealers at this time with 84 per cent citing it as a factor holding back their business. 
• Business impacts from COVID-19, OEM mandates/restrictions and credit availability for consumers are secondary issues for dealers this wave.

The survey was conducted by Cox Automotive in conjunction with the AADA. It aimed to understand dealer perceptions of the current retail automotive market and sales expectations for the next six months as “strong,” “average” or “weak.” 

It also asked dealers to rate business conditions with a focus on new and used-car sales as well as parts and service. 

It looked 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. 

The CAADSI data was gathered online from privately owned and publicly-listed franchise dealers. 

Data was used to calculate an index wherein a number over 50 indicates more dealers view conditions as strong or positive rather than weak or negative.

The Q3 2021 results were based on 117 dealer respondents across the country. This is the fourth published report.

By Neil Dowling