CATA News

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.

 

The first class has graduated from the East Coast version of the 16-week BMW Military Service Technician Education Program, part of an industrywide effort to keep up with the urgent demand for automotive technicians.

 

The newest version of the BMW program trains military service members at a U.S. Army base in Fort Bragg, North Carolina, starting shortly before discharge, and helps them find civilian jobs as technicians at BMW dealerships in the U.S.

 

About 39,000 new service techs graduate from U.S. technical colleges and training programs in an average year, the National Automobile Dealers Association said. But the NADA said the industry needs 76,000 techs annually.

 

That’s about 29% of the total number of U.S. technicians needed to replace those who quit or retire every year. As vehicles in operation increase, that generates even more demand for technicians, the NADA said.

BMW of North America and Universal Technical Institute, which performs the actual training, initially launched the BMW military training program in 2018 at Camp Pendleton, a U.S. Marine Corps base in Southern California. The first class there graduated in 2019.

 

Including the half-dozen recent Fort Bragg graduates, the military program since 2019 has graduated a total of 106 rookie BMW technicians nationwide, said Gary Uyematsu, national technical training manager.

 

Around the country, lots of technician training programs recruit ex-military trainees. What distinguishes the BMW program is that classes are offered directly on the U.S. military bases, according to BMW of North America. With permission from their commanding officers, participants can even complete the program while still on active duty, BMW said.

 

The BMW Military STEP program is open to military members whose honorable-discharge date falls within six months of a class start date, the company said. Preference is given to candidates with a relevant military specialty, like wheeled-vehicle mechanics, technology, or avionics, or who have other prior experience as an automotive technician.

 

BMW said its U.S. retail channel, with 350 dealerships, has more than 7,000 technicians. But like the rest of the auto retail industry, new technicians are in big demand because of turnover, and because Fixed Operations is so important to overall dealership profitability.

 

Uyematsu said that historically, BMW’s technician turnover rate in the U.S. market is just under 20% on average. But he said there’s been a slight uptick since the COVID-19 pandemic, to just over 20%.

 

While the military pipeline is relatively new, the BMW-sponsored Service Technician Education Program has been around since 1987, Uyematsu said. In the years since, the company has helped train and place more than 7,500 new technicians at dealerships, Uyematsu said, adding that about 49% of the alumni are still working at BMW dealerships.

 

U.S. motorists drove 7.1% more miles in October over the same month in 2020 as people returned to offices and resumed leisure trips, but the distance was slightly less than pre-pandemic levels. Nevertheless, traffic deaths jumped dramatically.

 

The Federal Highway Administration said Dec. 20 that motorists drove 277.5 billion miles in October, up 18.5 billion miles from October 2020, but still down 5.6 billion miles from October 2019. For the first 10 months of 2021, road travel is up 11.2%, or 262.5 billion miles, over last year.

 

The numbers remain down in part because millions of workers are working primarily from home.

 

Travel was up 0.5% over September levels. Travel on rural roads now exceeds pre-pandemic levels, while travel on urban roads still lags 2019 levels.

 

In the 12 months ending in October, drivers in the U.S. drove 3.09 trillion miles, which is at roughly the same rate as in 2015--and about 168 billion fewer miles than the 12 months ending in October 2019.

The percentage increase in traffic deaths has exceeded the rise in driving.

 

The National Highway Traffic Safety Administration said road deaths rose 18.4% in the first six months of 2021 from the same period a year earlier, for the deadliest first half on American roads since 2006.

 

Traffic deaths surged after coronavirus lockdowns ended in 2020 as more drivers engaged in unsafe behavior such as speeding and driving under the influence of drugs or alcohol, regulators said. That made for the largest six-month increase ever recorded in the Fatality Analysis Reporting System’s history, which has been in use since 1975.

 

U.S. Transportation Secretary Pete Buttigieg said that his department would release a strategy in January with a comprehensive set of actions to reduce serious traffic injuries and deaths.

 

Millennials, a generation that some disregarded as not being interested in driving, have rapidly become the largest generation of new-car buyers in the U.S.

 

While it’s traditional for each generation to eventually overtake the previous one, millennials — born between 1977 and 1994 — have done it at an "astonishing" rate, according to Tyson Jominy, J.D. Power’s vice president of data & analytics.

"Demographic information moves very slowly, but last year millennials took over in April during the peak of the coronavirus pandemic. We thought it was kind of a blip, but it’s only increased since then," he said. "It shifted overnight, and it has gotten faster every month."

Most impactful for the current U.S. market is that millennials for the first time this year will be the largest buyers of midsize, full-size and heavy-duty pickups. The segments are known as light-duty trucks. They represented 2.85 million sales, or 20%, of the U.S. new-vehicle market in 2020.

 

‘Coming-of-age story’

Amid the burgeoning coronavirus pandemic last year, millennials overtook sales of larger pickups from baby boomers — born between 1946 and 1964 — and are on pace this year to beat Gen X buyers — born between 1965 and 1976 — as the top buyers of mid-size and compact pickups, according to J.D. Power.

"It’s a coming-of-age story for millennials and maturing and getting promoted in their jobs and coupling and procreating and moving to the suburbs and all that normal stuff," Jominy said.

The rapid assent of millennials to become the largest demographic of U.S. car buyers corresponds with another generational shift, according to Jominy.

Baby boomers overtook pre-boomers, from the Great Generation, as the largest buyers when the Ford Mustang was rising in popularity in the late-1960s and ’70s. Now, millennials have overtaken them with the introduction of the first all-electric Mustang Mach-E crossover.

"You sort of have this Mustang for each generation," Jominy said.

 

EVs

While the average buyer age for the Mustang Mach-E are 50-year-old Gen Xers, J.D. Power reports millennials are the largest buyers of EVs. J.D. Power reports they’ve represented 35% of new EV purchases this year compared to baby boomers at 29% and Gen X at 26%.

While millenials are the top buyers in 17 of 27 vehicle segments, baby boomers still dominate more expensive, luxury vehicle segments.

"The higher the price the vehicle, the more likely we are to see boomers in it," Jominy said.