DETROIT — Price pressure, rising interest rates and a shrinking supply of affordable vehicles have U.S. dealers worrying more about business as they look toward 2019.
Dealers' expectations for the next 90 days, a period that they typically view through rose-colored glasses, have turned negative, according to the Cox Automotive Dealer Sentiment Index survey for the fourth quarter. It's the first time retailers' outlook has been negative since Cox Automotive began reporting survey results in the third quarter of 2017.
"We've reached a point in which dealers are clearly communicating to us that it's going to be very hard for their business to continue to be profitable and growing," Cox Automotive Chief Economist Jonathan Smoke told Automotive News last week here. "You look at the underlying metrics that we track and the data, and it relates to inventory, it relates to credit access for consumers, it relates to interest rates both for consumers and for themselves."
The survey, which gauges dealers' perceptions of the past 90 days and expectations for the next three months, identifies key factors affecting retailers' optimism or pessimism.
The top three factors dealers cited as holding business back — worsening market conditions, rising interest rates and competition from other dealers — carried over from the third quarter. And franchised dealers were more optimistic than independent retailers. Still, the degree of pessimism expressed surprised Smoke, and the gloomy outlook went beyond seasonal factors. Smoke said he didn't expect optimism to fall substantially until next year.