In NADA 2024 Show news, speakers have been announced! The lineup includes:

• Jon Taffer — Business expert and executive producer of “Bar Rescue”
• Danica Patrick — Former racecar driver, author, and entrepreneur
• Kurt Warner — Hall of Fame quarterback and philanthropist
• Geoffrey Pohanka — 2023 NADA chairman and chairman of Pohanka Automotive Group
• Gary Gilchrist — 2023 NADA vice chairman and president of Gilchrist Chevrolet Buick GMC

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New Jersey Governor Phil Murphy announced a proposal to adopt the Advanced Clean Cars II plan (ACC2), which would require car manufacturers to increase zero-emission vehicle shipments to 100% of all deliveries by 2035. The strategy was originally implemented by the California Air Resources Board (CARB) last year and has since been adopted by multiple states. On this episode of Inside Automotive, hosts Jim Fitzpatrick and Shyann Malone are joined by Jim Appleton, president of the New Jersey Coalition of Automotive Retailers (NJ CAR), to discuss the proposal and how it could affect the retail automotive sector.

Prior to the governor’s proposal, NJ CAR filed comments on the bill pointing out a number of weaknesses in the ACC2 plan. A key area of contention between lawmakers and the organization was the speed and scale with which manufacturers would be required to fully replace ICE vehicle sales with zero-emission vehicle sales. “I don’t think anybody in the automotive space doubts that EVs will play a major role in the coming years and decades,” remarks Appleton, “but 100% by 2035? I doubt it.”

Electric vehicle demand has certainly grown in a relatively short amount of time. In fact, according to the California New Car Dealers Association, Tesla sales outperformed Toyota, the state’s long-time frontrunner, in the last quarter. Although dealers are also increasingly excited by the growth of the zero-emission vehicle segment, many are concerned that the government’s goals will be unattainable without a rapid increase in demand. Appleton notes that the EV market is expected to grow to 9% by 2027 (Tesla comprises 4% of this total). Under the ACC2, this percentage would need to increase to 35% by the same timeframe, four times the anticipated amount.

Consumers have also voiced concerns. Affordability has become a major obstacle to new car ownership, especially for those in lower income brackets. While prices in the zero-emission vehicle segment have fallen over the last year, the average transaction price for such cars remains above $50,000. “This proposal, I think, will make a new car unaffordable for middle and working-class people in the state of New Jersey over the next three to five years,” predicts Appleton.

The ACC2 would also place disproportionate responsibility on different sectors of the automotive industry. Under the plan, car manufacturers would only be required to ship the targeted ratio of zero-emission vehicles into states which have adopted the CARB’s guidelines. Since ZEVs are expensive to make and have yet to offer meaningful returns on investments for most brands, this could encourage automakers to reduce their overall production as they slowly ramp up ZEV sales to improve cost efficiency. This could artificially constrain inventories and drive prices up even further. Customers and dealers would both be placed at a disadvantage if OEMs were to adopt such a strategy.

To increase sales of zero-emission vehicles, Appleton urges state and federal governments to “put their money where their mandates are.” In order to achieve the goals listed in the ACC2 without disadvantaging the middle class or dealerships, lawmakers should start by addressing the underlying issues currently blocking widescale ZEV adoption. Initiatives that lower car prices and improve infrastructure would naturally seed demand among hesitant car buyers. Appleton also recommends removing the proposed timeline. “I don’t think we can set a date,” he notes. “We have to set the pre-conditions for the marketplace to fall into line with the government mandates.” Once this is accomplished, the industry will be able to move much faster toward the goals envisioned by the ACC2 and the CARB.

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The California New Car Dealers Association (CNCDA) recently published its 2023 California Auto Outlook report, shedding light on automotive industry trends and a surprising shift in electric vehicle demand throughout the second quarter. On this episode of Inside Automotive, host Jim Fitzpatrick is joined by Brian Maas, president of the CNCDA and the 2023 chairman of the Automotive Trade Association Executives (ATAE), to discuss some of the outlook’s findings and what they can tell dealers about the automotive industry.

California is one of the most dynamic car markets in the country. Many of the trends affecting the automotive industry originated in the state, making it essential to track the work of CNCDA to stay ahead of the curve. “The auto market is one of constant change,” remarks Maas. “Our sales increased year-to-date…almost 12%. So as inventory numbers continue to go up, that provides more choice for consumers and more opportunities for dealers to sell more vehicles, and we’re seeing that reflected in the numbers.” The CNCDA now expects its dealers to sell 1.8 million new vehicles in 2023. While this number is still behind pre-COVID sales numbers, it is much closer to the region’s normal pace of 2 million, especially compared to 2022 and 2021.

One of the biggest upsets for the automotive industry in the second quarter was the success of Tesla and a surge in electric vehicle popularity. “It’s pretty hard to ignore, the top two selling vehicles in California were Telsas, and by large margins,” comments Maas, although he notes other brands have also seen success in the EV segment. Demand for battery-powered cars has increased so much in the state that the CNCDA is now reporting an EV market share of 21%, the highest in the nation.

While Tesla has seen a sizeable increase in sales, it is facing a problem of its own creation. “Candidly, and I think even Elon Musk would admit this, the Model 3 and Model Y, their top two selling vehicles, are pretty stale,” remarks Maas. “They’re gonna need to freshen up their product mix before the vehicles our dealers sell are gonna pass them by.” Dozens of new models from competing brands will be launching in the coming years: the more outdated Tesla’s lineup becomes, the more customers will turn to CNCDA dealers. Over time, the brand may need to adopt similar strategies to other automotive industry brands to continue driving value for shareholders. In some ways, this transition can already be seen in how the company is looking to boost sales through price discounts after enjoying years of high profit margins.

CNCDA has traditionally seen a high number of leases in the region, which Maas attributes to its large luxury segment as well as the popularity of German and Asian imports. “Couple that with some of the interpretations of the Inflation Reduction Act and what manufacturers can qualify for which credits, it makes leasing very attractive for consumers that want to take advantage of a potential rebate that might be offered to them,” he adds. “I think we’re gonna see leasing penetration continue to grow in California.”

Overall, the second quarter was a successful period for the state’s dealers. The trends the CNCDA has tracked, especially in regard to electric vehicles, may soon begin to spread to other parts of the country. However, as dealers know, nothing is ever certain in the car business. Staying on top of new and updates from organizations and associations is the best way to stay prepared against market shifts.

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General Motors Director of Dealer Diversity Relations, Tia Hardman, commented on the increase in minority-owned stores, stating that GM is “dedicated to growing a performance-driven, customer-focused and profitable dealer network by attracting highly qualified minority dealer candidates to ensure that [GM’s] retailers reflect the communities and the customers that [GM] serve[s].” GM has been actively looking to increase the number of minority-owned stores since 1972 when it created its Minority Dealer Development Program. 

The Head of Network Development for Stellantis, Phillip Langley, expressed pride regarding the automaker’s ongoing success in increasing minority-owned stores and told Automotive News that Stellantis is “always looking to grow [its] bench of candidates, so [Stellantis’s] work will persist on this important initiative, as [Stellantis’s] mission is to continue to improve network diversity and strive for Stellantis to be the OEM of choice.”

The executive director of the Chrysler Minority Dealers Association, Mitch Mitchell, also noted that Stellantis dedicates resources to finding and training potential minority dealers through the National Automobile Dealers Association’s Dealer Academy. “For us to lead the way, that’s an even greater feather in the cap to show that we’re definitely trying to do the right thing as far as ethnic diversity is concerned to put dealers in place to reflect the communities where our dealers sell and service vehicles and where customers buy those vehicles,” he said. 

Mitchell also pointed out the rising cost of franchise opportunities and that finding capital can be difficult for potential minority dealers. Many minority dealers also decide to retire and/or sell their stores to non-minority dealers, which reduces the total number of minority-owned dealerships. To overcome these potential drawbacks, Mitchell said that Stellantis is “hold[ing] on to the existing franchises that [it has] while trying to gain more.”

The Vice Chair of NAMAD, Damon Lester, told Automotive News that strong leadership within automakers has contributed greatly to the increase in minority-owned stores. This reportedly includes active efforts to increase diversity such as the addition of Lottie Holland as the Diversity and Inclusion Chief for Stellantis. “As leadership continues to stay stable, meaning the presidents and CEOs of these entities have not switched hands, or retirements or things like that, we do tend to fare well when that happens,” he stated. 

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In June, Florida Governor Ron Desantis signed a bill banning direct-to-consumer sales (excluding Tesla) to protect franchise dealers in the state, which went into effect on July 1. On this edition of Inside Automotive, we’re pleased to welcome back Ted Smith, President of the Florida Automobile Dealers Association (FADA), to tell us more about the bill, the association’s response, General Motors’ challenges with their dealers, and the lawsuit filed against Ford.

Florida’s Bill

One prominent issue faced by states across the country involves dealing with companies like Tesla, Lucid, and Rivian that engage in direct-to-consumer sales. According to Smith, many jurisdictions seem unsure of how to handle this situation. They often assert that the franchise system is the only way to sell cars and establish relationships between traditional automakers and dealers. This approach can hinder the entry of EV manufacturers like Tesla, Lucid, and Rivian into these markets. However, FADA recognized that restricting car sales solely to franchise dealers wouldn’t work for their state after Governor Ron DeSantis enacted the new bill.

Smith points out that Original Equipment Manufacturers (OEMs) attempting to sell directly to consumers is illegal in Florida. Nonetheless, he clarifies that certain reservation programs have been permitted under the new law. These programs have varied in effectiveness, with some being beneficial for consumers while others prove detrimental, leading to delays and frustration for car buyers and dealers alike. As a result, FADA supports the use of reservation systems but emphasizes the importance of allocating vehicles to dealers and ensuring the sales process is smoothly transitioned to dealers, ultimately ensuring the best care for the customers.

The Lawsuit

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The U.S. auto market saw an uptick in sales and inventory over the course of 2023, as dealers and car manufacturers made progress clearing post-pandemic hurdles. On this episode of Inside Automotive, host Jim Fitzpatrick is joined by Patrick Manzi, the chief economist for the National Automobile Dealers Association, to offer more insights into the car industry’s performance and where this may lead in the coming months.

The auto market has seen steady growth throughout the year, surprising analysts who expected economic headwinds to suppress demand well into the future. Instead, a steady stream of car buyers has pushed year-to-date sales up 13%, rising 20% year-over-year in June alone. Manzi comments that this has been an excellent start to 2023, acknowledging it was “a little better than we all were expecting.” Furthermore, the U.S. has seen significant growth in the alternative fuel space, which now comprises roughly 15% of all new vehicle sales. Electric vehicles are also closing in on 7% of the car market, with manufacturers and dealers selling a combined total of 550,000 units in the first six months of the year. Manzi notes that franchised dealers accounted for 36% of all EV sales, making them more competitive with direct sellers such as Tesla.

The auto market has also benefited from the recovering supply chain, which has allowed car manufacturers to produce more vehicles. On average, dealer inventories held enough cars for 36 days, with 1.9 million units on the ground and in transit at the end of June. This is a significant improvement over the previous year when low factory output hindered sales well into the winter. Still, the industry’s problems are not over yet. “We’re only about half the level we were before the pandemic,” Manzi remarks. While manufacturers are pushing out more models than at any point since COVID, availability varies greatly between brands and segments. For example, Manzi reports that pickups averaged a days’ supply of 59 days while only accounting for 18% of overall sales. On the other hand, crossovers saw a 30-day supply on dealership lots, despite comprising 46% of the total market.

Rates are another obstacle the auto market will need to address before it can return to its pre-pandemic state. Interest rates have grown steadily, while loans and credit have become more difficult for car buyers to attain. Manzi notes that average term lengths are closing in on 72 months, while rates for new and used cars typically cost 7% and 10.5%, respectively. “Still, I’ve been pleasantly surprised by just how well sales have been going despite the pressure of higher rates,” he adds. Although inflation is still on the rise, the Federal Reserve has hinted that it may begin to de-escalate its battle against rising costs, pausing or possibly reversing its series of rate hikes. If the implication is sincere, Manzi believes rates will stabilize in the latter half of the year before depressurizing in 2024.

2023 is also proving to be a strong year for fleet deliveries. Customers in this segment suffered the most from low inventories during the COVID pandemic. Now that manufacturers have returned to making new vehicles, the release of pent-up demand in the fleet market has helped push overall sales ahead of 2022. As Manzi notes, “They really need the inventory.” Sales in the segment rose 45% in the first six months of the year and comprised 18% of the auto market in June.

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Virginia dealers and executives in the car industry recently gathered to discuss electric vehicles and other hot topics at the Virginia Automobile Dealers Association’s (VADA) annual convention. On this episode of Inside Automotive, host Jim Fitzpatrick is joined by Don Hall, legendary defender of the franchise system and the president and CEO of VADA, to discuss the important takeaways from the event.

Participation in dealership conventions and conferences is crucial for retail automotive leaders who want their industry to remain profitable and sustainable. “The truth is dealer associations belong to the dealers of their respective states,” explains Hall. “If the conventions or the leadership isn’t doing the things that you want them to do, then change both because it is indeed your association.” Another important reason to attend events hosted by organizations like VADA is to meet with fellow dealers and experts with insights into both the national and international car business. Hearing from these individuals can vastly improve one’s understanding of new topics. One such topic is that of electric vehicles.

Support for the technology varies wildly, even in the retail automotive community. Hall notes that while the general dealer population seems to be split evenly on the issue, those who attended VADA were mostly against electric vehicle adoption. However, he warns that resistance to the EV transition creates more problems than it solves. “One of the things that I have said over and over again, that was certainly presented throughout the convention as well, is this: the fact that EVs exist is a national decision; it isn’t a state-by-state decision,” he remarks. “Your OEMs are going to have to abide by both what’s going on in the EU and what the federal government decides.” Failing to accept this reality not only prevents storeowners from getting a headstart in what is potentially the car business’s future but also gives automakers ammunition to lobby against the franchise system. Hall notes that legacy manufacturers want to have the same reach and profitability as Tesla and will see dealers as a threat to this goal if the opposition gets out of hand. Instead, he urges his colleagues to embrace the new technology and accept that times are changing, at least for now. “Let’s get excited about the opportunity to touch and sell new folks these new kinds of technology,” he remarks.

Another vital conversation happening at events like VADA is the industry’s staffing challenges. The dealership population is shrinking, and with more long-term employees, managers and storeowners retiring every day, the rate of new entries into the business remains far too slow. “We’re losing a talent pool,” warns Hall. “For the first time in our history, the average age of people in our business is very old, and it’s getting older by the years…” To attract younger workers, employers must begin to treat their teams differently, he argues, especially in the areas of health benefits, support for single parents, flexibility for those with medical issues and the overall work environment within dealerships. “Failure to do so means we will have a lot of dinosaurs working who will not embrace technology, who will not embrace change.”

Hall does acknowledge that the industry is improving in this regard and that organizations like VADA are helping educate dealers on ways to improve. However, many storeowners are still refusing to adapt to the new workforce. This, he explains, is often because dealers base their perspectives on the experiences they had when they themselves first entered the business. “We have to shed that and recognize that it’s not that this generation is less willing to work, it’s that this generation may…understand something better than you and I understand it, and that is that quality of life matters.” While veteran automotive retailers will remember manning their positions from open to close without ever taking a day off, this does not demand that today’s working conditions reflect the past. “We’ve gotta change in order to accommodate them and their desires, to have an excited, motivated workforce who make sure that consumers have the best buying experience that they could ever have,” concludes Hall.

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The highly anticipated 2024 NADA show is quickly approaching, starting February 1st in Las Vegas. On this episode of Inside Automotive, host Jim Fitzpatrick sits down with the managing partner of Rob Sight Ford and NADA Show Committee Chairman Bobby Sight to discuss the upcoming event and what dealers can expect to see.

Sight notes that the show, as always, will focus on educating dealers about the latest automotive trends. “NADA, as well as other vendors, provide best-in-class education and workshops that are beneficial to anyone in the dealership,” he remarks. Electric vehicles will be a major topic of discussion during the NADA show, as will the industry’s efforts to make the business more empowering for women professionals. “Then you have the expo floor,” Sight continues. “It’s the one-stop shop for anything, technologically, products, service that you can do right there in the Las Vegas Convention Center.”

That being said, dealers should be aware that several schedules have changed since they were originally announced, Sight warns. “The main stage is now going to be starting at 9 a.m. every day, which is great because it allows people to get their day started and then do what they please to do after the fact,” he remarks. This NADA show has also been reorganized to ensure that there are no scheduling conflicts with manufacturer and franchisee meetings, allowing attendees to travel between panels freely. “The TIME Dealer of the Year has been moved to Saturday instead of Friday,” continues Sight, “and also, we will be doing a two-hour happy hour with extended expo hours at the end of each day on the expo floor.”

Although Sight cannot reveal the NADA show speakers ahead of schedule, he notes that the upcoming event’s guest lineup is one of the best the organization has put together. The association is also looking to boost engagement from participants by hosting a video contest. “We want to get everybody in the dealerships… involved in the NADA show,” remarks Sight, “and this was a way to kind of let everybody use their creativity to show the education and the benefits of the show can help out any dealership employee.” Anyone can submit a video online nominating a dealer for the competition, although the association will stop taking submissions before October 31st. Winners will receive free all-access passes to the event.

Registration for the 2024 NADA show will open on July 31st. Dealers who visit the organization’s website to sign up should also be sure to book their hotel rooms and flights ahead of time if possible.

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Over the past few years, we’ve seen a significant decline in attendance at auto shows, which raises the question of whether auto shows are still relevant today. On today’s Inside Automotive, we’re pleased to welcome back Tim Jackson, the Former President and CEO of the Colorado Automobile Dealers Association, to give us his perspective on auto shows.

The lack of participation

Jackson believes that auto shows are more pertinent and vital today than ever before. Now that inventory is returning to dealers’ lots and the world is no longer under COVID restrictions, “Consumers are coming back to auto shows in record numbers,” asserts Jackson. According to Jackson, “Auto shows date back to New York’s first show in 1990, Chicago in 1901, Denver in 1902, and Las Angeles and Detroit in 1907.” However, it’s important to highlight that in the decade between 2010 and 2020, there was the largest audience attendance in history. 

However, since the world shut down, manufacturers have been on the fence about returning to the auto show scene. Jackson claims, “I think those manufacturers making decisions regarding its marketing departments may not be looking at the entire value of the shows. They may not be out in the trenches themselves witnessing the impact auto shows have.” 

According to the newly released data from Foresight Research out of Detroit: 

• In the last year, one in four consumers who attended an auto show would be considered in the market to buy for the previous buying cycle. 
• Looking forward, three out of four attendees are in the market to buy a car for the following year. 

If manufacturers neglect to participate in auto shows, which are seen as a one-stop-shop for consumers, they may be removing themselves from the shoppers’ list altogether. 

Challenges

According to Jackson, “I believe the U.S. is well-equipped to maneuver OEMs not participating in auto shows; however, international countries could sometimes struggle from not having enough OEM presence.” For example, if you went to the Tokyo Auto Show in Japan or the Paris auto show in France, all the vehicles are part of hometown manufacturers. “The point is, “We need to get back to having at least 33 brands at every auto show for the local market today,” Jackson notes. He continues, “However, I think the more brands you can offer, the more likely you’ll attract a larger attendance.” 

Ultimately, most American consumers have never driven or even sat in an electric vehicle. This is why auto shows are imperative for modern consumers to obtain experience and get all of their questions answered by dealers or OEMs in person. Auto shows are the key to bringing experience, exposure, and connection opportunities.

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The relationship between dealers and OEMs in our industry is crucial for mutual success. However, as we all know, conflicts frequently arise as OEM policies can negatively impact dealers’ businesses. In such cases, it becomes essential for dealers to advocate for themselves and find avenues to communicate their concerns effectively. There are various opportunities and strategies for dealers to make their voices heard.

Opportunities for Communication 

Dealers have several opportunities to communicate with OEMs and convey their concerns effectively. These include engaging with their OEM reps, participating in the various franchise councils, and attending the many meetings that occur throughout the year. Those are important avenues for communicating and collaborating directly.

That said, as a member of the ADA in your respective state, you are able to convey your message at a different level. Through the association, OEMs are made aware of the franchise laws in the specific state they operate in. Associations are also there to remind OEMs where and when they may be operating out of the various governing statutes.

OEM Priorities and Dealer Alignment/Conflict

Understanding OEM priorities is crucial for dealers to identify areas of alignment and potential conflicts. Right now, the hot-button issue is EVs. OEMs have committed to producing large numbers of EVs over the next decade or two, driven by demands from the current administration. Whether that all comes to pass or not, remains to be seen. Where this priority can and does create conflict is through the requirements being put on dealers to sell these vehicles. This includes everything from the facility requirements OEMs put on dealers to the distribution methods themselves. Much of this is being played out as we speak, and we have seen firsthand how overwhelming and invasive these plans can be. 

Get Attention and Seek Recourse

When OEM policies negatively affect business, dealers and associations have several options to get the attention of OEMs and seek recourse. Associations play a vital role in advocating for dealers. By regularly corresponding with dealers and OEMs, associations convey concerns, propose changes, and negotiate on behalf of members. The benefit is that these concerns are voiced by the association itself, avoiding the individual dealers’ fear of retribution by the OEM. 

The other place where dealers/associations can get the attention of the OEM is in the courts. Legal action can be an effective way to challenge unfair OEM policies, and the association’s main responsibility is to protect dealers’ rights and lobby for legislation affecting their interests. 

Support Open Dialogue Through Organizations

To open effective dialogue with automakers and strengthen their own collective voice, dealers can join and support various organizations. These include metro associations, state associations, and the National Automobile Dealers Association.

Membership in metro associations provides dealers with opportunities to collaborate with OEMs on auto shows and other local events. This involvement helps establish relationships and facilitates dialogue.

Your state association serves as the intermediary between dealers and OEMs, advocating for dealer interests and building relationships with legislators. This provides an important platform for communication on a state level.

Finally, membership in NADA offers dealers a powerful platform for national advocacy, ensuring their concerns are heard by OEMs, policymakers, and other stakeholders.

It is essential for dealers to advocate for their interests when faced with OEM challenges. By utilizing various communication channels, actively engaging with associations, and seeking recourse through legal/legislative means, dealers can effectively address issues with OEM policies. Open and constructive communication between dealers and OEMs is crucial for long-term success. By actively advocating for themselves, dealers can ensure that their voices are heard, and their concerns addressed, leading to a stronger and more resilient industry as a whole.

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