Alex Tovstanovsky, owner of used car dealership Prestige Motor Works, checks inventory with his general manager Ryan Caton in Naperville, Illinois, May 28, 2020.
Nick Carey | Reuters
DETROIT – There is “renewed optimism” among U.S. auto dealers heading into 2025, fueled by newly elected President Donald Trump's return to the White House and by positive trends in interest rates and automaker-backed sales incentives, Cox Automotive reported Wednesday.
But dealers are no more optimistic about electric vehicle sales, according to Cox's 'Q4 2024 Dealer Sentiment Index', which is based on extensive surveys of dealers after the US presidential election in November.
“The outlook for electric vehicle sales in the coming months has fallen further, with a majority of dealers suggesting sales would fall in the next quarter. There are concerns that the new administration's policies will not help an already vulnerable business,” Cox said.
Those potential policy changes under the Trump administration could include less federal funding for promoting electric vehicles, such as an end to the current consumer credit limit of up to $7,500 for the purchase of one of the vehicles, as well as less stringent fuel regulations and emission regulations.
“We are getting clear feedback that the tax credits are working in both the new and used markets,” Cox chief economist Jonathan Smoke said in a news release. “This is something that could change quite quickly next year, so I think the declining outlook is directly related to the risk status of the EV tax credits.”
Car dealer stocks in 2024.
Cox's market outlook index, which measures dealers' expectations for the auto retail market in the coming quarter, rose to 54 in the fourth quarter, up from 42 in the previous quarter. The higher the number, the more confidence dealers have in their business.
Dealer responses are weighted by dealer type and sales volume to best reflect the national dealer population. Data is used to calculate an index where a number above 50 indicates that more dealers view conditions as strong or positive rather than weak or negative.
“This significant increase suggests that more dealers believe the auto market will be stronger over the next three months. A year ago the index stood at just 41, one of the lowest readings in its history,” Cox said in a press release.
Despite the positive outlook, the current market index score of 42 indicates that a majority of dealers still view the current auto market as weak, Cox noted. This score is slightly better than a year ago, but remains well below pre-pandemic norms and the long-term average.
“The recent resolution of political uncertainty following the presidential election has paved the way for a more optimistic view of future auto market conditions,” Smoke said. “Combined with the potential for supportive measures such as tax credits and the possibility of lower interest rates, dealers are more hopeful about the road ahead as we enter 2025.”
After the November election, 35% of dealers surveyed said the U.S. political climate is affecting their business, a significant drop from the 44% of all dealers and 49% of franchise dealers who said the same in the previous quarter.
Shares of publicly traded car dealers have performed well this year as new and used vehicle prices remain high. Shares of AutoNatie, Lithia Motors And Sonic Automotive have risen between 15% and 22% this year Group 1 Automotive is the peak, an increase of about 40% in 2024.
