Pub 5 2023 Issue 2

CALIFORNIA ISSUE 2, 2023 Official Publication of the California New Car Dealers Association DMV/BAR Issues to Watch for During Buy-Sell Transactions

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 businesses • Trust Agreements including lifetime benefit trusts • Gift and Estate Tax planning Tax • Property Tax planning, audits, and appeals • Federal estate and gift tax controversy audits • 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 of automobiles • Manufacturer audit disputes • Hearings before the AQMD, RWQC and OSHA Real Estate • Dealership site acquisition and dispositions • Lease agreements • Lender Opinion Letters Employment Practices • Wage and hour class action lawsuits • Private Attorneys General Act (PAGA) claims • Arbitration Agreements • Employer Handbooks and Employer Compliance Procedures Ferruzzo & Ferruzzo, LLP began providing legal representation to new car and truck dealers over 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 25 attorneys, we provide a spectrum of legal services to support every aspect of running and owning your new car and/or truck dealership. We have practice groups in each area of the law that 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

21 CONTENTS 11 ISSUE 2, 2023 6 President’s Message Can CA Make It? Working to Meet 100% ZEVs by 2035 Brian Maas, President, California New Car Dealers Association 8 2023 Officers and Directors 10 Dealer Day 2023 15 CNCDA Thanks All Our 2023 Dealer Day Sponsors! 17 CNCDA and Reynolds & Reynolds Partnered to Develop 7th Edition F&I Compliance Manual 18 Prepare for Opening Day Early – Navigating New Systems By Les Swizer, Legal & Regulatory Affairs Counsel, CNCDA ©2023 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. California New Car Dealers Association 1517 L St. Sacramento, CA 95624 www.cncda.org (916) 441-2599 Member Legal Hotline: x1 Staff Brian Maas President Anthony Bento Chief Legal Officer Autumn Heacox Director of Communications & Marketing Cathy Mason Director of Operations Rebecca Matulich Director of Education & Events Kenton Stanhope Director of Government Affairs Les Swizer Legal & Regulatory Affairs Counsel Andrea Daugherty Political Engagement Manager Lauren Johnston Membership Manager Liza Hernandez Staff Accountant Michaela Martinez Executive Assistant Stacy Barawed Administrative Coordinator McKenna Bediamol Administrative Coordinator 10 16 18 20 DMV/BAR Issues to Watch for During Buy-Sell Transactions By Timothy D. Robinett, Esq., Partner at Manning, Leaver, Bruder & Berberich, LLP 23 CNCDA Upcoming Events 2023 24 EVs and the Service Department By Justin Carr, Vice President, Warranty Processing Company 27 Economic Impact Report 2022 32 California Auto Outlook 42 Thank You 2023 Sponsors

Brian Maas President California New Car Dealers Association PRESIDENT’S MESSAGE Can CA Make It? WORKING TO MEET 100% ZEVS BY 2035 multiple pumps, of course). This highlights the need for significant investment in charging infrastructure from all stakeholders, including the government, utilities, and other providers. As dealers, we are essential for EV distribution in California. However, our members cannot also be responsible for manufacturing affordable EVs AND installing and maintaining charging systems throughout the state; the burden is far too heavy for one group to carry alone. Put simply, we are car dealers and not fueling stations. Additionally, data from our newest Auto Outlook report shows that while ICE vehicles still dominate, new hybrid/electric vehicles accounted for 34.2% of new purchases in Q1 of 2023, demonstrating again that dealers are doing our part! As we work towards a future with 100% ZEVs, it is essential to remember that changes in public sentiment, affordability, access, and infrastructure will not happen overnight and cannot be a burden placed solely on the shoulders of California’s new car dealers. These new ZEV requirements are bringing significant changes to the automotive industry, and our members reaffirm their commitment to offering the best EVs on the market to California’s motoring public. That said, these vehicles need a fueling infrastructure that meets the needs of all Californians, whether higher or lower income, urban or rural, homeowners or renters. We are and will continue to do our part as automotive retailers, but all stakeholders need to step up and take on their fair share too. By working together, we can achieve a future with cleaner cars and a more sustainable future. Sincerely, Brian Maas, President California New Car Dealers Association Dear CNCDA members, As we all know, the California Air Resources Board (CARB) recently implemented new zero-emission vehicle (ZEV) goals to reach 100% of new vehicles sold in the state by 2035. Additionally, the Environmental Protection Agency (EPA) just proposed similar standards and guidelines regarding new ZEV sales and production requirements. These rules are already bringing dramatic changes to the automotive industry, and while California dealers are “all-in on EVs,” we are prepared to encourage all stakeholders to also step up to meet these ambitious goals. According to a recent presentation by the Alliance for Automotive Innovation, using a new model leaf blower (meeting CARB's emission standards) for one hour produces MORE ozone-forming pollution than driving a 2020 Jeep Grand Cherokee from Sacramento to Washington, D.C., and back. This perfectly illustrates that the burden of creating a cleaner, electrified California is not solely the responsibility of vehicle manufacturers, let alone new car dealers. If we want a cleaner California, it’s time for all industries to participate. While this is a surprising story, dealers are STILL willing and ready to help meet the standards when it comes to selling EVs in our state. However, with only about 20 out of 91 EV models qualifying for new Inflation Reduction Act tax credits, it is evident that manufacturers will also need to put in the work to make EVs that qualify for these rebates more available and financially accessible to buyers. The state and federal governments must also address charging infrastructure issues to meet their goals. According to data from the U.S. Department of Energy's Alternative Fuels Data Center, there are currently 5,060 electric charging stations in the U.S. as compared to 15,057 gas stations (most of which have 6 California New Car Dealer Quarterly

Running a dealership comes with its share of uncertain terrain. But one thing is certain. Our Dealer Financial Services team is dedicated to being by your side with the resources, solutions and vision to see you through. John Alexander john.f.alexander@bofa.com 213.621.8724 Liane Low-Bevett liane.low-bevett@bofa.com 925.692.7088 business.bofa.com/dealer Making business easier for auto dealers. Especially now. James Diedrich james.a.diedrich@bofa.com 916.326.3103 Bob Ludwig robert.ludwig@bofa.com 949.287.0635 “Bank of America” and “BofA Securities” are the marketing names used by the Global Banking and Global Markets divisions of Bank of America Corporation. Lending, other commercial banking activities, and trading in certain financial instruments are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Trading in securities and financial instruments, and strategic advisory, and other investment banking activities, are performed globally by investment banking affiliates of Bank of America Corporation (“Investment Banking Affiliates”), including, in the United States, BofA Securities, Inc. and Merrill Lynch Professional Clearing Corp., both of which are registered broker-dealers and Members of SIPC, and, in other jurisdictions, by locally registered entities. BofA Securities, Inc. and Merrill Lynch Professional Clearing Corp. are registered as futures commission merchants with the CFTC and are members of the NFA. Investment products offered by Investment Banking Affiliates: | Are Not FDIC Insured | Are Not Bank Guaranteed | May Lose Value | ©2022 Bank of America Corporation. All rights reserved. 4826555 08-22-0145

2023 Officers and Directors EXECUTIVE COMMITTEE Tony Toohey Chairman Auburn Toyota Hilary Haron Vice Chairwoman Haron Jaguar Land Rover Volvo David Simpson Secretary-Treasurer GMC Cadillac of Buena Park John Oh Immediate Past Chairman Lexus of Westminster Rick Niello Region 1 Vice President The Niello Company Jessie Dosanjh Region 2 Vice President Dublin Buick GMC Cheryl Bedford Region 3 Vice President Sunset Auto Center Bruce Hamlin Region 4 Vice President Guaranty Chevrolet Motors, Inc. Robb Hernandez Region 5 Vice President Camino Real Chevrolet 8 California New Car Dealer Quarterly

DIRECTORS Randy Denham SJ Denham, Inc. Taz Harvey Dublin Mazda Matthew Hall AutoNation Western Region Rick Niello 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 Ellena Sweet Fresno Acura Gary Fenelli Frank Toyota Bruce Hamlin Guaranty Chevrolet Motors, Inc. Greg Kaminsky Toyota of El Cajon John Oh Lexus of Westminster David Simpson Simpson Chevrolet of Irvine Anne Boland Bob Smith BMW Matt Browning Browning Automotive Group Ron Charron Boulevard Cadillac Buick GMC Sal Gonzales Culver City Volvo Robb Hernandez Camino Real Chevrolet Devinder Singh Bains Turlock Chrysler Dodge Jeep Ram Region 1 Region 2 Region 3 Region 4 Region 5 9 California New Car Dealer Quarterly

California New Car Dealers Association Dealer Day 2023 MARCH 20 | SACRAMENTO CNCDA would like to thank all who attended, participated, and sponsored 2023 Dealer Day! 10 California New Car Dealer Quarterly

11 California New Car Dealer Quarterly

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Continued from page 12 14 California New Car Dealer Quarterly

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We’re more than a financial partner. We’re an invested one. True relationships matter. We don’t take this lightly. The best are built on a deep understanding of your short- and long-term goals and always backed by thoughtful, strategic advice in support of your vision. With full-service financial solutions and a deep bench of industry expertise, we’ll build a team around your organization to focus on your success. So, let’s drive further—together. To learn more, contact Jason W. Smith, head of Dealer Commercial Services, 407-237-4011 or Jason.w.smith@truist.com. Truist.com/DealerServices © 2022 Truist Financial Corporation, Truist, Truist purple and the Truist logo are service marks of Truist Financial Corporation. All rights reserved. Truist Securities is the trade name for the corporate and investment banking services of Truist Financial Corporation and its subsidiaries. Securities and strategic advisory services are provided by Truist Securities, Inc., member FINRA and SIPC. | Lending, financial risk management, and treasury and payment solutions are offered by Truist Bank. | Deposit products are offered by Truist Bank, Member FDIC.

Every year, California releases an onslaught of new laws that either directly or indirectly affect dealership Finance & Insurance (F&I) offices. A myriad of applicable federal and state laws makes navigating the F&I sales process compliance challenging. As such, CNCDA has continually updated our F&I Compliance Manual to keep pace with the ever-changing environment. This year, CNCDA again commissioned Manning Leaver to produce the 7th Edition of the CNCDA F&I Compliance Manual. Reynolds & Reynolds’ continued partnership with CNCDA resulted in multiple forms for use as examples throughout the manual. The manual consists of 250 pages split over 50 chapters, covering compliance in the F&I office in detail and addressing numerous concerns brought to CNCDA via the Legal Hotline and in discussions with dealers facing the daunting task of F&I compliance. This manual is made for dealers, considering the issues faced by the boots on the ground in dealer showrooms and sales offices throughout California. Additionally, CNCDA and Manning Leaver presented a two-part webinar covering the major changes to the law and the current issues impacting the F&I office. Outlined below are some of the major points dealers should be aware of, but this certainly is not an exhaustive list. New LAW-CA-553 Retail Installment Sale Contract • Existing at over two feet long, this document underwent some changes to reflect the new requirements, and the new version was released March 2023. New Pre-Contract Disclosure • This statutorily required form underwent an update in March 2023 to reflect the changes to match the language in the statute addressing GAP waiver. New laws effective January 2023 vastly changed the way GAP waivers may be sold, including but not limited to: • new limits to amounts of GAP waivers in relation to vehicle value or amount financed; • new disclosures required regarding GAP waivers; • changes to whom dealers may sell GAP waivers to, including a prohibition on selling to an active-duty military member; and • new refund obligations. Prior History Disclosures • Lemon Law Disclosures • Reported stolen • Unwind/rollback • Damage history • NMVTIS vehicle history reports New Requirements for Co-Buyers • The co-signer disclosure form was changed to reflect the additional language Advertising Issues • Statutory duties to sell at advertised price • Discussion of MSRP issues • Discussion of mark-ups and supplemental sticker use GLB Privacy Notices • Covers updates to the requirements • Customer privacy concerns addressed • Information on safeguarding computerized consumer data Trade-in/Lease Return Issues • What fees are allowed or prohibited • Process as required by law • Handling buyouts Safety Recall Issues • Disclosure requirements • Dealer responsibility Use of Supplemental Stickers • When and how to use them • What products or features should be included Credit Card Payments • Discussion of credit card surcharges Fair Credit Compliance • Preventing discrimination Warranty Start Date Requirements • Changes to commencement date requirements of warranties • How service contracts are affected by this new law Partial Driving Automation Features Disclosure • New requirement to notify customers about partial driving features Electronic Contracting • How to remain compliant with the requirement to provide a customer copy of the contract • When e-contracting is permitted Ten-day Right of Rescission • Proper notification procedures • When the right applies • Compliance with processing a rescission Licensing Issues • Navigating the web of new financial licensing regulations A Any dealers or members of dealership staff in the F&I office or who deal with the F&I office did not make it to the webinar can still register and view the recording at www.cncda.org/events. At a minimum, dealers should review the updated 7th Edition of the CNCDA F&I Compliance Manual, available on CNCDA Comply at www.cncda.org. As always, if you have any questions about this or any other legal issue, feel free to reach out to us via the Legal Hotline at legalhotline@cncda.org or 916-441-2599, option 1. CNCDA and Reynolds & Reynolds Partnered to Develop 7th Edition F&I Compliance Manual 17 California New Car Dealer Quarterly

Beginning in October of 2022, the Department of Motor Vehicles (DMV) streamlined its occupational licensing department, moving many functions to the online portal. Previously, a buyer of a dealership had to submit an original dealer application and application fee payment to its local DMV Occupational Licensing Branch, which then moved the process to the next step. Now, dealers must access the DMV’s online portal to submit paperwork, initiate Livescans, and request site visits, among other tasks. As well as submitting paperwork to the DMV, buying dealers must apply for an Automotive Repair Dealer (ARD) license through the Bureau of Automotive Repair (BAR). BAR tends to be very efficient and processes applications rather quickly, but dealers should keep in mind that the whole process, including DMV applications, can take anywhere from two to six weeks and should plan as early as possible. For more information on issues that can arise during the buy-sell process, please see the article on page 20 titled “DMV/BAR Issues to Watch for During Buy-Sell Transactions,” by Tim Robinett of Manning, Leaver, Bruder & Berberich, LLP. While moves toward modernization are applauded, with any new system can come some growing pains. We have heard reports via the Legal Hotline of system issues and slowdowns in processing applications for dealer licenses and, in some instances, even salesperson licenses through the online portal. The bottom line is to be sure to consider these aspects of the buying process, ensuring paperwork is processed as early as possible, especially as the kinks are worked out of the newer online portal. While our experience with the entities issuing requisite licenses to open the doors to a new dealership has generally been helpful and efficient, early preparation could be the key to whether that ribbon gets cut at the grand opening. A If you have any questions about this topic or are having issues with occupational licensing, please reach out to us via the Legal Hotline at (916) 441-2599 or legalhotline@cncda.org. Prepare for Opening Day Early – Navigating New Systems By Les Swizer, Legal & Regulatory Affairs Counsel, CNCDA 18 California New Car Dealer Quarterly

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By Timothy D. Robinett, Esq., Partner at Manning, Leaver, Bruder & Berberich, LLP With the buy-sell market continuing to stay very active, both buyers and sellers involved in a transaction need to keep in mind the licensing issues and timing for both the DMV dealer license and BAR Automotive Repair Dealer (“ARD”) registration. From the seller’s side, the process is fairly simple and straightforward and only requires the selling dealer to complete and submit the DMV’s Notification By Licensee Out-Of-Business Report (Form OL79C) to its local DMV Occupational Licensing Branch, along with its original dealer license and dealer plates. It is important to note that the selling dealer will need to submit this form in order for the DMV to issue the new DMV dealer license to the buyer. The BAR has a similar procedure requiring the selling dealer to submit a Cancellation Request Form (Form BAR-116) to advise the BAR that the dealership is being sold and is canceling its ARD registration effective on the closing date of the transaction. The buyer’s side can be a little trickier and requires advanced planning and preparation in order to make sure that both the DMV and BAR will issue a dealer license and ARD registration in a timely fashion in order to meet the parties’ expectations for the closing date. With respect to the DMV, the buyer will need to complete all of the application forms found on the DMV’s website. Scan the QR code to view the forms. https://www.dmv.ca.gov/portal/vehicleindustry-services/occupational-licensing/ occupational-licenses/vehicle-dealer-license/ In addition to the original signed DMV application forms, the buyer must also submit the following documents to the DMV as part of its application package: 1) a file-stamped copy of its fictitious business name statement (this may take two-six weeks to be issued depending on which county you are located in), 2) a copy of its seller’s permit, 3) the original surety bond (the DMV will check and feel for the raised seal), 4) the OL-124 (Certificate of Proposed Franchise obtained from the manufacturer), 5) completed live scans for all owner/officers listed in the license application (if they have not already been live scanned for the DMV), 6) a file-stamped copy of a recent Statement of Information filed with the California Secretary of State’s Office, 7) photographs of your dealership location (showing the offices, showroom, signage and the address of dealership), and 8) a check for the application fee (which can vary based upon how many dealer plates are requested, and the county in which you will do business). In addition, the DMV now requires new vehicle dealer license applicants to schedule a DMV site visit prior to the DMV issuing the dealer license. Until very recently, the site visit requirement was only for used vehicle dealer applicants, and new vehicle dealers only had to submit photos of their facilities. However, the DMV now requires a physical site visit for new dealer applicants. Based upon communications with several DMV inspectors in different occupational license offices, the procedure to schedule a physical site inspection is a two-step process and requires additional processing time. First, the dealer applicant must submit its original dealer application and check for its application fee to its local DMV Occupational Licensing Branch. DMV/BAR Issues to Watch for During Buy-Sell Transactions 20 California New Car Dealer Quarterly

The buyer’s side can be a little trickier and requires advance planning and preparation in order to make sure that both the DMV and BAR will issue a dealer license and ARD registration in a timely fashion in order to meet the parties’ expectations for the closing date. Once the local DMV inspector reviews and approves the application package, he/she sends it up to the DMV’s Sacramento office for further review and approval. Once Sacramento approves the application, it will enter the new dealer’s info into its computer system. After the applicant’s information has been entered into the DMV’s system, the local DMV inspector will then send the applicant an online link to enter the DMV’s portal to schedule the physical inspection at the dealership. It is strongly recommended that the buyer schedule the physical inspection at least a few days prior to closing to allow for any delays on behalf of the DMV and to correct any deficiencies pointed out by the DMV inspector. Lastly, when scheduling your buy-sell closing date, please keep in mind that most of the local DMV Occupational Licensing Offices are closed on Wednesdays. With respect to the BAR ARD application, the buyer will need to complete the appropriate form and submit it to the BAR with a $200 check for the application fee. Please also note that the BAR has two different application forms — one for corporations and one for LLCs. Unlike the DMV, the BAR application and check must be sent straight to the BAR’s Office in Sacramento. Therefore, it is important to make sure the correct form is being used in order to avoid delays. In addition to the information required for the DMV dealer license, the BAR also requests the applicant’s California EPA license number, which can be obtained in advance from the Department of Toxic Substances Control. The form can be found by scanning the QR code. https://dtsc.ca.gov/ apply-for-hazardous-waste-epa-id-number/ Submit the form via email. The BAR can take upwards of two-four weeks or more to issue the ARD registration. Therefore, it is recommended that this process start at least a month prior to the parties’ scheduled closing date. A 21 California New Car Dealer Quarterly

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23 California New Car Dealer Quarterly

EVs and the Service Department By Justin Carr, Vice President, Warranty Processing Company Change is tough, but a lot of good can come from it. We’ve seen this repeatedly as disruptors redefine and restore balance to industries. EVs will cause a big shift, complete with changes to policy and procedure. However, as electric vehicles go mainstream, there will still be plenty to do in dealership service departments. EVs need maintenance and repairs despite dealer concerns that EVs require less maintenance than other vehicles because they have fewer parts and no need for engine-oil changes or regular service visits. For many dealerships, the service department’s bread-and-butter revenue mainly comes from work involving alignments, brakes, electrical systems, suspensions and tires. So it will help worried dealers to remember what’s on EVs: brakes, electrical systems, tires, steering systems and suspensions. Lube, oil and filter services have been the entry point for most service departments. Still, because EV batteries are heavy, EVs weigh more than otherwise similar vehicles with gas-powered engines. The weight wears out tires faster. Since EV tires need to be rotated and replaced more often, tire maintenance and replacement will be the new entry point for EVs. Additionally, EV repairs are usually expensive. History tells us that new technologies need an iron-out period, and EVs are no exception. Components break, and batteries have issues. As the vehicles evolve, there will be new opportunities for service. Starting with Ford, manufacturers seem to be giving the impression that they want to copy Tesla’s methods for handling repairs and eliminate the labor rate or parts markups they currently pay when dealers are involved. Doing so would increase their control and improve their bottom line, so manufacturers are putting requirements in place regarding the repairs a dealer can do. For example, Ford won’t allow dealer service departments to fix certain vehicles without having a specific equipment set. It will be interesting to see how this power play ends. We know dealers must protect the value of their service departments, and we also know that dealers understand service better than the manufacturers do. What are the first steps in finding a better solution? Recognize what the market is today and how it affects you. Also, continue planning for the future by getting clients in the door to repair and service their vehicles, and give them the best experience possible. A general manager may not have an expert to explain why a cost-cutting decision in the service department is a mistake, and it’s easy to miss important variables that drive revenue in the service department when you make decisions from 30,000 feet. Getting parts will continue to be a problem, and some repairs will take longer than others. As a dealer, do what you can to control processes, training and oversight. If you don’t have the bandwidth, find a strong partner who can fill in the gaps and work closely with your team. People are trying to automate the warranty process. It is nice when you can get simple repairs handled, but not everything is cookie-cutter. Your bread and butter comes from a few areas. One is maximizing the bigger repairs and understanding how to get the most out of that newly acquired labor rate or parts markup percentage increase. Another is creating efficiencies and processes that benefit the entire service department team. Education is still the key to growth and progress in service departments. When managers see markets drop, it’s easy to make hasty decisions without understanding the impact of that decision on the service department. Managers might think they can find cheaper ways to do things, but then receivables shrink or inefficiencies cut into profit margins. Claims fall, revenue decreases, and management doesn’t get the same knowledgeable reporting. That’s why it is important to think about how decisions affect everyone down the line as well as planning for the future. Everything will fall into place if we make good moves that benefit everyone. The service department must ensure their people understand their role and do their jobs to legitimately maximize warranty dollars. If the department can structure itself properly, which includes processes and efficiencies, they will be ready for the future. That future includes a rebounding market. When that happens, you want to be ready to absorb the full level of profitability by making sure the service department can deal with increased work without hiring staff. 24 California New Car Dealer Quarterly

Manufacturers always make changes, so you need to hire and retain staff with the knowledge to direct repair orders. A Service Manager, Technician, or Service Advisor like that can bring everyone else up. Even though it can be hard to find and hire staff with tribal knowledge, a lower-cost person doesn’t have the same skills. Skilled team players are expensive because they know their roles and what they should be doing. They stay in front, training and lifting the department. Hiring the right person or partner is like deciding whether to buy steak or jello. Jello costs much less, but it is no substitute for steak. If you end up hiring inexperienced staff in critical positions, in the absence of having a lot of senior people, it is easy for bad habits to spread. Then you have bigger problems to fix and miss out on the money you could have been earning. Cleaning up these types of internal messes pulls your critical team members down rabbit holes they shouldn’t be in. Although many dealers don’t have the time and money to train in-house, they can create partnerships by consulting and outsourcing with a good outside company that acts like a life coach and mentor for their business. The dealership can use a consulting company to keep employees on track and responsible, including new people. The consultants can do stand-in work when employees are gone, lift teams, and keep them on track. The right company will actively find patterns of problems, spoon-feed dealers the information they need and give them options to improve. Dealers can then learn from the consultant’s processes and keep moving forward. With a nonbiased partner, you can find ways to help everybody and grow the service department. It’s important to know why you are doing something because you will get stuck or slide backward if you do things for the wrong reasons. Success comes from acting purposefully for all the right reasons. Although EVs are a big change, they offer dealers many new opportunities. A Justin Carr is a VP at Warranty Processing Company, which recently relocated to Texas. Justin works with dealers nationwide to increase efficiencies within service departments and educates dealer staff on why efficiencies matter. Since EV tires need to be rotated and replaced more often, tire maintenance and replacement will be the new entry point for EVs. 25 California New Car Dealer Quarterly

We have the road map. Arent Fox’s Automotive Group drives innovative strategies forward. Our cutting-edge, national practice advises automotive leaders as the industry faces a dizzying array of competitive and regulatory hurdles. Key Contacts Aaron H. Jacoby Automotive Practice Leader, LA 213.443.7568 aaron.jacoby@arentfox.com Russell P. McRory Partner, NY 212.484.3942 russell.mcrory@arentfox.com Victor P. Danhi Partner, SF 415.757.5505 victor.danhi@arentfox.com Smart In Your World arentfox.com

THE CONTRIBUTIONS OF CALIFORNIA’S FRANCHISED NEW CAR DEALERS Economic Impact Report2022 27 California New Car Dealer Quarterly

AVERAGE DEALERSHIP INDUSTRY TOTAL New vehicle department $57.00 million $82.55 billion Used vehicle department $26.60 million $38.52 billion Service department $5.60 million $8.10 billion Parts and accessories department $7.47 million $10.82 billion Finance & insurance department $3.80 million $5.50 billion Other departments $0.78 million $1.14 billion Total dealership sales $101.25 million $146.63 billion VEHICLE SALES (SUMMARY FOR AVERAGE CA DEALERSHIP) UNITS SOLD $ PER UNIT TOTAL New vehicles 1,170 $48,718 $57.00 million Used vehicles* 950 $28,000 $26.60 million DEALERSHIP SALES AVERAGE DEALERSHIP INDUSTRY TOTAL Full time employees 91 131,768 Part time employees 3.5 5,068 Total employees 94.5 136,836 Annual payroll $9.14 million $13.23 billion Percentage of dealerships that provide access to health insurance for employees 97% 97% Workers’ compensation premiums per employee $1,470 $1,470 Workers’ compensation premiums paid $133,770 $193.70 million EMPLOYMENT & PAYROLL 7.3% 5.5% 26% 56% 4% * Includes retail and wholesale transactions. Generated by CA’s New Car Dealers in 2022 TOTAL SPENT FOR PRODUCTS AND SERVICES FROM OTHER CALIFORNIA BUSINESSES AVERAGE DEALERSHIP $2.27 million INDUSTRY TOTAL $3.29 billion

TAXES AVERAGE DEALERSHIP INDUSTRY TOTAL State sales tax $5.84 million $8.46 billion Federal payroll taxes $2.31 million $3.34 billion State payroll taxes $541,000 $783.37 million Real estate taxes $159,000 $230.23 million Other state and local taxes $106,200 $153.78 million Total taxes collected and paid by California’s new car dealers $8.96 million $12.97 billion AVERAGE DEALERSHIP INDUSTRY TOTAL Amount spent on EV charging infrastructure during 2021 $24,600 $35.45 million Estimated expenditures on EV charging infrastructure during 2023 $235,000 $340.28 million CA’S ELECTRIC VEHICLE MARKET 2022 EV MARKET SHARE 17.1% (9.5% in ‘21) NUMBER OF EVS SOLD IN 2022 285,199 (176,357 in ‘21) Average sales tax generated on the sale of a new vehicle in Los Angeles: $4,628.21 % OF REPAIR WORK: Recalls Warranty Customer pay % OF TECHNICIANS CERTIFIED FOR EV SERVICING 34% Generated by CA’s New Car Dealers in 2022 CHARITABLE GIVING AVERAGE DEALERSHIP INDUSTRY TOTAL Number of service technicians employed at dealerships 22 31,856 Number of additional service technicians needed 4 5,792 Number of repair orders 22,900 33.2 million SERVICE TECHICIANS In 2022, California new car dealers made over $62.84 million in donations to charitable and civic organizations, a 29% increase in charitable giving since 2019. 8% 28% 64% 29 California New Car Dealer Quarterly

CALIFORNIA NEW CAR DEALERS ASSOCIATION 1517 L Street l Sacramento, CA 95814 l Phone 916.441.2599 l www.cncda.org ANNUAL CONTRIBUTIONS OF CALIFORNIA NEW CAR DEALERS Total sales $146.61 billion Average sales per dealership $101.25 million Share of total statewide sales tax collected 16% Number of new car dealerships 1,448 DEALERS EMPLOY HARD WORKING CALIFORNIANS Total payroll for all new car dealerships $13.23 billion Total number of new car dealership employees 136,836 DEALERS PLAY AN IMPORTANT ROLE IN CALIFORNIA AS BUSINESS AND CIVIC LEADERS Total taxes collected or paid $12.97 billion Total spent for products and services from other California businesses $3.29 billion Donations to charitable and civic organizations $62.84 million 2022 CALIFORNIA VEHICLE SALES New vehicles sold* 1,667,831 Used retail vehicles sold** 861,560 Used wholesale vehicles sold 514,040 Total new and used vehicles sold 3,043,431 Electric vehicles sold 285,199 * New vehicles sold based on California registrations. ** Includes retail transactions only This report provides an in-depth analysis of the economic impact of California new car and truck dealers on the State’s economy. It includes estimates of employment, personal income, and tax collections generated by California new car dealers. Also included is a review of dealership financial statistics and operations. This report was prepared by Auto Outlook, Inc., an independent automotive market analysis firm, and was sponsored by the California New Car Dealers Association. The report was compiled based on data collected from AutoCount from Experian, Auto Outlook, California’s new car dealerships, as well as government sources. CALIFORNIA’S NEW CAR DEALERS ARE DRIVING THE CALIFORNIA ECONOMY 30 California New Car Dealer Quarterly

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California Auto Outlook Comprehensive Information on the California Vehicle Market Volume 19, Number 2 Released May 2023 Covering First Quarter 2023 TM Publication Sponsored By: California New Vehicle Market Moved Higher in First Quarter 2023 vs. Year Earlier TWO YEAR PERSPECTIVE Historical Data sourced from Experian Automotive. *2023 forecast by Auto Outlook. California Annual New Light Vehicle Registrations - 2008 thru 2023 ANNUAL TRENDS QUARTERLY RESULTS California Quarterly New Light Vehicle Registrations Percent Change vs. Year Earlier Data sourced from Experian Automotive. 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 1.67 1.78 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 '22 YTD '23 Change YTD '22 YTD '23 Change Registrations TOTAL 425,216 450,000 5.8% 3,317,506 3,594,969 8.4% Car 133,771 139,367 4.2% 681,132 768,851 12.9% Light Truck 291,445 310,633 6.6% 2,636,374 2,826,118 7.2% Domestic 151,781 169,612 11.7% 1,450,896 1,611,967 11.1% European 61,015 66,490 9.0% 320,912 358,068 11.6% Japanese 178,399 171,568 -3.8% 1,223,105 1,242,580 1.6% Korean 34,021 42,330 24.4% 322,593 382,354 18.5% Market Share Car 31.5 31.0 -0.5 20.5 21.4 0.9 Light Truck 68.5 69.0 0.5 79.5 78.6 -0.9 Domestic 35.7 37.7 2.0 43.7 44.8 1.1 European 14.3 14.8 0.5 9.7 10.0 0.3 Japanese 42.1 38.1 -4.0 36.9 34.6 -2.3 Korean 8.0 9.4 1.4 9.7 10.6 0.9 Source for California new vehicle registrations: Experian Automotive. Source for U.S. sales: Automotive News. -15.5% -13.8% -21.6% -11.9% 13.6% 5.8% 4Q '21 vs. 4Q '20 1Q '22 vs. 1Q '21 2Q '22 vs. 2Q '21 3Q '22 vs. 3Q '21 4Q '22 vs. 4Q '21 1Q '23 vs. 1Q '22 % change vs. year earlier New vehicle registrations in California are predicted to approach 1.8 million units this year and increase 6.9 percent from 2022. Following three years of below average sales, pent-up demand is at elevated levels as the volume of postponed purchases continues to grow. This will be the driving force for the market for the remainder of the year. Weakening consumer affordability will hold back the release of pent-up demand, but improving vehicle inventories should be sufficient to push sales above current levels. New light vehicle registrations in California increased 5.8 percent in the First Quarter of this year versus the year earlier, slightly below the 8.4 percent improvement in National sales. After several years of steep declines, fleet purchases in the state have accelerated in 2023. Fleet registrations increased by 38.7 percent versus the slim 1 percent increase in retail registrations. New vehicle registrations in the state increased for the second consecutive quarter in 1Q ‘23. Prior to the fourth quarter of last year, the market declined by more than 10 percent for four consecutive quarters. California’s new vehicle market is predicted to increase higher than last year’s results in the remaining three quarters of this year. California New Light Vehicle Registrations and U.S. New Vehicle Sales - YTD ‘22 and YTD ‘23 thru March 32 California New Car Dealer Quarterly

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. OUR SERVICES • Illness and Injury Prevention • Safety Inspection and 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 and Reporting

California Auto Outlook 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% 120.0% 140.0% 160.0% Franchised Dealerships Direct Sellers 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 2016 2017 2018 2019 2020 2021 2022 YTD '23 Market Share Electric Hybrid (excl. plug ins) Plug in Hybrid Non-Luxury SUVs, 34% Luxury SUVs, 19% Pickups and Vans, 16% Small Cars, 12% Luxury & Sports Cars, 11% Non-Luxury MidSize & Large Cars, 8% Non-Luxury SUVs, 35% Luxury SUVs, 16% Pickups and Vans, 17% Small Cars, 12% Luxury & Sports Cars, 12% Non-Luxury MidSize & Large Cars, 8% SEGMENT MARKET SHARE TRENDS Luxury SUV Market Share Approaches 20 Percent HYBRID AND ELECTRIC VEHICLES Estimated Electric Vehicle Market Share Approached 20 Percent in 1Q ‘23 Segment Market Shares in California YTD 2022 thru March Segment Market Shares in California YTD 2023 thru March The two graphs above show market shares for primary segments in during the first three months of 2022 and 2023. Data sourced from Experian Automotive. Non-Luxury SUV Share YTD ‘22: 35% Estimated Hybrid and Electric Vehicle Market Share The graph and table above show 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 ‘23: 34% Estimated Hybrid and Electric New Vehicle Registrations and Market Share 2019 2020 2021 2022 YTD 2023 Electric registrations 106752 101628 176357 285199 87525 Electric share 5.1% 6.2% 9.5% 17.1% 19.5% Hybrid regs. (excl. plug ins) 117218 113103 196777 183461 49680 Hybrid share (excl. plug ins) 5.6% 6.9% 10.6% 11.0% 11.0% Plug in hybrid regs. 52329 31144 61261 50035 16470 Plug in hybrid share 2.5% 1.9% 3.3% 3.0% 3.7% Percent Change in New Retail BEV Registrations for Vehicles Sold by Franchised Dealerships and Direct Sellers YTD 2023 thru March vs. YTD 2022 Up 140% New retail registrations for battery electric vehicles sold at franchised dealerships increased by 140 percent during the first three months of this year versus the year earlier. New registrations for vehicles sold by direct sellers increased 14 percent. Franchised dealership share of the state’s new retail BEV market increased from 19.0 percent in 1Q ‘22 to 32.9 percent this year. Data sourced from Experian Automotive. BEV share: 2022 annual: 17.1% 1Q ‘23: 19.5% Up 15% 34 California New Car Dealer Quarterly

Covering First Quarter 2023 The table below shows the top five selling models during the first three months of 2023 in 18 segments. In addition to unit registrations, it also shows each model’s market share in its respective segment. Sales results for many models are still being negatively impacted by supply chain issues and limited vehicle inventories. MODEL RANKINGS Tesla Model Y was Best-Seller in California New Vehicle Market BEST SELLERS IN PRIMARY SEGMENTS Small Cars: Honda Civic Full Size Pickup: Ford F-Series 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 Compact SUV: Tesla Model Y Data sourced from Experian Automotive. Figures for Prius include Prius Prime. Model Regs. Share Model Regs. Share Model Regs. Share Model Regs. Share Honda Civic 10375 20.7 Toyota Camry 13929 39.0 Ford Mustang 2301 42.8 Tesla Model 3 17715 48.9 Toyota Corolla 10100 20.2 Honda Accord 9879 27.7 Dodge Challenger 982 18.3 Mercedes C-Class 2495 6.9 Chevrolet Bolt 7296 14.6 Chevrolet Malibu 3792 10.6 Chevrolet Camaro 788 14.7 BMW 3-Series 2139 5.9 Kia Forte 7020 14.0 Nissan Altima 3565 10.0 Mazda MX5 453 8.4 Lexus ES 2021 5.6 Hyundai Elantra 3412 6.8 Dodge Charger 1465 4.1 Toyota 86 367 6.8 BMW i4 1631 4.5 Model Regs. Share Model Regs. Share Model Regs. Share Model Regs. Share BMW 5-Series 2038 17.1 Toyota Tacoma 9543 48.1 Ford F-Series 12955 34.4 Honda Odyssey 2111 35.4 Mercedes EQS 1499 12.6 Ford Maverick 2490 12.5 Chevrolet Silverado 9527 25.3 Toyota Sienna 1909 32.0 Mercedes S-Class 1018 8.5 Nissan Frontier 1710 8.6 Ram Pickup 5973 15.9 Chrysler Pacifica 1447 24.2 Chevrolet Corvette 789 6.6 Chevrolet Colorado 1583 8.0 GMC Sierra 5355 14.2 Chrysler Voyager 292 4.9 BMW 7-Series 706 5.9 Ford Ranger 1517 7.6 Toyota Tundra 2610 6.9 Kia Carnival 212 3.6 Model Regs. Share Model Regs. Share Model Regs. Share Model Regs. Share Ford Transit Connect 3117 37.3 Honda HR-V 5327 17.3 Toyota RAV4 13326 20.8 Subaru Outback 3587 18.6 Mercedes Sprinter 2045 24.5 Subaru Crosstrek 5260 17.1 Honda CR-V 6912 10.8 Ford Mustang Mach-E 2813 14.6 Ram Promaster 1911 22.9 Kia Niro 3555 11.6 Jeep Wrangler 5569 8.7 Hyundai Santa Fe 2261 11.7 Chevrolet Express 496 5.9 Hyundai Kona 2484 8.1 Nissan Rogue 5242 8.2 Toyota 4Runner 2225 11.5 Ford E-Series 356 4.3 Kia Soul 2367 7.7 Mazda CX-5 3955 6.2 Jeep Grand Cherokee 2205 11.4 Model Regs. Share Model Regs. Share Model Regs. Share Model Regs. Share Toyota Highlander 6218 20.7 Ford Bronco 3343 31.7 Mercedes GLA-Class 1060 20.5 Tesla Model Y 31940 64.5 Ford Explorer 4698 15.6 Chevrolet Tahoe 2105 20.0 Audi Q3 812 15.7 Audi Q5 3245 6.6 Honda Pilot 2896 9.6 Chevrolet Suburban 1235 11.7 Lexus UX 783 15.2 Lexus NX 2951 6.0 Kia Sorento 2329 7.7 Ford Expedition 1045 9.9 Volvo XC40 721 14.0 BMW X3 2146 4.3 Kia Telluride 2172 7.2 GMC Yukon 768 7.3 Audi Q4 E-Tron 625 12.1 Porsche Macan 1650 3.3 Model Regs. Share Model Regs. Share Model Regs. Share Model Regs. Share Lexus RX 3820 16.2 Land Rover Range Rover 1106 19.7 Tesla Model 3 17715 12.7 Tesla Model Y 31940 10.3 Mercedes GLE-Class 3025 12.8 Cadillac Escalade 1042 18.6 Toyota Camry 13929 10.0 Toyota RAV4 13326 4.3 Tesla Model X 2806 11.9 BMW X7 884 15.8 Honda Civic 10375 7.4 Ford F-Series 12955 4.2 BMW X5 2575 10.9 Mercedes GLS-Class 828 14.8 Toyota Corolla 10100 7.3 Toyota Tacoma 9543 3.1 Acura MDX 1444 6.1 Mercedes G-Class 726 13.0 Honda Accord 9879 7.1 Chevrolet Silverado 9527 3.1 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 2023 thru March) 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 35 California New Car Dealer Quarterly

EPIC is proud of its partnership with more than 300 California dealerships and is the CNCDA’s only licensed broker for Health Insurance and Workers’ Compensation. As the dealers’ consultant, experience what EPIC can do for you today, including: • A team producing real results and decades of experience with dealerships and their specific needs • Proprietary Workers’ Compensation and specific insurance products tailored for dealerships • Full compliance, along with audit and claims management EPICBROKERS.COM ©2023 Edgewood Partners Insurance Center. All rights reserved. | CA License: 0B29370 LEARN MORE ABOUT OUR SERVICES BY CONTACTING: Alison McCallum (949) 422-6431 alison.mccallum@epicbrokers.com Eric Kitei (949) 228-2779 eric.kitei@epicbrokers.com RS18001-CarDealerAd-jy04-final3-outlines.indd 1 12/11/18 1:28 PM 36 California New Car Dealer Quarterly

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