As we approach the year 2025, the sentiment among U.S. car dealers appears to be undergoing a transformation, primarily marked by a sense of “renewed optimism.” This change is attributed not only to the anticipated leadership of President-elect Donald Trump but also to favorable conditions such as decreasing interest rates and ongoing sales incentives from automakers. However, this optimism does not extend to the electric vehicle (EV) market, as highlighted in the recent “Q4 2024 Dealer Sentiment Index” published by Cox Automotive.
Despite the rise in overall dealer confidence, the electric vehicle sector is experiencing its own set of challenges. The index indicates that a significant number of dealers expect a downturn in EV sales in the immediate future. This skepticism largely stems from anticipated policy shifts that may arise from the incoming administration. There is apprehension that new policies could reduce support for electric vehicles, which would jeopardize their current sales momentum and dampen any growth in consumer interest.
The Trump administration’s potential approach to various programs could spell trouble for the electric vehicle market. Among the worries are the possibility of discontinuing the federal tax credit of up to $7,500 for new EV purchases, as well as relaxing fuel and emission regulations. Analysts have noted that dealer feedback strongly shows the current tax incentives are catalysts for sales in both the new and used EV markets.
Jonathan Smoke, Cox’s Chief Economist, highlighted that the perception among dealers is closely linked to the uncertain fate of these tax credits. Should these credits be scaled back or eliminated altogether, the downward trend in dealer expectations regarding EV sales could escalate, further complicating the already fragile landscape.
Interestingly, while there are clouds on the horizon for the electric vehicle segment, the broader landscape for car dealerships appears to be brightening. The Cox Automotive market outlook index surged to 54 in Q4 2024, a notable increase from the previous quarter’s score of 42. This uptick suggests that more dealers are optimistic about their immediate future, signaling a departure from a year ago when the index plummeted to one of its lowest points in history at 41.
However, it’s crucial to note that even as optimism spreads, the current score of 42 still indicates that a majority of dealers consider the retail auto market to be underwhelming at best. Although an improvement over prior figures, this reading remains below pre-pandemic averages, implying that confidence is still fragile and may require time to recover fully.
One notable factor influencing dealer sentiments is the political environment. Following the recent election, insight from Cox Automotive indicated that the proportion of dealers who believe that the political climate is affecting their business has decreased significantly. Reports suggest that only 35% of dealers are now concerned about political influences, down from 44% in the previous quarter. This newfound stability could be contributing to the improving sentiment, as dealers feel they can plan for the future without the shadow of political uncertainty looming over their operations.
Moreover, there is enthusiasm surrounding potential regulatory adjustments which could support the auto market, including prospective tax rebates and lowered interest rates. These factors could potentially bolster sales and help rejuvenate dealership revenues as the market navigates the complexities ahead.
Despite the mixed reviews regarding the EV sector, the overall stock performance of publicly traded car dealerships has been robust in 2024. Corporations such as AutoNation, Lithia Motors, and Sonic Automotive have all experienced significant gains, with stock increases ranging from 15% to 22% throughout the year. Group 1 Automotive stands out with an impressive 40% rise, showcasing the resilience within the dealership industry.
As we stand on the brink of 2025, the automotive market is poised for potential growth amid optimism and resilience. However, the shadow of uncertainty regarding electric vehicle policies poses a significant challenge that cannot be ignored. As dealers navigate these turbulent waters, their adaptability and foresight will likely be tested. Ultimately, whether optimism outweighs caution will define the trajectory of the automotive landscape in the coming months.