Official Publication of the California New Car Dealers Association CALIFORNIA ISSUE 3, 2022 3 A Successful 2022 – With More Work Ahead 10 2022 CNCDA Annual Convention 16 Succession Planning for Dealers in an Evolving Business Environment
• Business Transactions • Buy-Sell Agreements • DMV, BAR and other governmental approvals • Lender flooring and capital loan agreements • Entity formation and structure • Shareholder Agreements • Manufacturer approvals and relations • NMV non-profit association representation Estate Planning • Succession planning for business continuation • Family estate planning (wills and trusts) Tax • Property tax planning, audits and appeals • Federal estate and gift tax controversies with IRS • EDD audits BUSINESS LAW | LITIGATION | ESTATE PLANNING | REAL ESTATE | TAX | EMPLOYMENT PRACTICES FERRUZZO & FERRUZZO, LLP | A Limited Liability Partnership, including Professional Corporations 3737 Birch Street, Suite 400, Newport Beach, California 92660 | PH: (949) 608-6900 | ferruzzo.com Business Litigation • Consumer Legal Remedies Act lawsuits • Sales and Service Agreements • Disputes before the CA New Motor Vehicle Board • Consumer claims regarding the sale/lease of autos • Manufacturer audit disputes • Hearings before the AQMD, RWQC and OSHA Real Estate • Dealership site acquisitions and lease agreements • Lender opinion letters • Relocations Employment Practices • Arbitration agreements • Wage and hour class action lawsuits • Private Attorneys General Act (PAGA) claims Ferruzzo & Ferruzzo, LLP began providing legal representation to new car and truck dealers nearly four decades ago. Over the course of that time, one of the central goals of the firm has been to remain rooted in our client relationships. With the strength of over 20 attorneys, we provide a spectrum of legal services to support every aspect of running and owning your new car and/or truck dealership. Each member of our team is available to service the needs of you and your dealership.
1067 Park View Drive | Covina, CA 91724 | (626) 858-5100 | Fax (626) 332-7012 YOUR SUCCESS... IS OUR SUCCESS ➢ Committed to our Dealer Clients for over 40 Years ➢ Helping to Optimize your Business Operations ➢ Providing the Highest Quality Tax and Accounting Services ➢ Consulting & Management Support ➢ Estate Planning & Dealer Succession Opportunities George R. Applebaum, CPA Shareholder (626) 858-5100, ext. 215 gapplebaum@rogersclem.com Scott M. Biehl, CPA Managing Shareholder (626) 858-5100, ext. 229 sbiehl@rogersclem.com Andy R. Jones, CPA Shareholder (626) 858-5100, ext. 237 ajones@rogersclem.com
4 ©2022 California New Car Dealers Association (CNCDA) | The newsLINK Group, LLC. All rights reserved. The California New Car Dealer Quarterly is published four times each year by The newsLINK Group, LLC for the CNCDA and is the official publication for this association. The information contained in this publication is intended to provide general information for review, consideration and dealer education. The contents do not constitute legal advice and should not be relied on as such. If you need legal advice or assistance, it is strongly recommended that you contact an attorney as to your specific circumstances. The statements and opinions expressed in this publication are those of the individual authors and do not necessarily represent the views of the CNCDA, its board of directors, or the publisher. Likewise, the appearance of advertisements within this publication does not constitute an endorsement or recommendation of any product or service advertised. The California New Car Dealer Quarterly is a collective work, and as such, some articles are submitted by authors who are independent of the CNCDA. While the California New Car Dealer Quarterly encourages a first-print policy, in cases where this is not possible, every effort has been made to comply with any known reprint guidelines or restrictions. Content may not be reproduced or reprinted without prior written permission. For further information, please contact the publisher at 855.747.4003. 22 CONTENTS 18 20 ISSUE 3, 2022 5 President’s Message: A Successful 2022 – With More Work Ahead 8 2022 Officers and Directors 11 2023 Dealer Day 12 2022 CNCDA Annual Convention Photos 17 Thank You 2022 Sponsors 18 The Right Time For A Risk Management Reset 20 Succession Planning for Dealers in an Evolving Business Environment 22 EV Hazards: Preparing an EV Battery for Shipping 25 California Auto Outlook Q3
5 BRIAN MAAS President California New Car Dealers Association President’s Message A Successful 2022 – WithMoreWork Ahead As we wrap up 2022, we reflect on all the goals we set to accomplish for the year, as well as the insight we gained from new experiences. While we are very proud of the advocacy work on behalf of dealers in 2022, we know the uphill battles we will need to prepare for in 2023 to ensure a thriving business climate for California’s new car dealers. Some of our top priorities included qualifying the California Fair Pay and Employer Accountability Act (PAGA) for the November 2024 General Election ballot and our work on Senate Bills 986, 1249 and 2311, and Assembly Bill 1311. Due to the extraordinary engagement from our membership, we made significant progress in defeating, amending, and laying the groundwork for future legislative efforts. Below are recaps of CNCDA’s 2022 top legislative priorities. Senate Bill 986 Nearly a dozen bills were introduced in this legislative session to address catalytic converter theft. CNCDA staunchly opposed SB 986 (Umberg, D-Orange County), which would have mandated dealers – not manufacturers – permanently mark VINs on all vehicles’ catalytic converters before sale. After months of trying to work with the author on amendments, our team pivoted and called on dealers to ramp up the pressure, encouraging them to contact their State Assembly members to urge them to vote against the bill. Defeating the bill faced steep odds, but dealers helped us secure a major win. We were pleased that the bill eventually FAILED. This is no small feat and could not have been accomplished without the extraordinary engagement of dozens of our members. Assembly Bill 2311 This summer, the CNCDA team negotiated a compromise with Attorney General’s Office on AB 2311 (Maienschein, D-San Diego). The bill would have placed a strict 2% cap on the amount dealers were able to charge for Guaranteed Asset Protection (GAP) under a conditional sales contract and would have prevented dealers from offering customers the option to purchase GAP if the conditional sales contract loan to value ratio or amount financed at the contracting date exceeded an arbitrary formula. Attorney General Rob Bonta, a sponsor of the bill, and our team negotiated an increased cap at 4% of the amount financed and secured more favorable loan-to-value ratio terms to allow the sale of GAP for customers needing the protection. Senate Bill 1311 As introduced, SB 1311 included an egregious provision that would have provided an annual, cost-free 30-day right of return for military service members who purchase or lease a motor vehicle from the date the service member took possession of the vehicle or obtained title to the vehicle. After working closely with the authors’ offices, the language related to vehicle sales was ultimately removed from the bill, eliminating a potentially costly and unfair mandate for dealers. Conclusion We cannot overstate how much we value your continued engagement in this legislative session. Your support has been crucial for our successes, and we look forward to engaging our members and advocating on behalf of California’s new car dealers in 2023. We hope you had a wonderful time celebrating the holiday season with loved ones, friends, and family. We are so thankful to our Members, Vendors, Sponsors, and Associates for their continued support and participation in our association. We appreciate you all. Cheers! Brian Maas, President California New Car Dealers Association
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8 2022 Officers and Directors 2022 Executive Committee John Oh Chairman Lexus of Westminster Tony Toohey Vice Chairman Auburn Toyota Hilary Haron Secretary-Treasurer Haron Jaguar Land Rover Mark Normandin Immediate Past Chairman Normandin Chrysler Jeep Dodge RAM Fiat Rick Niello, Jr. Region I Vice President The Niello Company Jessie Dosanjh Region II Vice-President Dublin Buick GMC Ted Nicholas Region III Vice-President Bakersfield Gary Fenelli Region IV Vice-President National City K.C. Heidler Region V Vice-President Santa Ana
9 2022 Directors Randy Denham S.J. Denham Chrysler Jeep Fiat Taz Harvey Dublin Mazda Matthew Hall AutoNation Western Region Rick Niello, Jr. The Niello Company Tony Toohey Auburn Toyota Jessie Dosanjh Stevens Creek Chevrolet Ryan Fitzpatrick Coliseum Lexus of Oakland Dave Moeller City Toyota Mark Normandin Normandin Chrysler Jeep Dodge RAM Cheryl Bedford Sunset Auto Center Cliff Cummings Toyota of San Bernardino Bill Hatfield Hatfield Buick GMC Hilary Haron Haron Jaguar Land Rover Volvo Ted Nicholas Three Way Chevrolet Gary Fenelli Frank Toyota Bruce Hamlin Guaranty Chevrolet Motors Inc. Greg Kaminsky Toyota/Honda of El Cajon John Oh Lexus of Westminster David Simpson Simpson Chevrolet of Irvine Anne Boland Bob Smith BMW Ron Charron Boulevard Cadillac Buick GMC K.C. Heidler Tom’s Truck Center Robb Hernandez Camino Real Chevrolet Darryl Holter Felix Chevrolet Devinder Singh Bains Turlock Chrysler Dodge Jeep Ram
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12 October 2-5, 2022 Ritz Carlton Laguna Niguel Thank you to all who attended. 2022 CNCDAAnnual Convention Photos Photography: Shuttered Light
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15 Save the Date 2023 CNCDA Annual Convention October 8-11, 2023 Fairmont Kea Lani, Maui We hope to see you there!
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The Right Time For A Risk Management Reset The past two years have seen auto retailers adapt to limited vehicle inventory and pandemic restrictions while driving profits to new heights. Now dealers face rising interest rates – a critical concern for an industry that relies on capital to fund operations and growth. For some, it’s time for a balance sheet review and risk management reset. Changing conditions dealers must watch The Fed (Federal Reserve) has already taken aggressive steps by raising rates to throttle persistent inflationary pressure in the U.S. So far this year, we’ve seen the Fed hike the short-term rate by 3.00% (300 basis points). But with low inventory and reduced need for floor plan loans, many dealers haven’t yet felt the full impact of rising rates. 1-month CME Term SOFR since the beginning of the pandemic As you imagine what’s next for the economy and your dealership, the impact of rising rates comes into sharper focus. For instance, if vehicle supply and demand start to realign, higher inventory levels could mean more floor plan loans on balance sheets. As you look at business assets, the recent surge in inflation strengthening real estate values could provide an additional source of funds that you can tap into if needed. Unfortunately, when it comes to expansion and new construction, inflation will cut the other way by driving up building costs and the loans needed to finance them. Sustained volatility in economic and market conditions makes planning for these possibilities and others both challenging and critical. Your risk management planning needs to focus on balance sheet moves available to you today – options that may be closed off tomorrow – to protect your dealership from economic and rate volatility and keep your cost of capital low. Actions to get ahead As economic and market conditions are shifting, you’ll want to ground your capital decisions in your business plans for your dealership and your personal goals as an owner. You can walk through a few steps – on your own or with your banker – to gauge the impact that rising rates will have on your business and identify actions you can take to mitigate their effect. By Brandon Artigue, Director, Financial Risk Management, Truist Securities
19 Step 1 – Start with your goals and plans. Balance sheet risk management starts by asking, “Where will my business be in five years?” Your goals might lead you to look for funds to grow, seek ways to release capital to equity holders or lenders, or explore other restructuring moves that might accomplish a bit of both. Timing of those capital flows matters, and your options may look very different if you’re planning to exit the business versus being committed for the long haul. Step 2 – Evaluate funding flows. Look at where you need funds, where you have them, and what sources (and especially at what cost) you can tap into to find capital. What happens to your cost of capital and valuation as rates rise? Where do you have needs in the future that will likely have to be met with additional, higher-cost capital? Have you considered ways to manage cash more strategically now that effective liquidity management can yield elevated returns? Step 3 – Envision what the future looks like for your dealership. Add the dynamics that you expect will change over the coming years. When do you think floor plan inventory will return to normal levels? One year? Two years? Potentially a longer time frame? What do higher construction costs mean for your dealership? Will the economy cool before you have to undertake your next building project? What changes will the ongoing electrification of vehicles and any regulatory shifts bring to your dealership? Step 4 – Get specific about actions you should take. When you’re protecting yourself in a rising rate environment, your primary move is to raise capital earlier when rates are lower and consider financial instruments like swaps as insurance. It doesn’t make sense for all situations, but commercial real estate and blue-sky loans are often amenable to this strategy. As you’re thinking about what works for your business, some of the strategies below might fit your situation: • If you expect inventory to return to more normal levels but want to protect your business from the risk of higher floating rates, you could target more liquidity to cushion against increased interest expense on floor plan lines. Or, to protect your bottom line, consider fixing rates on other outstanding loans that may currently be variable and subject to future rate hikes. • If you want more cash to invest in growth or to be ready for whatever comes next, you can secure loans now. Consider a cash-out commercial mortgage that, if fixed, could protect you from higher interest rates down the road and give you funds for capital expenditures like renovations or preparing for the shift to EVs. If rates continue to climb, you’ll have the peace of mind of having funds at a lower cost to cover future uncertainty. (Don’t forget that the cash-out proceeds from the loan can be earning interest all along.) • If you need cash for family/shareholder dividends or to finance a transition or succession, think about a dividend recap, particularly if you need liquidity now while you’re continuing to make moves that could help your dealership draw a higher valuation in the future. Or, as mentioned before, you could tap into increased real estate values to provide these proceeds. Step 5 – Look at all elements of financial risk. Interest rates may be front and center, but a comprehensive approach to financial risk needs to look beyond the cost of capital. Cyberfraud threats and weather events, along with business property, lot inventory, and liability exposure, can have a devastating effect on a thriving dealership. Insurance can protect you from events that can put your dealership at financial risk – talk to Truist’s McGriff Insurance to see how we can help. Preparing your dealership for a range of financial possibilities should be a priority for you and your financial advisors. With a rising rate environment, now’s the time to talk to your Truist Dealer Services relationship manager about a balance sheet risk management review. Have you taken measures to keep your cost of capital low while rates rise? Preparing your dealership for a range of financial possibilities should be a priority for you and your financial advisors. With a rising rate environment, now’s the time to talk to your Truist Dealer Services relationship manager about a balance sheet risk management review. 3
20 Succession Planning for Dealers in an Evolving Business Environment By Bank of America Corporation While there are many considerations in running a thriving dealership, one of the most important – and often overlooked – is developing and maintaining a succession plan. A strategy that allows for the transfer of ownership to the next round of leaders – whether family members, a trusted partner or an outside buyer – will position you and your business for future success. Why now? Having a succession plan is important for many reasons; however, in today’s environment, there are three crucial reasons that rise above the rest. 1. There’s a lot of buy/sell activity in the industry and accelerated consolidation. If your long-term plan is to exit the industry, you should consider the current market valuations and buyer interest. 2. The U.S. is on the verge of material changes in tax laws that could affect your finances and the value of your business if passed on to future generations. The estate and gift tax exemption, currently at a historic high of $12.06 million per person or $24.12 million per married couple, will drop by half in 2026 when the current tax law lapses. It could drop even faster if Congress passes a new law before 2026. 3. The market, labor costs, supply chains and other factors influencing dealerships continue to fluctuate. As the pandemic brought home to us, every business needs a plan in place in case top leadership can’t run day-to-day operations. Consider your priorities To begin the succession planning process, you need to identify your goals. Perhaps you’d like to sell – to family, management or a third party – to generate liquidity. You may also want to maintain some level of control of the business, particularly during a transition, if you’re gifting or selling the business to family members or selling to trusted employees. Or, you may want to step away completely and allow a third party to take over. In addition to identifying your goals, it’s important to consider how your decision will affect employees and the community to assess whether your actions align with your goals.
21 Finally, you’ll want to consider the financial implications of your decision, whether it’s reducing the amount of taxes you pay or generating liquidity for future needs. Identify key players One of the most critical succession planning decisions is determining the organization’s future leadership. While it can be difficult and emotional to talk with family and key managers about the future, it’s an essential piece of the process. An honest talk about your goals and theirs will help clarify your options and develop a more realistic succession plan. Facilitating the process will be two crucial teams: internal and external. Your internal team will consist of key family members, senior dealership managers, your banker, lawyer and accountant. Your external team will consist of advisors who think broadly and are strategic and defensive, like a transition attorney, estate lawyer, investment bank and appraiser or auditor. Maximize the value of your dealership Once your team is in place, you’ll want to get your documents in order. These include: 1. Financial and business information. You should pull out your business’s financial statements and consider RS18001-CarDealerAd-jy04-final3-outlines.indd 1 12/11/18 1:28 PM conducting an audit if you plan to sell the dealership. An audited statement is a more powerful statement to share with a prospective buyer. 2.Updated appraisal. An appraisal will compare your business to other dealerships, their gross margins and growth rate. Key metrics are important, whether you’re selling or benchmarking the success of your business for future managers. 3.Strategic plan. It’s an excellent time to create or update the strategic plan for your dealership. It will help you look at your dealership in the context of how the industry is changing and evolving. Opportune times to update your strategic plan include any time you experience changes in your family situation or senior management team. Initiating a succession plan can be emotional, and the process will take time. However, once you get started, you’ll find relief in clarifying your goals, understanding the intent of your family and senior managers and creating strategies that maximize the value of your business and legacy. 3 © 2022 Bank of America Corporation
22 EVHazards Preparing an EV Battery for Shipping By Micah O’Shaughnessy, CSP, ASP, KPA With the number of electric vehicles coming through the service department growing day by day, dealers need to make sure their technicians are working with EV batteries safely. And they need to do this in a variety of locations, whether it’s inside or outside of a vehicle, or when a battery needs to be packaged and shipped offsite. Once a service technician removes an EV battery and is packaging it for shipping, they’ll need to assess its’ risk protocol before packaging it. Follow the steps we’ve outlined below to assess whether the battery you’re preparing to ship is a critical risk, a high risk, or an average risk. And, of course, follow your dealership’s standard operating protocols for handling critical-risk and high-risk EV batteries. How to Assess Risk When Preparing an EV Battery for Shipping Critical Risk Confirm that there is no critical risk to the battery before performing a more detailed assessment. 1. Is the battery emitting smoke or flames? 2. Are there visible sparks or arcing coming from the battery or other components? 3. Are you able to get a voltage reading from nonenergized parts of the vehicle? The answer to all of those questions should be a definitive, “No.” Any “yes” answer is an indicator that the battery is a critical risk. If it is not, move on to the assessment of thermal codes, loss of isolation, and physical damage to determine if the battery is high risk or average risk. Physical Damage The casing for high-voltage batteries is designed to protect the fragile and volatile internal components, but it’s not foolproof. It’s best to conduct a visual assessment. 1. Is there evidence of prior fire? 2. Is there evidence of rupture, puncture, or high impact? 3. Is there evidence of incorrect disassembly or assembly?
23 4. Is there evidence of leakage, either electrolyte or coolant? 5. Is there evidence of damage to high-voltage components around the battery? 6. Is there evidence of damage to the vehicle near the battery? 7. Is there evidence of a collision that could have impacted the battery or its components? 8. Is there evidence of environmental damage (e.g., water, soil, flora)? A “yes” answer means the battery is considered high risk. Thermal Stability Batteries outside a vehicle are not exposed to heat generated through operation, so any signs of continuing heat generation are warning signs that the battery may be unstable. To learn more about how to test for thermal stability, please scan the QR Code https://www.kpa.io/blog/ev-hazards-how-to-assessthe-risk-of-battery-fire-outside-a-vehicle Assess a Battery’s Readiness for Shipping 1. Are all covers (metal or plastic) installed properly? 2. Are any covers missing? 3. Are all bolts, nuts, fasteners, and shipment brackets installed properly and correctly torqued? 4. Is the service plug secured? 5. Are all electrical wires and energized components (service plug port) protected from incidental contact? Batteries that have all their parts, and all parts are secured and protected as necessary, are good to go for shipping. Performing these basic assessments on each battery, as appropriate to the circumstances, will allow you to classify each battery as critical risk, high risk, or average risk. By doing so, you will greatly reduce the risk of an EV battery fire in your dealership. 3 Stay on top of EV requirements with KPA, the nation’s leader in automotive compliance solutions. KPA has an EV compliance solution designed to help you prepare your facility, educate your staff, and document/maintain OSHA compliance. CONCERNED WITH THE COST, COMPLIANCE AND SERVICING OF YOUR DEALERSHIPS’ INSURANCE? EPIC CAN HELP WITH YOUR BENEFIT AND BUSINESS INSURANCE NEEDS • CNCDA's only licensed broker for Health and Business insurance • The largest insurer of auto dealers in the state • The only broker with proprietary products specific to dealerships • 15TH largest brokerage firm in the nation We know dealerships have specific needs and issues, we are here to help. Please contact us for a free evaluation of your insurance and HR/compliance packages. © EDGEWOOD PARTNERS INSURANCE CENTER | CA LICENSE 0B29370 EPICBROKERS.COM Alison McCallum 949.417.9136 alison.mccallum@epicbrokers.com Eric Shaw 916.832.0958 eric.shaw@epicbrokers.com Ron Joy 949.417.9134 ron.joy@epicbrokers.com
OUR SERVICES • Illness & Injury Prevention • Safety Inspection & Training • Spill Prevention Control and Countermeasures Plan • Newsletters on Emerging EPA/OSHA Issues • Hazardous Waste Management • Hazardous Waste Cost Recovery • Haz Mat Release Response • Respiratory Protection • Representation in OSHA Enforcement Cases • Phase I Environmental Assessment • Regulatory Permits & Reporting Celly Services, Inc. • Sam Celly, BChE MChE JD • Certified Safety Professional • sam@cellyservices.com • (562) 716-6100 WHY CHOOSE US We provide specific solutions for dealerships through comprehensive site analysis, employee training, and newsletters. We are available online, onsite and on the phone to answer questions and solve problems. We provide perspective and experience that is unmatched in the industry. ABOUT CSI CSI is an employee-owned EHS consulting firm based in California with Certified Safety Professionals on staff. Today, we have hundreds of satisfied auto dealership clients in California, Arizona, Hawaii, Nevada, Idaho, Texas and Washington. WE HELP DEALERSHIPS NAVIGATE COMPLIANCE With over 35 years in the automotive EHS business, we understand compliance in California. From proactive management to oil rebates, we can help you stay ahead of ever-changing regulations and keep your employees safe.
25 California Auto Outlook Comprehensive Information on the California Vehicle Market Volume 18, Number 4 Released November 2022 Covering Third Quarter 2022 TM Publication Sponsored By: California New Vehicle Registrations Predicted to Increase in 2023 California New Light Vehicle Registrations and U.S. New Vehicle Sales YTD ‘21 and YTD ‘22 thru September TWO YEAR PERSPECTIVE Historical data source: AutoCount data from Experian. *2022 and 2023 forecasts by Auto Outlook. California Annual New Light Vehicle Registrations - 2008 thru 2023 ANNUAL TRENDS Predicting the impact of supply chain issues has been difficult, to say the least. Lost production due to the microchip shortage during 2022 was significantly higher than expected at the beginning of the year. As a result, vehicle sales projections have been lowered during the year. Registrations for all of 2022 are now predicted to decline 9.7 percent from 2021. Demand is softening due to deteriorating economic conditions, but pent-up demand is accumulating. Assuming supply chain issues ease during the next 12 months, Auto Outlook believes that the market will increase next year. It would likely take a severe economic downturn for the market to fall, while the chances for an upside surprise are above average. Current forecast is for registrations in the state to reach 1.77 million units next year, a 5.4 percent increase from this year. The California new vehicle market slipped 16.1 percent during the first nine months of 2022 versus 2021, as limited inventories and strong year earlier sales impacted results. U.S. market declined by 13 percent during the same period. Light trucks accounted for 68.3 percent of the California new vehicle market compared to 78.9 percent in the Nation. As shown on the graph to the left, the state market posted its fourth consecutive double digit percentage decline in the Third Quarter of this year. That streak will almost certainly end in the Fourth Quarter of this year, however, as registrations should increase versus weak year earlier levels. QUARTERLY RESULTS California Quarterly New Light Vehicle Registrations Percent Change vs. Year Earlier Data source: AutoCount data from Experian. 1.45 1.04 1.17 1.29 1.62 1.80 1.93 2.16 2.21 2.202.152.09 1.64 1.86 1.68 1.77 0.0 0.5 1.0 1.5 2.0 2.5 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22* '23* New vehicle regs. (millions) Years California U.S. YTD '21 YTD '22 Change YTD '21 YTD '22 Change Registrations TOTAL 1,484,862 1,245,748 -16.1% 11,768,255 10,236,245 -13.0% Car 509,554 394,315 -22.6% 2,727,094 2,162,757 -20.7% Light Truck 975,308 851,433 -12.7% 9,041,161 8,073,488 -10.7% Domestic 454,480 448,781 -1.3% 4,736,335 4,553,339 -3.9% European 225,279 187,294 -16.9% 1,223,286 1,075,711 -12.1% Japanese 682,790 496,247 -27.3% 4,633,154 3,519,869 -24.0% Korean 122,313 113,426 -7.3% 1,175,480 1,087,326 -7.5% Market Share Car 34.3 31.7 -2.6 23.2 21.1 -2.1 Light Truck 65.7 68.3 2.6 76.8 78.9 2.1 Domestic 30.6 36.0 5.4 40.2 44.5 4.3 European 15.2 15.0 -0.2 10.4 10.5 0.1 Japanese 46.1 39.8 -6.3 39.4 34.4 -5.0 Korean 8.2 9.1 0.9 10.0 10.6 0.6 Source for California new vehicle registrations: AutoCount data from Experian. Source for U.S. sales: Automotive News. 96.0% 7.8% -15.5% -13.8% -21.6% -11.9% 2Q '21 vs. 2Q '20 3Q '21 vs. 3Q '20 4Q '21 vs. 4Q '20 1Q '22 vs. 1Q '21 2Q '22 vs. 2Q '21 3Q '22 vs. 3Q '21 % change vs. year earlier KEY TRENDS IN NEW VEHICLE MARKET
26 Covering Third Quarter 2022 The table below shows the top five selling models during the first nine months of 2022 in 18 segments. In addition to unit registrations, it also shows each model’s market share in its respective segment. Sales results so far this year were primarily determined by vehicle production and availability. New registrations of the Honda Civic and Toyota Camry, two perennial top-sellers in the state, were impacted by diminished inventories. MODEL RANKINGS Tesla Model Y Retains Top Spot in California Market BEST SELLERS IN PRIMARY SEGMENTS Small Cars: Toyota Corolla Full Size Pickup: Chevrolet Silverado Mid-Size and Large Cars: Toyota Camry Compact SUV: Toyota RAV4 Near Luxury Cars: Tesla Model 3 3 Row Mid-Size SUV: Toyota Highlander Comp./Mid Size Pickup: Toyota Tacoma Luxury Mid Size SUV: Lexus RX Data Source: AutoCount data from Experian. Figures for Prius include Prius Prime. Model Regs. Share Model Regs. Share Model Regs. Share Model Regs. Share Toyota Corolla 32216 25.1 Toyota Camry 40358 37.6 Ford Mustang 5644 34.3 Tesla Model 3 56851 54.3 Honda Civic 23723 18.5 Honda Accord 23933 22.3 Dodge Challenger 4386 26.6 Lexus ES 7707 7.4 Kia Forte 14553 11.3 Nissan Altima 13698 12.8 Toyota 86 2049 12.4 BMW 3-Series 5509 5.3 Nissan Sentra 8264 6.4 Dodge Charger 7994 7.4 Chevrolet Camaro 1962 11.9 BMW 4-Series 4616 4.4 Toyota Prius 8004 6.2 Chevrolet Malibu 7956 7.4 Toyota Supra 811 4.9 Mercedes C-Class 4251 4.1 Model Regs. Share Model Regs. Share Model Regs. Share Model Regs. Share Tesla Model S 7683 20.8 Toyota Tacoma 28342 45.4 Chevrolet Silverado 29543 28.0 Toyota Sienna 8277 41.5 BMW 5-Series 3785 10.2 Nissan Frontier 6233 10.0 Ford F-Series 29055 27.6 Chrysler Pacifica 6542 32.8 Mercedes E-Class 3518 9.5 Ford Maverick 5981 9.6 Ram Pickup 25698 24.4 Honda Odyssey 3229 16.2 Mercedes S-Class 3486 9.4 Chevrolet Colorado 5621 9.0 GMC Sierra 12922 12.3 Kia Carnival 1080 5.4 Chevrolet Corvette 2463 6.7 Ford Ranger 5471 8.8 Toyota Tundra 7113 6.7 Chrysler Voyager 791 4.0 Model Regs. Share Model Regs. Share Model Regs. Share Model Regs. Share Ford Transit Connect 7515 33.6 Subaru Crosstrek 15430 20.2 Toyota RAV4 44738 25.0 Subaru Outback 11995 21.3 Mercedes Sprinter 6047 27.1 Honda HR-V 12380 16.2 Honda CR-V 19087 10.7 Toyota 4Runner 9479 16.8 Ram Promaster 4539 20.3 Kia Niro 5567 7.3 Jeep Wrangler 13943 7.8 Ford Mustang Mach-E 7310 13.0 Chevrolet Express 1699 7.6 Nissan Kicks 5509 7.2 Mazda CX-5 12706 7.1 Hyundai Santa Fe 6292 11.2 Ford E-Series 1676 7.5 Volkswagen Taos 5480 7.2 Subaru Forester 9066 5.1 Ford Edge 5841 10.4 Model Regs. Share Model Regs. Share Model Regs. Share Model Regs. Share Toyota Highlander 19778 22.7 Ford Bronco 8188 28.2 Audi Q3 3183 27.3 Tesla Model Y 61544 52.1 Ford Explorer 11729 13.5 Chevrolet Tahoe 5274 18.2 Lexus UX 2263 19.4 Mercedes GLC-Class 11821 10.0 Honda Pilot 8007 9.2 Jeep Grand Wagoneer 3076 10.6 Mercedes GLA-Class 1959 16.8 BMW X3 8009 6.8 Kia Sorento 6851 7.9 Chevrolet Suburban 2939 10.1 Volvo XC40 1441 12.4 Audi Q5 7136 6.0 Kia Telluride 6620 7.6 GMC Yukon 2550 8.8 BMW X1 1059 9.1 Lexus NX 6947 5.9 Model Regs. Share Model Regs. Share Model Regs. Share Model Regs. Share Lexus RX 12871 18.8 Cadillac Escalade 3546 24.6 Tesla Model 3 56851 14.4 Tesla Model Y 61544 7.2 Mercedes GLE-Class 9121 13.3 Mercedes GLS-Class 3281 22.7 Toyota Camry 40358 10.2 Toyota RAV4 44738 5.3 BMW X5 9078 13.3 BMW X7 2833 19.6 Toyota Corolla 32216 8.2 Chevrolet Silverado 29543 3.5 Tesla Model X 7467 10.9 Mercedes G-Class 1351 9.4 Honda Accord 23933 6.1 Ford F-Series 29055 3.4 Acura MDX 3604 5.3 Land Rover Range Rover 1307 9.1 Honda Civic 23723 6.0 Toyota Tacoma 28342 3.3 Luxury and High End Sports Cars Compact/Mid Size Pickup Full Size Pickup Mini Van Top Selling Models in Each Segment - New Retail Light Vehicle Registrations (YTD 2022 thru September) Small Cars Mid Size and Large Cars Sports/Pony Cars Near Luxury Cars Luxury Mid Size SUV Luxury Large SUV Top Selling Passenger Cars Top Selling Light Trucks Large Van Subcompact SUV Compact SUV 2 Row Mid Size SUV 3 Row Mid Size SUV Large SUV Luxury Subcompact SUV Luxury Compact SUV
27 California Auto Outlook Non-Luxury SUVs, 34% Luxury SUVs, 17% Pickups and Vans, 17% Small Cars, 12% Luxury & Sports Cars, 11% Non-Luxury MidSize & Large Cars, 9% Non-Luxury SUVs, 33% Luxury SUVs, 15% Pickups and Vans, 17% Small Cars, 16% Luxury & Sports Cars, 9% Non-Luxury MidSize & Large Cars, 10% SEGMENT MARKET SHARE TRENDS SUVs Accounted for 51 Percent of California New Vehicle Market So Far This Year HYBRID AND ELECTRIC VEHICLES Estimated Electric Vehicle Market Share Approaches 16 Percent Segment Market Shares in California YTD 2021 thru September Segment Market Shares in California YTD 2022 thru September The two graphs above show market shares for primary segments during the first nine months of 2021 and 2022. Data Source: AutoCount data from Experian. Data Source: AutoCount data from Experian. Non-Luxury SUV Share YTD ‘21: 33% Hybrid/electric vehicle market share, YTD ‘22: 29.9% Estimated Hybrid and Electric Vehicle Market Share The graph above shows the estimated hybrid powertrain and electric vehicle market share in the state. Registrations by powertrain for vehicles equipped with multiple engine types were estimated by Auto Outlook. The estimates are based on model registrations compiled by Experian, and engine installation rates collected from other sources. Non-Luxury SUV Share YTD ‘22: 34% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% 2016 2017 2018 2019 2020 2021 YTD '22 Market Share Electric Hybrid (excl. plug ins) Plug in Hybrid Estimated Hybrid and Electric New Vehicle Registrations and Market Share 2018 2019 2020 2021 YTD 2022 Electric registrations 99121 106752 101628 176357 196828 Electric share 4.6% 5.1% 6.2% 9.5% 15.8% Hybrid regs. (excl. plug ins) 92658 117218 113103 196777 139524 Hybrid share (excl. plug ins) 4.3% 5.6% 6.9% 10.6% 11.2% Plug in hybrid regs. 64644 52329 31144 61261 36127 Plug in hybrid share 3.0% 2.5% 1.9% 3.3% 2.9%
28 Covering Third Quarter 2022 BRAND REGISTRATIONS Detailed Results for All Brands in California Market The table above shows new light vehicle (car and light truck) registrations in California. Figures are shown for the Third Quarters of 2021 and 2022, and year-to-date totals. Vehicle registrations are recorded based on when the vehicle title information is processed by the state, which typically occurs after the vehicle is sold. The top ten ranked brands in each category are shaded yellow. California Auto Outlook Published by: Auto Outlook, Inc., PO Box 390 Exton, PA 19341 Phone 610-640-1233 Email: jfoltz@autooutlook.com Any material quoted must be attributed to California Auto Outlook, published by Auto Outlook, Inc. on behalf of the California New Car Dealers Association. Data source must also be shown as “Data Source: AutoCount data from Experian.” Please contact CNCDA with any questions or comments regarding the publication. Copyright: Auto Outlook, Inc. November 2022. At Auto Outlook, we strive to provide sound and accurate analyses and forecasts based upon the data available to us. However, our forecasts are derived from third-party data and contain a number of assumptions made by Auto Outlook and its management, including, without limitation, the accuracy of the data compiled. As a result, Auto Outlook can make no representation or warranty with respect to the accuracy or completeness of the data we provide or the forecasts or projections that we make based upon such data. Auto Outlook expressly disclaims any such warranties, and undue reliance should not be placed on any such data, forecasts, projections, or predictions. Auto Outlook undertakes no obligation to update or revise any predictions or forecasts, whether as a result of any new data, the occurrence of future events, or otherwise. California New Car and Light Truck Registrations Third Quarter Year to date thru September Registrations Market Share (%) Registrations Market Share (%) 3Q '21 3Q '22 % Change 3Q '21 3Q '22 Change YTD '21 YTD '22 % Change YTD '21 YTD '22 Change TOTAL 445,633 392,401 -11.9 1,484,862 1,245,748 -16.1 Acura 5,036 2,350 -53.3 1.1 0.6 -0.5 14,459 9,055 -37.4 1.0 0.7 -0.3 Alfa Romeo 736 757 2.9 0.2 0.2 0.0 2,499 1,757 -29.7 0.2 0.1 -0.1 Audi 8,017 7,966 -0.6 1.8 2.0 0.2 31,442 23,891 -24.0 2.1 1.9 -0.2 BMW 16,112 15,182 -5.8 3.6 3.9 0.3 50,207 45,228 -9.9 3.4 3.6 0.2 Buick 1,401 716 -48.9 0.3 0.2 -0.1 5,543 2,442 -55.9 0.4 0.2 -0.2 Cadillac 2,247 2,658 18.3 0.5 0.7 0.2 8,528 7,612 -10.7 0.6 0.6 0.0 Chevrolet 27,142 29,702 9.4 6.1 7.6 1.5 104,123 82,928 -20.4 7.0 6.7 -0.3 Chrysler 1,223 2,364 93.3 0.3 0.6 0.3 8,543 8,081 -5.4 0.6 0.6 0.0 Dodge 5,339 5,849 9.6 1.2 1.5 0.3 19,115 14,667 -23.3 1.3 1.2 -0.1 Ford 27,362 31,748 16.0 6.1 8.1 2.0 113,066 105,894 -6.3 7.6 8.5 0.9 Genesis 1,661 2,129 28.2 0.4 0.5 0.1 3,738 5,306 41.9 0.3 0.4 0.1 GMC 7,948 7,883 -0.8 1.8 2.0 0.2 27,339 23,880 -12.7 1.8 1.9 0.1 Honda 52,066 24,649 -52.7 11.7 6.3 -5.4 165,633 97,639 -41.1 11.2 7.8 -3.4 Hyundai 17,431 16,679 -4.3 3.9 4.3 0.4 57,254 47,776 -16.6 3.9 3.8 -0.1 Infiniti 1,469 992 -32.5 0.3 0.3 0.0 6,458 3,525 -45.4 0.4 0.3 -0.1 Jaguar 605 339 -44.0 0.1 0.1 0.0 2,454 1,113 -54.6 0.2 0.1 -0.1 Jeep 14,223 11,643 -18.1 3.2 3.0 -0.2 43,710 36,007 -17.6 2.9 2.9 0.0 Kia 20,295 21,542 6.1 4.6 5.5 0.9 61,321 60,344 -1.6 4.1 4.8 0.7 Land Rover 3,410 1,937 -43.2 0.8 0.5 -0.3 13,037 7,321 -43.8 0.9 0.6 -0.3 Lexus 14,610 13,027 -10.8 3.3 3.3 0.0 45,308 37,657 -16.9 3.1 3.0 -0.1 Lincoln 771 959 24.4 0.2 0.2 0.0 3,774 3,045 -19.3 0.3 0.2 -0.1 Maserati 336 232 -31.0 0.1 0.1 0.0 988 918 -7.1 0.1 0.1 0.0 Mazda 11,846 7,248 -38.8 2.7 1.8 -0.9 38,187 25,134 -34.2 2.6 2.0 -0.6 Mercedes 16,519 19,551 18.4 3.7 5.0 1.3 57,074 55,366 -3.0 3.8 4.4 0.6 MINI 1,516 1,350 -10.9 0.3 0.3 0.0 4,381 3,735 -14.7 0.3 0.3 0.0 Mitsubishi 1,469 642 -56.3 0.3 0.2 -0.1 5,057 3,574 -29.3 0.3 0.3 0.0 Nissan 20,733 14,025 -32.4 4.7 3.6 -1.1 78,030 55,077 -29.4 5.3 4.4 -0.9 Other 854 862 0.9 0.2 0.2 0.0 2,779 2,782 0.1 0.2 0.2 0.0 Porsche 4,219 3,505 -16.9 0.9 0.9 0.0 13,595 11,461 -15.7 0.9 0.9 0.0 Ram 11,498 9,820 -14.6 2.6 2.5 -0.1 38,696 30,233 -21.9 2.6 2.4 -0.2 Subaru 16,485 15,743 -4.5 3.7 4.0 0.3 54,465 48,086 -11.7 3.7 3.9 0.2 Tesla 32,165 42,650 32.6 7.2 10.9 3.7 82,040 133,545 62.8 5.5 10.7 5.2 Toyota 83,384 63,662 -23.7 18.7 16.2 -2.5 275,193 216,500 -21.3 18.5 17.4 -1.1 Volkswagen 11,262 9,828 -12.7 2.5 2.5 0.0 35,152 25,663 -27.0 2.4 2.1 -0.3 Volvo 4,243 2,212 -47.9 1.0 0.6 -0.4 11,674 8,506 -27.1 0.8 0.7 -0.1 Source: AutoCount data from Experian.
29 California Auto Outlook 2.3% 4.1% 5.3% 1.9% 2.3% 5.2% 3.9% 4.9% 2.6% 5.1% 10.7% 6.4% 12.8% 3.3% 13.4% 2.1% 2.4% 2.9% 3.0% 3.6% 3.8% 3.9% 4.4% 4.4% 4.8% 6.7% 7.8% 8.5% 10.7% 17.4% 0.0% 5.0% 10.0% 15.0% 20.0% Volkswagen Ram Jeep Lexus BMW Hyundai Subaru Nissan Mercedes Kia Chevrolet Honda Ford Tesla Toyota Market Share State U.S. BRAND SUMMARY Toyota Maintains Big Lead in California New Vehicle Market Registrations increased for Tesla and Genesis. Kia, Mercedes, Chrysler, Ford, and BMW had declines of less than 10 percent. California and U.S. Market Share - YTD 2022 thru Sept. (Top 15 selling brands in state) Percent Change in Brand Registrations YTD 2022 thru September vs. YTD 2021 (Top 30 selling brands in state) Source for California new vehicle registrations: AutoCount data from Experian. Source for U.S. market share: Automotive News. Toyota, Tesla, Ford, Honda, and Chevrolet were market share leaders in California. -45.4% -43.8% -41.1% -37.4% -34.2% -29.4% -29.3% -27.1% -27.0% -24.0% -23.3% -21.9% -21.3% -20.4% -19.3% -17.6% -16.9% -16.6% -15.7% -14.7% -12.7% -11.7% -10.7% -9.9% -6.3% -5.4% -3.0% -1.6% 41.9% 62.8% -130.0% -80.0% -30.0% 20.0% 70.0% 120.0% Infiniti Land Rover Honda Acura Mazda Nissan Mitsubishi Volvo Volkswagen Audi Dodge Ram Toyota Chevrolet Lincoln Jeep Lexus Hyundai Porsche MINI GMC Subaru Cadillac BMW Ford Chrysler Mercedes Kia Genesis Tesla Percent change in registrations
30 Covering Third Quarter 2022 23.5 17.3 12.0 9.4 7.7 7.4 5.4 5.0 3.6 3.4 17.3 12.9 10.2 8.8 10.0 6.9 7.3 11.1 3.6 4.0 0.0 5.0 10.0 15.0 20.0 25.0 Toyota Ford Subaru Kia Hyundai Honda Chevrolet Jeep Nissan Volkswagen Share of Mid Size SUV Segment (%) State U.S. 3.0% 4.1% 4.7% 4.9% 7.9% 10.4% 11.2% 13.0% 16.8% 21.3% VW Atlas Cross Sport Chevrolet Blazer Honda Passport Jeep Grand Cherokee Toyota Venza Ford Edge Hyundai Santa Fe Ford Mustang Mach-E Toyota 4Runner Subaru Outback 4.6% 5.1% 5.5% 6.0% 6.1% 7.6% 7.9% 9.2% 13.5% 22.7% Nissan Pathfinder Jeep Grand Cherokee L Hyundai Palisade Subaru Ascent Chevrolet Traverse Kia Telluride Kia Sorento Honda Pilot Ford Explorer Toyota Highlander SEGMENT CLOSE-UP: MID SIZE SUVs Toyota and Ford Lead State Mid Size SUV Segment Model Sales Leaders Top 10 Selling Models in State for Two Row and Three Row Mid Size SUVs YTD ‘22 thru September Brand Market Share in Mid Size SUV Segment, California and U.S. Markets - YTD 2022 thru September Market Share for Two Row Mid Size SUVs Market Share for Three Row Mid Size SUVs Two Key Trends Mid Size SUV segment is performing better than overall market... Two row SUVs have been gaining market share in Mid Size SUV segment... % Change in New Vehicle Registrations YTD ‘19 thru Sept. to YTD ‘22 Mid Size SUVs: Industry DOWN 13.2% 2 Row SUV Share of Mid Size SUV Segment - YTD ‘19 and YTD ‘22 #1 #2 DOWN 21.6% YTD 2019: YTD 2022: 36.0% 39.3% Toyota, Ford, and Subaru market shares were higher in the state than in the U.S. Data Source: AutoCount data from Experian. Figures in the graph above include retail transactions only. U.S. figures estimated by Auto Outlook. Data Source: AutoCount data from Experian.
31 California Auto Outlook 0 100000 200000 300000 400000 500000 600000 700000 800000 900000 Retail Light Trucks Retail Passenger Cars Fleet Light Trucks Fleet Passenger Cars Registrations YTD '20 YTD '21 YTD '22 BREAKDOWN OF RETAIL AND FLEET MARKETS Retail Market Down 16.6 Percent Thru September; Fleet Registrations Decline 13.3 Percent REGIONAL MARKETS IN CALIFORNIA Northern and Southern California Markets Post Similar Results Data Source: AutoCount data from Experian. PERCENT CHANGE: YTD ‘22 thru Sept. vs. YTD ‘21 Retail cars: DOWN 22.7% Retail light trucks: DOWN 13.3% Fleet cars: DOWN 21.9% Fleet light trucks: DOWN 9.3% Percent Change in New Retail Registrations - YTD ‘22 vs. YTD ‘21 Northern California Cars DOWN 21.3% Light trucks DOWN 13.8% Southern California Cars DOWN 23.4% Light trucks DOWN 13.2% Data Source: AutoCount data from Experian. California New Car and Light Truck Retail and Fleet Registrations - YTD ‘20, ‘21, & ‘22 thru Sep. New Retail Light Vehicle Registrations (excluding fleets) YTD thru Sep. North and South California YTD '21 YTD '22 % chg. Statewide Total 1,244,271 1,037,353 -16.6% Cars 431,598 333,449 -22.7% Light Trucks 812,673 703,904 -13.4% Northern California 418,615 350,717 -16.2% Cars 134,803 106,049 -21.3% Light Trucks 283,812 244,668 -13.8% Southern California 825,656 686,636 -16.8% Cars 296,795 227,400 -23.4% Light Trucks 528,861 459,236 -13.2% Selected Regional Markets San Francisco Bay 216,907 188,019 -13.3% Cars 72,905 60,249 -17.4% Light Trucks 144,002 127,770 -11.3% LA and Orange Counties 468,282 384,464 -17.9% Cars 175,453 132,798 -24.3% Light Trucks 292,829 251,666 -14.1% San Diego County 110,369 94,409 -14.5% Cars 33,928 27,727 -18.3% Light Trucks 76,441 66,682 -12.8%
California Auto Outlook California Used Vehicle Market Declined 13.1 Percent During First Nine Months of 2022 Percent Change in New and Used Vehicle Registrations - YTD ‘22 thru Sept. vs. YTD ‘21 TWO KEY TRENDS IN USED VEHICLE MARKET Data Source: AutoCount data from Experian. CALIFORNIA USED VEHICLE MARKET -16.1% -13.1% -23.6% -9.1% 4.8% New vehicles All used vehicles 3-year-old or newer used vehicles 4- to 6-year-old used vehicles 7- to 10-year-old used vehicles 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% 4-yrs.-old or newer 5- to 8-yrs.-old USED VEHICLE BRAND MARKET SHARE Brand Market Share for Top 15 Selling Brands, by Vehicle Age (YTD ‘22 thru September) Ford market share was higher for 5- to 8-year-old vehicles. Data Source: AutoCount data from Experian. The graph below shows used light vehicle registrations by brand for two age categories: vehicles newer than four years old, and vehicles five to eight years old. Brands are positioned from left to right based on market share for four year old or newer vehicles. Toyota was the best-selling brand for 4-year-old or newer vehicles. Toyota is Top Seller in California Used Vehicle Market 01. 02. Used vehicle registrations in the state declined 13.1 percent during the first nine months of this year versus a year earlier, a smaller drop than the 16.1 percent fall in the new vehicle market. As the year has progressed, strong headwinds have emerged that have impacted used vehicle sales. All of these headwinds are related to vehicle supplies and pricing. Below average new vehicle sales during the past two years have reduced the availability of newer used cars and have resulted in fewer trade ins. In addition, escalating used vehicle prices in 2021 and the first half of this year, combined with a weakening economy have cooled demand. Used vehicle prices have softened over the past several months, however, which should provide a mild boost.
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