U.S. Car Dealers Optimistic About 2025, Pessimistic About Electric Vehicles
According to a report released by Cox Automotive on Wednesday, U.S. auto dealers are entering 2025 with a renewed sense of optimism. This positive sentiment is largely attributed to the return of President-elect Donald Trump to the White House, favorable trends in interest rates, and sales incentives supported by automakers. Cox Automotive's "2024 Q4 Dealer Sentiment Index" indicates a significant increase in dealers' expectations for the automotive retail market in the coming quarter, with the index rising from 42 in the previous quarter to 54.
Based on a series of surveys conducted after the November U.S. presidential election, which reflect dealers’ views, the index shows that a score above 50 indicates more dealers perceive market conditions as strong or positive. This marks a significant improvement from the previous year when the index reached one of its lowest readings at 41. Although the current market index score of 42 indicates that the majority of dealers still view the retail auto market as weak, it shows improvement from last year and suggests a cautious optimism about the market's future.
Cox Chief Economist Jonathan Smoke emphasized the impact of political stability on the sector, noting that the resolution of political uncertainty after the election has opened the door to a brighter outlook for future automotive market conditions. Expectations for potential supportive measures such as tax cuts and the likelihood of declining interest rates are contributing to dealers' hopeful sentiments as the new year approaches.
However, sentiment regarding electric vehicles (EVs) is not universally positive. The Dealer Sentiment Index shows that expectations for EV sales in the coming months have decreased, with the majority of dealers anticipating a decline in sales next quarter. The report suggests that potential policy changes under the Trump administration, such as reduced federal funding for EV promotion and less stringent fuel and emission regulations, have raised concerns among dealers. As Smoke points out, the precarious status of EV tax credits, which offer consumer credits of up to $7,500 for EV purchases, is particularly troubling for the sector.
The survey also revealed a decrease in the percentage of dealers who believe the political climate in the U.S. is affecting their business; the proportion expressing this view dropped from 44% in the previous quarter to 35% after the election. This decline is even more pronounced among authorized dealers, where the figure fell from 49% to 35%.
In summary, despite concerns about the future of electric vehicle sales under the new administration, U.S. auto dealers are entering 2025 with a more positive outlook for the automotive market, supported by political stability and favorable economic trends.