CATA News

The Families First Coronavirus Response Act (FFCRA) established a mandatory obligation to provide employees with paid emergency sick and family medical leave until Dec. 31, 2020. Since then, dealerships have had access to tax credits to offset the cost of any such leave provided to their employees voluntarily. Unless extended by Congress (which appears unlikely) those tax credits were available for FFCRA leave provided on or before Sept. 30, 2021. 

 

With the end of these tax credits, dealerships should: 

 

1. Determine if they will provide voluntary paid leave for any (or all) of the permissible FFCRA purposes through Sept. 30, 2021;

2. Take advantage of the tax credits available for any such paid leave; and

3. Review existing leave policies and applicable family and medical leave mandates, for their potential application to leave requests for FFCRA-type purposes. Important: State and local law may impose leave mandates over and above those imposed by federal law. 

Questions can be submitted to regulatoryaffairs@nada.org.

 

The American International Automobile Dealers Association on Sept. 27 launched an awareness campaign to highlight the employment and environmental consequences that would result from the severe limitations of a proposed new tax credit for electric vehicles.

"There are more than 50 EV models sold in the U.S., but Congress’s proposed new $4,500 tax credit will apply only to five union-made cars," said Cody Lusk, president and CEO of the AIADA. 

"This rule undermines consumer choice and competition, it treats non-union autoworkers and international dealers unfairly, and it absolutely runs counter to the goal of an EV tax credit, which is reducing carbon emissions by getting as many green vehicles on the road as possible."

The AIADA’s campaign is attempting to bring attention to the consequences of what it calls an unfair tax credit proposal, including:

• Fewer EVs will be sold because of the severe restrictions of the EV tax credit. This, in turn, will mean slower progress toward reducing America’s carbon emissions.

• The proposed tax credit threatens the livelihoods of American workers. The U.S. ecosystem of international autos — including dozens of non-union plants and thousands of dealerships — supports nearly 700,000 American jobs. The tax credit would lower sales of non-union international brand EVs, jeopardizing the jobs of Americans who work in that innovative and competitive sector.

• The proposed tax credit would benefit some regions of the country, such as the Midwest, at the expense of others, including southeastern states such as Alabama and Georgia. The tax credit would reduce payroll and economic activity in states and communities that provide a home for non-union auto plants.

"The solution is simple," Lusk said. "Congress should ensure the tax credit proposal applies to both union and non-union made EVs. It’s wrong for lawmakers to pick winners and losers among American workers."

Established in 1970, the AIADA is the national trade association representing America’s 9,400 international nameplate franchised automobile dealers.

 

The wholesale rush of car buying online has jangled traditional auto dealers, forced them to rethink their business models and nudged many into exiting the business altogether. But for those dealers who stick around, the takeover by e-commerce during the pandemic ironically may provide a big benefit.

Young consumers are more likely to trust the auto sales process the more that it moves online. "For younger Americans," the rise of automotive e-commerce "has elevated trust," said Joanna Piacenza, head of industry intelligence for Morning Consult. Her insight is based in part on a new survey conducted by the Washington, D.C.-based market-research firm of 4,400 adults to gauge their trust in the auto industry and how it’s built — and hurt.

"It’s meeting them where they are. They’re used to conducting sales on their phone. Don’t make them get up and go to a car dealership. They’re used to the online platform. And if they’re suspicious about anything, they know exactly how to go on the web site where they can gut-check something. They’re used to this interface. It’s going to increase their trust in the industry."

On the other hand, Piacenza said, the U.S. automakers’ growing problem with microchip shortages is eroding trust by consumers in the entire industry and in specific brands. As the shortages continue to whack the output of the companies’ factories — depleting inventories, strapping selection, delaying deliveries and inflating prices — would-be car buyers are getting increasingly frustrated, she said.

"There’s a growing risk not necessarily of distrust but of consumer dissatisfaction with not getting the product they’ve saved up for and want to buy," Piacenza said. "It’s not available because of the supply chain." She predicted the car shortage "will get worse before it gets better" and that if consumers "didn’t buy a car during the pandemic surge, you should probably wait until after the chip shortage is over."

 

U.S. light-vehicle sales volume in September was projected to fall to its lowest September level since 2009, according to a forecast by Cox Automotive.

 

Cox predicted that sales would drop to 1 million units in the just-concluded month, down 26% from a year ago. There have been only three months of below 1 million volume in the past decade, according to Cox.

 

Many U.S. automakers planned to report September and third-quarter light-vehicle sales on Oct. 1, as they continued to idle plants intermittently to redirect scarce semiconductor microchips. AutoForecast Solutions estimated the global auto industry has lost 8.9 million vehicles from production plans because of the chip crisis, including 2.9 million in North America.

 

Cox expected the September sales pace, or the seasonally adjusted annual rate (SAAR), to fall to about 12.1 million vehicles, the slowest pace since May 2020, when much of the country was shut down in the early months of the coronavirus pandemic. That pace is down about 1 million vehicles from August and about 4 million units from the sales rate set in September 2020.

 

September would mark the fifth straight month of U.S. light-vehicle SAAR declines. In each of those months, the sales pace has declined by more than a million units. Stock on dealership lots has sunk 58% since 12 months ago, down by nearly 1.4 million units, Cox said.

 

"After a strong spring selling season, the supply situation has worsened precipitously and is dragging sales down with it," Charlie Chesbrough, Cox Automotive senior economist, said in a statement.

 

No vehicle segments bolstered sales in September, Cox said. The largest year-over-year decreases were in the midsize car segment at 41% and the compact crossover segment at 33.7%

 

With the September sales drop, Cox expected third-quarter volume to drop 14% from a year ago and 22% from the third quarter of 2019.

 

Consumer demand is strong, but inventory on dealers’ lots has remained sparse. The lack of choices may be pushing would-be buyers out of the market, according to an August survey by Cox’s Kelley Blue Book team.

 

Cox expects the chip supply constraints to improve, resulting in a better fourth-quarter selling rate. "But that doesn’t mean good selling rates," said Chesbrough. Still, some automakers have managed the shortage better in recent months, he added.

 

"Automakers are improving their ability to redirect existing chips to the most important vehicles in their portfolios," Chesbrough said. "This strategy should support better sales in the fourth quarter compared to the third quarter."

 

Global automakers could lose $210 billion in revenue this year because of supply chain disruptions, nearly double a forecast earlier this year, consulting firm Alixpartners said Sept. 23.

A shortage of semiconductors is just part of the problem, Alixpartners said in its new forecast. High prices and tight supplies of commodities such as steel and plastic resin are driving up costs and forcing automakers to curtail production.

Automakers are on track to lose production of 7.7 million vehicles in 2021, according to the new forecast. Alixpartners advises automakers on supply chain and other issues.

In May, the firm predicted automakers would lose $110 billion in revenue and fall 3.9 million vehicles short of production plans for the year.

The dour new forecast comes amid warnings from automakers and commercial truck manufacturers that semiconductor shortages and commodity price spikes are not easing as 2021 heads into its final months, as industry executives had hoped they would. 

IHS Markit in September slashed its global auto industry production outlook for 2021 and 2022.

In the U.S. market, vehicle sales have begun to slow because inventories on dealer lots are about 20 days’ supply, less than half the normal levels, said Dan Hearsch, a managing director in Alixpartners’ auto practice.

"We had originally assumed we would get back to normal and claw back volume" in the fourth quarter, Hearsch told Reuters. "That is not going to happen." Instead, he said automakers could have tight inventories until late 2022 or early 2023.

Supplies of semiconductors have been hit in the past few months by a COVID surge in Malaysia, which has hobbled production at important suppliers. 

Backlogs at major U.S. ports are hampering efforts by auto manufacturers to import more plastic resins and steel, he said. In response, automakers are committing to longer contracts to lock in supplies, buying as much as 40-50 weeks in advance, Hearsch said.

"They are signing up for things they would never have done a year ago," he said.

 

Nearly half of car shoppers are exiting the market and delaying their purchase for the next several months due to the impacts of the global microchip shortage on the automotive industry, according to consumer research reported Sept. 21 by Kelley Blue Book. 

 

The survey, taken in late August, also reveals further details about car shoppers’ current perspectives and intentions given the state of an automotive marketplace plagued by inventory shortages and record-high vehicle prices.

"The latest research indicates that most consumers anticipate negative impacts on the automotive market due to the chip shortage, from increased prices to inventory shortages and longer delivery times," said Vanessa Ton of Kelley Blue Book. "With a large portion of the in-market population now saying they plan to delay their purchase given the current market conditions, it will be interesting to see how that could impact the ongoing delicate balance of supply, demand and pricing across the industry. Long term, OEMs are likely experimenting with made-to-order deliveries for consumers."

Among in-market shoppers, 48% say they are likely to postpone their purchase due to the chip shortage. Of those likely to postpone, most plan to wait at least several months: 40% said three-to-six months, and 12% said one-to-two months. Shoppers who do not plan to postpone understand that they may need to make some changes to their plans to be able to purchase a vehicle sooner rather than later. Among shoppers who said they would not postpone their purchase, 25% said they would consider switching brands, 19% said they would consider changing vehicle categories, and 18% said they would consider shifting from purchasing new to used.

Slightly more than a third (35%) of all surveyed in-market shoppers said they are willing to pay above MSRP, further indicating they would pay up to a 13% premium, or roughly $5,600 more based on Kelley Blue Book’s latest average transaction prices. In addition, three-quarters of consumers are willing to drive outside their local area for a vehicle, with most shoppers willing to drive 50-200 miles; however, fewer than 20% would drive more than 200 miles.

In addition, many shoppers said they are willing to make some changes to their vehicle purchase plans due to the chip shortage. Among all in-market shoppers surveyed, 35% said they would shift from an import to a domestic brand, 32% said they would switch brands they are considering, and 31% said they would shift vehicle categories. Further, 38% said they would shift from buying a new vehicle to a used vehicle, but only 18% said they would consider shifting from buying used to new.

In general, overall awareness of the chip shortage among car shoppers is high. More than half of shoppers (58%) are aware of the cause of the shortage, and 71% are familiar with the effects of the shortage on the automotive market. Other findings:

 

• An overwhelming majority (90%) of shoppers are aware of the new-vehicle inventory shortage problem at dealerships, and they understand there are significant impacts to their car-buying experience; 

• 84% think the vehicle with their desired options/specs will take longer;

• 83% think the vehicle of their desired category will take longer;

• 69% think prices will increase; and

• 61% think there will be less favorable deals/incentives available.

Shoppers also seem to understand that the issue mostly is industry-wide: 79% said the shortage impacts both domestic and import vehicle brands, 76% said all brands will be impacted, and 71% said all vehicle brands are impacted.

 

A new Illinois task force battling retail theft charged five men and a woman on Sept. 28 with running a multistate car theft ring.

Anthony Brown (who, as a rapper, goes by Tony Sosa), 40, of Lansing; and Sierra Wells, 27, of Orland Park allegedly obtained high-value vehicles by defrauding dealerships and financial institutions of about $100,000 by using stolen and fraudulent identities. The pair face up to 30 years in prison.

Illinois Attorney General Kwame Raoul said his office worked with police from Barrington and West Chicago to investigate a pattern of seemingly isolated retail automobile thefts. The investigation spanned years and involved thefts in Illinois and other states. Entities in the banking, insurance and automotive industries helped identify organizers of the crimes.

Accomplices Kevin Bandy, 48; DeAngelo Hackney, 30; James Krout, 47; and Zebedee Moore, 48, were charged with identity theft, aggravated possession of a stolen motor vehicle, theft by deception, financial institution fraud, and forgery, charges which could bring up to 15 years in prison.

"These indictments allege that the defendants orchestrated and executed a complex fraud operation that crossed county and even state lines to steal expensive luxury vehicles and defraud car dealerships and financial institutions in the process," Raoul said. "I appreciate the critical support from our federal and local law enforcement partners as well as our retail partners. Today’s charges demonstrate the importance of partnerships and collaborations in order to better protect communities and hold individuals accountable for these complex criminal operations."

Raoul’s office was supported during the investigation and prosecution by the state’s attorney offices of Robert Berlin in DuPage County and Kimberly Foxx in Cook County. The Attorney General’s Organized Retail Crime Task Force is the first statewide, public-private collaboration of its kind in Illinois and is designed to foster cooperation among retailers, online marketplaces, law enforcement agencies and state’s attorneys dedicated to targeting organized retail crime enterprises.

 

Unionized technicians ended their longest strike since 1975 when they voted Sept. 26 to ratify a new four-year collective bargaining agreement. Work had stopped Aug. 1 when the previous pact expired.

More than 800 technicians initially walked off the job at 56 area new-car dealerships. About 600 mechanics at 35 dealerships remained on strike until the vote after 21 dealerships broke ranks with the New Car Dealer Committee and signed deals with the union during the course of the eight-week walkout.

At issue were such matters as base pay guarantee for technicians and dealership contributions to the union’s health and welfare fund.

Dealers at nonunionized stores who are interested in details of the new contract should contact Chris Konecki, the CATA’s executive vice president, at ckonecki@drivechicago.com.

 

By Anjani Trivedi, Bloomberg

 

There’s no shortage of excitement for electric vehicle battery startups or multibillion dollar investments in the industry, as companies, backers and scientists look for the winning play. China, though, is already moving on to the next leg in the race with sodium-ion batteries — one that isn’t dependent on a big, bold breakthrough. 

Done right, the technology could lead to widespread adoption in a market largely dependent on subsidies and where EV sales are still a fraction of all cars.

China’s Contemporary Amperex Technology Co., or CATL, the world’s largest battery manufacturer, unveiled its latest product in July: a sodium-ion battery. Last month, China’s Ministry of Industry and Information Technology said it would drive the development, standardization and commercialization of this type of power-pack, providing a cheaper, faster-charging and safe alternative to the current crop on sale, which continue to be plagued by a host of problems, not least, faulty units catching fire.

Sodium-ion batteries aren’t a new development. They were being researched in the 1970s, but interest was quickly overtaken by a newer, fancier, more promising variety: the lithium-ion battery. Their widespread use meant the sodium-based units didn’t have many takers and any ongoing development took a back seat.

Now, decades on, the challenges with lithium-ion batteries are becoming apparent. Carmakers and battery manufacturers are focused on bringing down costs — a perennial obstacle. And while lithium-ion batteries have been one of the greatest inventions in power storage, they are increasingly coming up against issues including the cost and availability of materials, and safety. There’s a constant tug-of-war between stable chemistry so the battery doesn’t combust and greater energy density. Clear solutions largely have confounded scientists, and what is available isn’t good enough to make lithium-ion scalable and commercially viable for electric vehicles.

The sodium-based batteries aren’t going to take electric cars any farther than lithium can. Not anytime soon, at least. However, the materials needed to make them are widely available. The content of sodium in earth reserves is about 2.5%-3%, or 300 times more than lithium and is more evenly distributed, according to Jefferies Group LLC analysts. That means it has a major cost advantage: These power packs could cost almost 30%-50% less than the cheapest electric car battery options currently available. In addition, the price of sodium is less sensitive to market gyrations compared with lithium, increasingly a sentiment gauge for the world’s green ambitions.

 

And although sodium-ion batteries currently have a relatively lower energy density, they run better at cooler temperatures and have a greater life span, making them a better long-term investment, in theory. CATL’s latest product is expected to have an energy density of 160 Watt-hour per kilogram and will take 15 minutes to reach 80% of its charge. That’s on par with batteries currently on the market, ranging from 140 Wh/kg to 180 and 240 in the highest end type (that have proven to be combustible at times). 

Sodium-ion batteries will effectively need a new supply chain — they can’t rely on the well-established lithium-ion ones. Low material costs, though, means manufacturing expenses will be reduced and honing the existing production processes to upgrade these older batteries will be faster. CATL has said it will have a supply chain in place by 2023. Other companies such as HiNa Battery Technology Co. already have projects in progress.

Ultimately, the ability to put cheaper and safer options on the market also means widespread accessibility for price-conscious consumers or resource-constrained nations. Countries such as India and South Africa are vying to get on the electric car bandwagon with big, ambitious plans to hit global green targets. However, they just don’t have the resources or access to them — neither financial nor raw materials. Options like the sodium-ion battery offer a clear path to go electric and make headway with their climate change goals.

 

By Rick Twydell, Urban Science

 

In today’s challenging retail automotive market – with low inventory due to chip shortages – and a strong trend of consumer demand for new vehicles, it’s easy for dealers to focus on what they don’t have. A better strategy embraces both the "here-and-now" and the future. For the here-and-now, dealers would be well advised to focus on – and make the most of – the inventory they do have, so as to prevent losing customers to other dealers. For the future (and for dealers faced with shoppers determined to get exactly what they want), dealers should encourage shoppers to order and wait for their new vehicle.

 

Urban Science recently executed two surveys, one with the Harris Poll taken among consumers, and one executed independently among dealers. The results underscore the danger of making assumptions about what new-vehicle shoppers want and need to motivate a purchase or lease.

 

For dealers to make the most of the inventory they do have, they need to clearly understand:

1. How and when to motivate consumers to consider alternative vehicle choices

2. How long shoppers are willing to wait for their next vehicle

 

Two-thirds of new-vehicle shoppers are in market now

According to the studies, dealers believe that well over half of new-vehicle shoppers (58%) are willing to wait for their vehicle. In contrast, less than a third of consumers (28%) actually say they will order and wait if their vehicle of choice isn’t available in two to three months.

 

The perception that consumers will wait could result in an even-more unsettling outcome for dealers who fail to realize the depth of their misalignment between what they believe and what consumers are saying: 42% of new-vehicle shoppers say they would consider a different dealership, and 22% would consider a different dealership for the same brand, while 14% would go even further and consider a different brand. In other words, the competition.

 

Given the circumstances, it’s imperative that dealers create and implement strategies proven to influence shopping behavior and promote positive customer experiences. One of those strategies is incentives.

 

Don’t overlook the power of incentives to motivate shoppers to consider alternatives

Incentives are a tried-and-true strategy for motivating behavioral change. This carries over to a large purchase like a new vehicle. What’s more, incentives need not be big to motivate behavior. And they are relevant to all kinds of buyers. According to a recent study commissioned by Urban Science, gift-card incentives worked nearly as well for those making $50,000-$74,500 (40%), as those with HHI above $124,999 (43%).

 

In fact, the Urban Science Harris Poll mentioned earlier found that six in 10 consumers said incentives would be influential in getting them to change their vehicle purchase or lease decision. It also identifies the four areas that consumers reported that incentive would be likely to influence: 1) encouraging a new purchase for those who planned to buy used; 2) enticing them to consider a Certified Pre-Owned vehicle (if they originally intended to buy new); 3) shifting them to a larger vehicle of the same brand; or 4) encouraging them to a higher trim level for the same model.

 

The bottom line: Make sure "nobody walks"

While only 26% of dealers say they would use incentives to encourage consumers to consider a different trim level, 77% of consumers say incentives would motivate them to consider a higher trim level. There is clearly a missed opportunity for dealers who don’t use incentives to motivate shoppers.

 

Incentives (even small ones) can be a secret weapon in facing today’s inventory shortage. The solution echoes the strategy mentioned earlier:

 

1. Motivate customers to purchase from the alternative choices you do have in inventory

• When you have a shopper in your showroom, do everything you can to ensure they don’t walk – as the survey mentioned earlier clearly indicates, incentives can be effective in motivating shoppers to go up in trim level, consider a larger vehicle, or move from new to CPO.

 

2. Help shoppers bridge from "buy now" to an "order & wait" mindset

• Helping, within this competitive environment, may also mean using incentives to motivate consumers to order a vehicle and wait for delivery.

 

By implementing these strategies, dealers can demonstrate their willingness to serve as true sales consultants, and help ensure a positive customer experience while gaining (or keeping) a customer who might otherwise have gone elsewhere.