CATA News

Norway in 2021 reached a milestone: Only about 8% of new cars sold in the country ran purely on conventional gasoline or diesel fuel. Two-thirds of new cars sold were electric, and most of the rest were electric-and-gasoline hybrids.

For years, Norway has been the world’s leader in shifting away from traditional cars, thanks to government benefits that made electric vehicles far more affordable and offered extras like letting electric car owners skip some fees for parking and toll roads.

Still, electric car enthusiasts are stunned by the speed at which the internal combustion engine has become an endangered species in Norway.

"It has surprised most people how quickly things have changed," said Christina Bu, the secretary general of the Norwegian EV Association. In 2015, electric cars were about 20% of new-car sales, and now they are "the new normal," Bu said. (Her organization is like AAA for electric vehicle drivers.)

Americans might view Norwegians as environmental die-hards who were eager to ditch gas cars. But Bu and other transportation experts said that Norwegians started with much of the same electric-vehicle skepticism as Americans.

That changed because of government policies that picked off the easier wins first and a growing number of appealing electric cars. Over time, that combination helped more Norwegians believe electric cars were for them. Bu said that if Norway could do it, the U.S. and other countries could, too.

Transportation is the largest source of greenhouse gas emissions in the U.S., and climate scientists have said that moving away from combustion engine vehicles is essential to avoiding the worst effects of a warming planet. U.S. electric car sales are increasing fast, but at about 3% of new passenger vehicles, percentages are far lower than those in most other rich countries.

So what did Norway do right? Bu said that the country’s policies focused first on what was the least difficult: nudging people who were considering a new car to go electric.

Norwegians who bought new electric cars didn’t have to pay the country’s very high taxes on new-vehicle sales. That made electric cars a no-brainer for many people, and it didn’t hurt people who already owned conventional cars or those who bought used ones.

Bu also said that Norway didn’t become paralyzed by the reasonable objections to electric vehicles — What about places to charge them? Are electric car subsidies a government benefit for the rich? In other words, Norway didn’t let the perfect be the enemy of the good.

 

Not every country has a tax system that’s as well suited to encourage electric vehicle purchases. (Gas taxes are also very high in Norway.) But Bu suggested that for this to work in America, the U.S. could impose higher taxes on the most polluting new-car models, and use that money to subsidize electric vehicle purchases.

 

The U.S. federal government and many states already offer tax breaks on some electric cars. We don’t tend to tax gas guzzlers, partly because Americans don’t love using higher taxes to discourage behaviors.

 

Subsidies for electric cars aren’t enough on their own to boost electric vehicle ownership, although they did help create momentum in Norway. As more new electric cars hit the road, it made it more palatable to build more places to charge them. Car companies started to devote more of their marketing to electric vehicles and released more models at a range of prices and features. That’s just starting to happen in the U.S.

 

These are no easy policy choices in Norway or anywhere else, said Norwgian planning and engineering consultant Anders Hartmann. Letting electric vehicle drivers skip parking or toll fees was manageable when few were on the roads, he said, but some local governments more recently said they were losing out on money they used to fund public transportation. 

 

Norway’s legislature has discussed scaling back the tax breaks for electric vehicles, but it’s difficult because they are popular.

 

Bu said that the biggest change in Norway is that most people came to believe that electric cars were for them. "What really surprised me was the shift of mentality," she said.

 

Her father once was one of those people who said they would never buy an electric car. Now, she said, her parents own one, too.

 

Hollywood can over-dramatize artificial intelligence. As proof, see 2015’s "Chappie," a movie about a police force of mechanized droids patrolling the streets.

In real life, AI is less ominous. Used in the business world, it can reduce stress and increase profits, according to CDK Global’s newly released "Artificial Intelligence in Automotive Retail Report."

Dealerships aren’t using AI to conquer the world. They are using it to increase sales, boost auto-technician efficiency and get to know customers better — particularly their individual buying behaviors.

The CDK survey highlights the use of AI tools in automotive retail today and gauges how dealers might benefit from such systems in the future.

"We don’t want to look at AI in the Hollywood way, but rather as to how it can (non-theatrically) help dealers become more productive," said Peter Kahn, the senior director of marketing research at CDK, an automotive information technology company.

Among the report’s findings:

• Most dealers are familiar with artificial intelligence (75%), with 40% feeling extremely or very familiar with it.

• Sixty-eight percent of polled dealerships are already using AI or at least plan to do so within the next three to five years.

• A majority of dealers (56%) who don’t use AI today, but plan to in the future, anticipate ultimately positive outcomes.

 

And although every survey pool has its outliers, only 2% of this one’s respondents say they don’t see their dealership using AI-based applications in the future.

 

"The results of our research are encouraging and tell us dealers are excited about the possibilities of AI and how it will help them meet their financial and customer satisfaction goals," said Mahesh Shah, CDK’s chief product and technology officer.

Kahn said he was rather surprised at dealers’ "high level of enthusiasm" about the topic.  

Conventional wisdom might suggest big dealership chains are the dominant users of AI systems. But the survey results indicate it’s not just the big dogs. Auto retailers interested in AI include "everyday dealers, middle-volume dealers located across America," Kahn said.

The CDK survey was based on a national sample of 243 dealership department heads and executives.

 

CDK sought to determine from the onset whether survey participants actually knew what AI is, Kahn said. "We asked if they were familiar with it, and then asked them to give examples of it." 

Essentially, AI is a branch of computer science focused on systems capable of learning and performing tasks that typically require human intelligence.

That doesn’t mean bots will replace humans in showrooms someday soon. But it does mean systems can lend a hand to people throughout a dealership.

Kahn said AI can help tackle current dealer challenges, including:

• Addressing employee and skills shortages by replacing resource-intensive tasks and augmenting employee skills.

• Attracting customers by looking at existing sales and service profiles and determining propensity to buy based on prior buying cycles and behavior.

• Retaining existing service department customers through proactive and personalized service and by better predicting potential vehicle service issues.

"AI," Kahn said, "can help both variable operations (sales) and fixed operations. It can help BDCs (business development centers focused on drumming up sales). It can help auto technician productivity. It can help a dealership to better know customers and their buying patterns."

And in doing so, AI systems "can learn and improve" as they accrue more and more data, he said.

In the service department such systems can take on something of a mentorship role by aiding rookie auto technicians in their work. "It can help the apprentice journey with diagnosis equipment that recommends things to do," Kahn said. Consequently, "young technicians understand their job better and do a better job."

 

The Federal Trade Commission has amended its Safeguards Rule, which requires non-banking financial institutions including dealerships to develop, implement, and maintain a comprehensive security system to keep their customers’ information safe.

 

Under the current Safeguards Rule, one or more individuals could be designated to oversee and implement the information security program. Under the Rule change, a single "Qualified Individual" must be responsible for overseeing and implementing the information security program.

 

The new requirements are effective Dec. 9, 2022, but they are not policies and procedures that can be implemented overnight. See this link for details of the FTC amendments.

 

The revised Safeguards Rule has been years in the making. When the FTC sought comment in 2019 on its proposed Rule changes, Andrew Smith, then-director of the FTC’s Bureau of Consumer Protection, said the changes would better protect consumers and provide more certainty for business.

 

Smith said, "While our original groundbreaking Safeguards Rule from 2003 has served consumers well, the proposed changes are informed by the FTC’s almost 20 years of enforcement experience. It also shows that, where we have rulemaking authority, we will exercise it as necessary to keep up with marketplace trends and respond to technological developments."

 

The new Rule also updates the employee security training requirement. Security awareness training must be updated to reflect risks identified in a risk assessment. Also, ongoing training for security personnel is required. That includes verification that security personnel are taking steps to stay current on emerging threats and countermeasures.

 

Materials shipped this month to all members of the Chicago Automobile Trade Association in good standing, to help them get through the coming year and to help publicize the Chicago Auto Show, Feb. 12-21 at McCormick Place. It’s your show; please promote it.

Packages sent via United Parcel Service to dealer principals and company presidents include the following:

• 1 CATA-member 2022 window decal; and

• 1 form to order free supplies of odometer statements, used-car buyer’s guides, used-car limited warranty statements, and emission control equipment statements.

 

Also, to promote the 2022 Chicago Auto Show, the shipment includes:

 • 4 Chicago Auto Show easel cards;

• 2 Chicago Auto Show posters;

• 1 First Look for Charity poster;

• 2 Honored Guest tickets good for repeated admission throughout the auto show;

• 50 Employee Appreciation Day admission tickets, valid once Feb. 14-18 and Feb. 21; and

• 200 vouchers to offer customers and others for discounted admission to the show.

 

Don’t forget to purchase additional admission tickets to the auto show as well as any First Look for Charity tickets.

 

Any member who does not receive the UPS shipment by Jan. 25 should notify the CATA. The shipments are traceable, to help resolve problems.

 

After a one-year absence, First Look for Charity returns to the 2022 Chicago Auto Show on Feb. 11. The black-tie gala will benefit 17 area nonprofits.

 

The coming First Look for Charity event gives benefactors the chance to see hundreds of new vehicles on display amid an elegance not present when the masses converge on McCormick Place during the auto show’s 10-day consumer run, Feb. 12-21. 

 

Benefactors also have the chance to win one of two 2022 vehicles: a Buick Enclave Avenir or a GMC Yukon Denali. Attendees at the gala will be treated to heavy hors d’oeuvres; champagne, spirits, wine, beer and soft drinks; and special entertainment presented by the automakers in their displays.

First Look for Charity is one of the special events on the winter schedules of Chicago socialites and car buffs, said Bill Haggerty, chairman of the 2022 Chicago Auto Show.

"The Chicago Auto Show is uniformly regarded as the finest auto show in the country, but the charitable cause demonstrates that this auto show is about more than just vehicles and accessories," he said. "It’s also about giving something to the charities of our community." 

The 16 organizations participating in this year’s First Look for Charity predominantly are children-oriented. Some operate on a global level; others, locally. The charities use the proceeds they raise from the event in their efforts in the Chicago area, Haggerty said. 

Charities involved in the 30th annual First Look for Charity are the 100 Club of Chicago, Advocate Health Care, ALS Association Greater Chicago Chapter, Boys & Girls Clubs of Chicago, Catholic Charities of the Archdiocese of Chicago, and Catholic Charities of the Diocese of Joliet.

Also, Franciscan Community Benefit Services, Glenwood Academy, Habitat for Humanity, Susan G. Komen Chicago, the Ann & Robert H. Lurie Children’s Hospital of Chicago, and Lydia Home & Safe Families for Children.

And, Misericordia, New Star, Special Olympics Illinois, Turning Pointe Autism Foundation, and the Jesse White Tumbling Team.

Tickets to the event are $275 each and can be ordered at chicagoautoshow.com or by calling (630) 495-2282. 

Benefactors should indicate which charity or charities they want their donation to benefit. Of each ticket, $223 is tax-deductible as a charitable contribution.

 

The Supreme Court held a special session on Jan. 7 to consider two challenges to the Biden administration’s workplace vaccine requirements.

 

The first one challenges the rule that private employers require workers to be vaccinated or wear masks on the job and submit to weekly testing, and the second challenges the administration’s rule that employees at health care facilities receiving Medicare and Medicaid funding be vaccinated.

 

The vaccine rules affect up to 100 million workers. 

 

The clock is ticking for the justices. In an unusual move, the court said it would move with exceptional speed on the two measures.

 

The Biden administration has said it would start requiring compliance with the healthcare worker policy on Jan. 10, though companies would have until Feb. 9 to set up testing programs. In the states where this regulation has not been blocked, workers are required to be fully vaccinated by Feb. 28.

 

Employers are currently unsure how to proceed, with some concerned about losing staff in a tight labor market if they impose vaccine or testing requirements, said Todd Logsdon, a lawyer based in Louisville, Kentucky who represents companies on workplace safety.

 

"The quicker they can issue the decision the better," Logsdon said of the Supreme Court.

 

The Occupational Safety and Health Administration issued the vaccine-or-test mandate on Nov. 5. It requires all employers with more than 100 employees to mandate that those employees be either fully vaccinated against COVID-19 or be tested weekly and wear masks at work.

 

The White House has pointed to OSHA’s authority to issue emergency workplace rules for up to six months to protect employees from "substances or agents determined to be toxic or physically harmful or from new hazards." That authority gives OSHA the responsibility to act, the administration has said.

 

The private employer mandate applies to companies with 100 or more workers. Critics say the government is over-reaching. Critics say the rules would force millions of workers to "choose between losing their jobs or complying with an unlawful federal mandate."

 

The more sweeping of the two measures, directed at businesses with 100 or more employees, would affect more than 84 million workers and is central to the administration’s efforts to address the pandemic. The administration estimated that the measure would cause 22 million people to get vaccinated and prevent 250,000 hospitalizations.

 

The Supreme Court has repeatedly upheld state vaccine mandates in a variety of settings against constitutional challenges. But the new cases are different, because they primarily present the question of whether Congress has authorized the executive branch to institute the requirements.

 

The vaccination-or-testing requirement for large employers was issued in November by the Labor Department’s Occupational Safety and Health Administration.

 

Employers are allowed to give their workers the option to be tested weekly instead of getting the vaccine, though they are not required to pay for the testing. The rule makes an exception for employees who do not come into close contact with other people at their jobs, like those who work at home or exclusively outdoors.

 

Under a 1970 law, OSHA has the authority to issue emergency rules for workplace safety, provided it can show that workers are exposed to a grave danger and that the rule is necessary.

 

The Occupational Safety and Health Administration issued the vaccine-or-test mandate on Nov. 5. It requires all employers with more than 100 employees to mandate that those employees be either fully vaccinated against COVID-19 or be tested weekly and wear masks at work.

 

In dealers’ efforts to promote community loyalty and goodwill, they no doubt have considered many possibilities. They also are well aware that today’s high school students are tomorrow’s automobile consumers. That’s why the Chicago Automobile Trade Association created the Adopt-A-School Program. 

What better way is there for a dealer to attract future customers than to sponsor an auto show visit for students from the local high school? And this year the Adopt-A-School program has been expanded. Dealers can show kindness to schools in their communities and to schools in communities that are underserved. 

Adopted groups can obtain tickets at a discounted rate of $10 each. The tickets can be used Monday-Friday, Feb. 14-18 and Feb. 21, and complimentary tickets will be provided for chaperones (1:10 ratio). And thanks to the cooperation of Savor...Chicago at McCormick Place, student groups will receive discount coupons for food. Pre-paid vouchers are available for $9 lunches but must be ordered by Jan. 28. 

For further information and to adopt a school, call Roxanne Sammarco, the Chicago Auto Show’s group ticket sales coordinator, at (630) 424-6060.

Tickets and coupons that admit the holder to the 2022 Chicago Auto Show free or at a reduced price can be ordered by CATA members using the order form posted at www.CATA.info.

The passes promote goodwill with customers and even can help persuade a prospect to close a deal. Two kinds of passes are available, General Admission tickets and Weekday Discount coupons. The former, which costs CATA members $7 each for a minimum 100 tickets, admits the holder to the auto show free, without a box-office wait. The coupon costs members $100 for 100 and admits the holder for $10 during the week.

 

Regular admission is $15.

 

The annual year-end sell-a-thons by car dealerships have turned into wait-a-thons for many shoppers unable to find the vehicle they want on dealer lots. But that could be about to change as some dealerships modernize the way they sell their cars.

Why it matters: Supply chain disruptions could have a silver lining for automakers if Americans can be trained to order the exact car they want — color, features, bells and whistles — and then wait a month or so for it to be delivered.

It is how Europeans have been buying cars since World War II, when money and materials were in short supply and factories were struggling to recover. But Americans are accustomed to going to the dealership and driving off the lot in a shiny new car.

Some companies say they plan to capitalize on the inventory crunch to permanently shift to an order-based system, starting with their new lineups of electric vehicles. Ford, for example, is trying a build-to-order scheme with its new Mustang Mach-e, which is in high demand. And Ford is offering a $1,000 discount to customers who pre-order any vehicle.

"You cannot imagine ... how much money we waste by not — by guessing what our launch mix is for a new product," Ford CEO Jim Farley told investors and analysts in October. A build-to-order model, he said, is a far more efficient way to run the business.

Between the lines: Filling lots with large numbers of cars, trucks and SUVs is a huge drain on profits for both dealers and automakers. Dealers have to cover the cost of financing all those cars sitting around, waiting for a buyer.

And automakers usually wind up producing more cars than they need to, in hopes of satisfying every shopper’s desire. That means more parts, more labor and more cost. Inevitably, though, they end up spending more on advertising and incentives to clear out the slow sellers.

Automakers have tried before to switch to a build-to-order model, with little success. "Americans have no patience. We’re too impulsive," said Michelle Krebs, executive analyst at Cox Automotive. "Right now, we’re in an unusual situation, so people are putting their dibs in," said Krebs. 

That doesn’t mean it’s a new business model.

It’s been a hard lesson for newcomers like Polestar, the Swedish electric car manufacturer spun off from Volvo, which had to tweak its U.S. strategy. It had planned to deliver customer-ordered vehicles to stores, which would carry no vehicles on their lots. But franchised Polestar dealers discovered impatient buyers wouldn’t wait, and they risked losing sales to competitors. Now, Polestar furnishes retailers with five to seven cars for spot deliveries.

 

The bottom line: The pandemic finally made it possible to complete a car purchase online without ever setting foot in a showroom.

 

The big question is whether consumers ordering the exact car they want from the factory is next.

 

When the government reported Dec. 10 that consumer inflation rocketed 6.8% in the 12 months that ended in November — the sharpest jump in nearly 40 years — the biggest factor, apart from energy, was used vehicles. And while the rate of increase is slowing, most experts say the inflated vehicle prices aren’t likely to ease for the foreseeable future.

 

The blame can be traced directly to the pandemic’s eruption in March 2020. Auto plants suspended production to try to slow the virus’ spread. As sales of new vehicles sank, fewer people traded in used cars and trucks. At the same time, demand for laptops and monitors from people stuck at home led semiconductor makers to shift production from autos, which depend on such chips, to consumer electronics.

 

When a swifter-than-expected economic rebound boosted demand for vehicles, auto plants tried to restore full production. But chip makers couldn’t respond fast enough. And rental car companies and other fleet buyers, unable to acquire new vehicles, stopped off-loading older ones, thereby compounding the shortage of used vehicles.

 

Bleak as the market is for used-car buyers, the computer chip shortage has also driven new-vehicle prices higher. The average new vehicle, Edmunds.com says, is edging toward $46,000.

Even so, prices of used cars are likely to edge closer to new ones. Since the pandemic started, used vehicle prices have jumped 42% — more than double the increase for new ones. Last month, the average used-vehicle price was 63% of the average new-vehicle cost. Before the pandemic, it was 54%.

At this point, used-car dealer Jeff Schrier has to tell lower-income buyers that he has very few vehicles to sell them.

 

"What used to be a $5,000 car," he said, "is now $8,000. What used to be $8,000 is now $11,000 or $12,000."

Including taxes, fees, a 10% down payment, and an interest rate of around 7.5%, the average used vehicle now costs $520 a month, even when financed for the average of nearly six years, Edmunds calculated.

Ivan Drury, a senior manager at Edmunds, said that while he doesn’t track used-vehicle prices relative to household income, he thinks November marked a record "in the worst way possible for affordability."

Monthly payments for the average used vehicle, he noted, were $413 two years ago, $382 five years ago and $365 a decade ago. The November average payment of $500-plus for a used vehicle, Drury said, is about the average that was needed five years ago for a new vehicle.

New-vehicle dealers have about 1 million vehicles available nationally — scarcely one-third of the normal supply, said David Paris, a senior manager at J.D. Power. And the vast majority have already been sold.

Given pent-up demand from consumers, prices for new vehicles are expected to remain historically high until the supply returns to around 2 million or 2.5 million and automakers resume discounting, which could take well into 2023. Once new-vehicle prices do ease, the pressure on used-vehicle prices would eventually follow.

Yet even after that, the availability of vehicles will be tight because traditional sources of used vehicles — autos turned in from leases and trade-ins or sold by rental companies — have essentially dried up.

For the past decade, cars returning from two- and three-year leases were a leading source of almost-new used vehicles. But that was when more than one-third of U.S. new-vehicle sales were leases, a figure now down to 22%, said Edmunds’ Drury. Because there aren’t many new autos, people with expiring leases often are buying those cars once their leases end.

Rental companies, another key source of late-model used cars, can’t buy new ones now and are holding the ones they have. Some rental companies are even buying used vehicles. Given all those factors, Paris expects the shortage of used cars to worsen through 2024.

Among the few consumers who stand to benefit are those who want to sell a used car and don’t necessarily need to replace it. The average trade-in value in October, Paris said, was $9,000, twice what it was a year earlier.