In spite of COVID-19 impacted trading conditions, Australian car dealers have rated business conditions as the best on record says the fourth Cox Automotive Australia Dealer Sentiment Index (CAADSI).
It has been more than 18 months since the results of the last survey were published says the company.
According to Cox Automotive Australia (CAA) the latest survey results provide clear insights into dealer’s perceptions of business conditions over the last six months.
In the third survey, published in early 2020, market conditions were poor and the outlook for the next six months was thought to have been even weaker. It continued a downward trend reflected by continuous month on month new vehicle sales declines, however in a turnaround, dealer views of the current market are at their highest, as are their projections for the next six months.
The survey, conducted by CAA in conjunction with the Australian Automotive Dealer Association (AADA), wanted 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 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 findings
• Dealers responding to the survey rated their sentiment to the current market as extremely high, with an indexed score of 76 this wave (compared to an index of only 18 in Q4 2019).
• Future projections (6 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 since last wave 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 wave, 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% 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.
“In most of the major survey categories, the indexed results were much higher for this survey period compared to the last survey which was published just prior to COVID impacting our market. 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,” CAA chief executive David Colwell says.
“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.”
“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,” AADA chief executive James Voortman says.
“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.”
The survey also asked dealers to rate the top factors holding back their businesses over the last 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 top three concerns for dealers in the last survey were market conditions, consumer confidence and margin compression,” Colwell says.
“In this wave, they dropped to 9th, 8th and 10th 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,” he says.
Data for the CAADSI research is gathered via an online survey of privately owned and publicly listed franchise automotive dealers. Data is 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.
