Official Publication of the California New Car Dealers Association CALIFORNIA ISSUE 1, 2022 18 How California’s New Car Dealers Can Utilize the Tools at ElectricForAll.org 14 Economic Impact Report 2021 23 Car Careers Scholarship 26 As California Transitions to Electric Vehicles, Franchise Laws Are More Important Than Ever
• 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. 26 CONTENTS 12 18 ISSUE 1, 2022 6 President’s Message: It’s Shaping Up to Be a Year to Remember 8 2022 Events 10 2022 Officers and Directors 12 Dealer Day Legislative Recap 14 Economic Impact Report 2021 18 How California’s New Car Dealers Can Utilize the Tools at ElectricForAll.org 23 Car Careers Scholarship 24 The Ins & Outs Of Dealership Communication 26 As California Transitions to Electric Vehicles, Franchise Laws Are More Important Than Ever 28 California Auto Outlook
6 BRIAN MAAS President California New Car Dealers Association President’s Message: It’s Shaping Up to Be a Year to Remember We are only several months into 2022, and already this year is one for the books. With an unprecedented effort to eliminate PAGA, a historic election year that will change the legislature for years to come, and a full slate of legislative battles, CNCDA is in overdrive to seize the opportunities in front of us. Just ahead of the New Year, we launched a massive fundraising effort to support our ballot initiative to replace PAGA. CNCDA is leading the entire business community to bring this issue to the voters and finally be rid of the lawsuits it brings. In just three months, we raised over $3 million, demonstrating the leadership of our dealers in taking on this fight. Other groups have stepped up to the plate, following your example. This month, we held our annual Dealer Day event; we went back to Sacramento for the first time in two years. The voices of those in attendance were critical to our efforts in the Capitol. The legislature has kept our advocacy team busy with a long list of propositions that would have massive impacts on dealers. Chiefly among them, and a heavy topic at Dealer Day, AB 2311 would place restrictions on dealers’ ability to offer GAP protection to their customers. The bill would place caps on how much waivers could cover, mandate even more disclosures, and could lead to it ultimately no longer being worth the effort to offer. Another bill, SB 1311, would mandate car dealers provide an annual, cost-free right for military service members who purchase or lease a motor vehicle to cancel the purchase or lease within 30 days, essentially providing a free, brandnew rental car at the expense of the dealer. Worse still, those that violate this law face a misdemeanor and could even be sentenced to prison. Fortunately, it’s not all a fight in opposition. This year, we are fighting to finally modernize the Document Processing Charge (DPC) and get dealers the compensation they deserve. With the help of Senator Bob Archuleta, SB 1249 faces a difficult path to the Governor’s desk, but the tireless work being done by our team has given it an extremely promising start. As we approach November, PAGA is not the only thing we are watching closely on the ballot. With new district lines drawn, many lawmakers have decided not to seek reelection, and with others terming out, this election will bring the most open seats in recent memory. Many of these new lawmakers will remain fixtures in the Legislature for the next 12 years, providing an invaluable opportunity to create relationships now. In another historical development, an unprecedented three dealers are currently running for legislative office. Matt Gunderson, Jasmeet Bains, and Roger Niello have all started their campaigns and would bring to the Capital the knowledge and experience of what it takes to be California’s new car dealers. The value these three would bring to the legislature, and the opportunity this represents, cannot be overstated. Beyond our advocacy efforts, I would be remiss in not addressing what we have all been waiting for; we are extremely excited to welcome the return of in-person events! After a taste of normalcy during last year’s Convention in Hawaii, we have been anxiously awaiting any chance to get back to seeing one another. Dealer Day was long overdue and everything we could have hoped for, setting the stage for even more excitement for this year’s annual Convention. A huge thank you to everyone who joined us; it would not have been what it was without you. Speaking of the Convention, it’s hard to compete with Maui, and last year’s event set the bar to new heights. This year, we will raise it even further. With the stunning backdrop of the Ritz Carlton Laguna Niguel and hopefully pandemic era restrictions long behind us, we look forward to exceeding your expectations this October. As always, your CNCDA team is here to provide the resources you need to keep your dealership running smoothly. As we leave many pandemic-era restrictions behind, CNCDA will continue to provide the same insights and guidance we have over these tumultuous last two years. Thank you for your continued support for our association; our dealers make it all possible. 3
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8 REGISTER NOW AT REGISTRATION FOR 2022 WEBINARS: $49 www.cncda.org/events ON EVENTS BY VISITING STAY UP-TO-DATE www.cncda.org/events APRI 21 F&I Series, Part IV 10am - 11:30am MAY 19 Franchise Law Webinar 10am - 11:30am APRI 19 Motor Vehicle Dealers Tax Webinar 10am - 11:30am JUNE Advertising Law Date & Time TBD JU Y 14 Employment Law Series Part I 2pm - 3:30pm AUGUST 19 Employment Law Series Part II 2pm - 3:30pm SEPTEMBER 8 Employment Law Series Part III 2pm - 3:30pm JUNE 22 NorCal Member Appreciation Dinner The Ritz-Carlton Half Moon Bay, CA Upcoming Webinars : 2022 CNCDA UPCOMING EVENTS Upcoming In-Person Events: OCTOBER 2 - 5 CNCDA Annual Convention The Ritz-Carlton Laguna Niguel, CA
Tommy Struchen and his team service about 450 vehicles a month. To move all these cars through the dealership efficiently, he needed to streamline communications between dealership employees as well as with customers. With VUE, the Service team can communicate immediately with other employees within the DMS. Technicians can take notes and send them to their advisors, so there is no miscommunication about the repair orders. When advisors inspect vehicles, technicians can see what tickets are assigned to them and appropriately plan for it in real time. EASE OF USE. CONSIDER VUE DMS. RECONSIDER Since the install, processes have been a lot more seamless. From technicians to service advisors to including even the parts department. It made everyone’s job so much easier. Tommy Struchen Service Manager, Mack Grubbs Hyundai CONSIDER VUE DMS 866.928.3210 | VUEDMS .COM/CALIFORNIA
10 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
11 2022 Directors Randy Denham S.J. Denham Chrysler Jeep Fiat Taz Harvey Dublin Mazda Steve Kwak AutoNation - Toyota of Cerritos 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 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
12 This month, CNCDA hosted its annual Dealer Day event – back in person – in Sacramento for the first time in over two years. I would like to give a huge “thank you” to everyone that attended and participated in the day’s events – it truly makes a difference and has set the stage for our efforts this year. We’d also like to thank our sponsors, vendors, and partners who helped make this event possible. For those who were able to attend, this year’s event more than made up for lost time. As we continue through the second year of a two-year legislative cycle, lawmakers are running on all cylinders to ensure their legislative priorities are successful. After two years of conversation largely centered around COVID-19, this year promises to be a whirlwind of policy conversations centering primarily around employment laws, homelessness, and crime – just to name a few. CNCDA has taken the opportunity this year to push for one of our long-sought objectives, modernizing the Document Processing Charge (DPC). To that end, CNCDA has proposed a sponsored bill, SB 1249 by Senator Bob Archuleta (D-Pico Rivera), to modernize the DPC to finally secure the compensation dealers deserve for the work they do on behalf of customers every single day. California’s new car dealers provide a wide range of document processing services that benefit customers, saving significant time, money, and hassle while ensuring consumers benefit from the strongest consumer protections anywhere in the nation. Providing these services for consumers requires substantial staff time, training, and technology at each dealership. However, current law only allows California dealers to recover a statutory maximum of $85 of these substantial costs through the DPC, which is well below their actual costs in performing the required services. California’s DPC is the lowest in the nation – roughly ¼ of the national average – despite the fact that California’s car dealerships are subject to the most stringent document processing and compliance requirements in the country. SB 1249 would modernize California’s DPC to more accurately reflect the costs of these important services by gradually increasing the DPC over five years – beginning in 2024 and then adjusting for inflation every year starting in 2030. It would also establish a new fee upon dealers to be deposited in the state Motor Vehicle Account to fund important DMV and CHP operations. This ensures that new car dealers and their employees can continue offering valuable services and protections for consumers. But, as we fight to pass our own legislation, we also face a number of bills targeting dealers directly. AB 2311: SEVERE LIMITATIONS ON GAP PROTECTION As a stand-alone protection, traditional auto insurance does not make a consumer whole financially if their car is wrecked or stolen and they owe more on the auto loan than the vehicle is worth. Insurance companies will pay the consumer for the value of the vehicle, not including any amount they may be upside down on their Dealer Day Legislative Recap By Alisa Reinhardt, Director of Government Affairs
13 vehicle loans. That is why, for many consumers, GAP protection provides a relatively low-cost method to secure peace of mind and protect against the possibility of having to make payments on a vehicle they no longer own for months or years. Especially with both new and used vehicle prices reaching record highs in the past few years and the reality that many Americans cannot afford to put multiple thousands of dollars down on a vehicle purchase, GAP protection can provide a valuable safeguard. Despite this, Attorney General Bonta is sponsoring AB 2311 by Assembly Member Brian Mainschein (D-San Diego), which would place significant limits on GAP protection dealers can offer their customers. AB 2311 would strictly limit the amount charged for GAP to 2% of the amount financed under a conditional sales contract and prevent dealers from offering a customer the option to purchase GAP if the conditional sales contract’s loan to value ratio or amount financed at the contracting date exceeds certain complicated formulas. The bill would also void the GAP protection and provide the customer a refund of GAP charges, plus the finance charges attributable to the GAP protection if a dealership employee makes an error. The buyer may also be able to recover three times the amount of any GAP charges as a penalty. And unsurprisingly, it would also require over-the-top disclosure warnings, even though dealers already provide customer notices and disclosures regarding GAP protection purchases. These overly onerous restrictions on GAP protection would result in an unstable GAP market and cause many dealers to decide the risk of offering GAP to customers who may need it the most is just not worth it. Given that GAP customers primarily include those with lower incomes, smaller reserves for emergencies, and longer and larger loans (that could indicate smaller down payments and higher loan-to-value), such conditions entail higher risks and make GAP protection a more attractive option to provide peace of mind. California’s new car dealers understand the true value of these products to customers. They work with consumers every day to recommend and provide purchases and protections that make sense for each individual. As the direct connection with customers and as the ones who hear the horror stories of consumers paying for vehicles long after a total loss occurs, dealers are in the best position to inform their local legislators about the value customers have seen and the important protections GAP protection provides. SB 1311: MANDATES ANNUAL FREE 30-DAY+ RIGHT OF VEHICLE RETURN FOR CERTAIN MILITARY SERVICE MEMBERS Another bill specifically targeting dealers was introduced disguised as an innocuous veterans’ protection. California is home to almost 163,000 military service members, many of whom have or intend to purchase vehicles. All consumers, including service members, are covered by some of the most robust protections in the country when they purchase a vehicle from a new car dealer in California. Despite this long list of existing consumer protections, SB 1311 – authored by Senator Susan Eggman (D-Stockton) and Senate Pro Tem Toni Atkins (D-San Diego) – would mandate car dealers to provide an annual, cost-free right for military service members in the grade of E-5 or below who purchase or lease a motor vehicle in the state to cancel the purchase or lease up to 30 days from the date on which the servicemember took possession of the vehicle, or the date on which the servicemember obtained title to the vehicle, whichever is later – essentially providing a free, brand-new rental car for 30 days at the expense of the selling or leasing dealer. A service member who chooses to cancel a vehicle purchase or lease would be entitled to a return of any trade-in and a full refund of all amounts paid within 24 hours of returning the vehicle. This bill does not distinguish between new and used vehicles, and only provides that the vehicle must be returned to the dealer in “substantially the condition in which the service member received it.” California and federal law impose many requirements on dealers related to the sale of motor vehicles. These laws include the California Car Buyer’s Bill of Rights, which was signed into law in 2006. Part of this comprehensive consumer protection package is the used car contract cancellation option agreement. Consumers who purchase a used car for less than $40,000 must be offered a contract cancellation option agreement, with a minimum time frame of two days. The vehicle purchase process is more transparent than ever before. Consumers have access to a virtually limitless amount of information related to their vehicle purchase, both online and via customer disclosures at the dealership at the point of sale. California consumers are protected by the most stringent laws in the country, and some dealers already provide a free, no-questions-asked right of return for used vehicles. Providing certain military service members a free, annual right of vehicle return over 30 or more days, when a used vehicle right to return can already be purchased at a price that has not increased for over 15 years (despite vehicle prices sharply rising over that same time frame), is unnecessary and unfairly interferes in dealer business practices. There’s a long road to the end of this legislative session on August 31st, and battles to be fought at every step along the way. Once again, we cannot thank our Dealer Day attendees enough. Your support was critical and will be a huge part of any success we see this year. 3
14 THE CONTRIBUTIONS OF CALIFORNIA’S FRANCHISED NEW CAR DEALERS ECONOMIC IMPACT REPORT 2021
15 AVERAGE DEALERSHIP INDUSTRY TOTAL New vehicle department $59.15 million $85.24 billion Used vehicle department $25.74 million $37.09 billion Service department $5.08 million $7.31 billion Parts and accessories department $6.91 million $9.96 billion Finance & insurance department $3.83 million $5.52 billion Other departments $0.78 million $1.12 billion Total dealership sales $101.49 million $146.24 billion VEHICLE SALES (SUMMARY FOR AVERAGE DEALERSHIP) UNITS SOLD $ PER UNIT TOTAL New vehicles 1,300 $45,500 $59.15 million Used vehicles* 1,100 $23,400 $25.74 million 2021 DEALERSHIP SALES In $5 or AVERAGE DEALERSHIP INDUSTRY TOTAL Full time employees 91 131,131 Part time employees 4.5 6,485 Total employees 95.5 137,616 Annual payroll $7.10 million $10.23 billion Percentage of dealerships that provide access to health insurance for employees 97% N/A Workers’ compensation premiums per employee $1,480 N/A Workers’ compensation premiums paid $134,680 $194.07 million EMPLOYMENT & PAYROLL 7% 5% 25% 59% 3% TOTAL SPENT FOR PRODUCTS AND SERVICES FROM OTHER CALIFORNIA BUSINESSES AVERAGE DEALERSHIP $2.06 million INDUSTRY TOTAL $2.97 billion Am infr Est infr E * Includes retail and wholesale transactions. ta th
16 CHARITABLE GIVING In 2021, California new car dealers made over $54.61 million in donations to charitable and civic organizations, including: ADVERTISING In 2021, California new car dealers collectively spent over $1.23 billion on advertising. TAXES AVERAGE DEALERSHIP INDUSTRY TOTAL State sales tax $5.8 million $8.36 billion Federal payroll taxes $1.79 million $2.58 billion State payroll taxes $410,000 $590.81 million Real estate taxes $157,000 $226.24 million Other state and local taxes $108,500 $156.35 million Total taxes collected or paid $8.26 million $11.90 billion Digital TV Radio Mail Other Paper 12% 9% 9% 9% 3% 58% Our Healthcare Heroes AVERAGE DEALERSHIP INDUSTRY TOTAL Amount spent on EV charging infrastructure during 2021 $24,600 $35.45 million Estimated expenditures on EV charging infrastructure during 2022 $89,700 $129.26 million ELECTRIC VEHICLES 2021 EV Market Share 9.5% Number of EVs Sold in 2021 176,357 Average sales tax generated on the sale of a new vehicle in Los Angeles: $4,542.90
17 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 $146.24 billion Average sales per dealership $101.49 million Estimate percent of total statewide sales tax collected 16% Number of new car dealerships 1,441 DEALERS PROVIDE JOBS IN CALIFORNIA Total payroll for all new car dealerships $10.23 billion Total number of new car dealership employees 137,616 DEALERS PLAY AN IMPORTANT ROLE IN THE STATE AS LOCAL BUSINESS AND CIVIC LEADERS Total taxes collected or paid $11.90 billion Total spent for products and services from other California businesses $2.97 billion Donations to charitable and civic organizations $54.61 million 2021 VEHICLE SALES New vehicles sold* 1,856,391 Used retail vehicles sold** 1,023,110 Total new and used vehicles sold 2,879,501 * 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 new car dealerships throughout the state, as well as government sources. CALIFORNIA’S NEW CAR DEALERS ARE DRIVING THE CALIFORNIA ECONOMY
18 HowCalifornia’s NewCar Dealers Can Utilize the Tools at ElectricForAll.org Consumer interest in electric vehicles (EVs) is at an all-time high, and it’s important for car dealers to be prepared. Those shopping for a new EV will likely come to the showroom with more questions than answers, and the complementary tools featured at ElectricForAll.org can be used by new car dealers to help their customers through the EV buying process. From learning the facts about going electric and browsing for the right EV to searching for available EV incentives and finding, installing, and saving on a level 2 home charging station, ElectricForAll.org has all Californians covered for every step of their journey to go electric. Myth Busting One of the biggest hurdles facing prospective EV consumers is finding the right information and ElectricForAll.org has a robust section of the site built around busting myths and learning the perks of going electric. Dealers can use the EV Myth Busting page to their advantage! The page is a perfect place to help sales associates dispel the myths about EVs and educate their customers about how EVs can benefit themselves, their community and the world. Learn more at ElectricForAll.org/ev-myths. EV and Incentive Finders ElectricForAll.org also provides an up-to-date search function with customizable browsing features for currently available electric makes and models to simplify the search for your next EV. Once you select the EV that’s right for you using the Find Your EV tool, you can click the “View Incentives” button on the page to access a list of money and time-saving perks for the desired ZIP code. Learn more at ElectricForAll.org/which-car-is-right. Home Charging Advisor When it comes to home charging, customers will want to learn the best path forward for their specific living situation, and they’ll be happy to know that charging at home can save them money and time! Dealers can answer their questions by heading over to the ElectricForAll.org Home Charging Advisor tool to easily help their customers shop and compare all available Level 2 home charging stations to find the right one for them. Once a home charging station is identified, the new Home Charging Incentive Assistant tool makes it simple to find and apply online for any available home charging incentives, all in one convenient spot. Learn more at HomeCharging.ElectricForAll.org.
19 RS18001-CarDealerAd-jy04-final3-outlines.indd 1 12/11/18 1:28 PM Three Ways California New Car Dealers Get Involved 1. Get your dealership EV certified so it will appear in ElectricForAll.org’s Certified EV Dealers section at ElectricForAll.org/certified-dealers. 2. Share the good news! ElectricForAll.org is a free electric car buyer’s guide and tool that we encourage you to use and promote to consumers! 3. Dealers and sales associates can join the conversation by using the hashtag #ElectricForAll. Retweet and tag us at @LetsVeloz and @ElectricForAll on Twitter. Everyone has a unique reason to go electric. Help your customers find theirs at ElectricForAll.org. 3 FIND EV INCENTIVES CHARGE AT HOME DISCOVER EV FACTS
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WE HELP DEALERSHIPS NAVIGATE COMPLIANCE With over 33 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 help keep your employees safe. 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. Celly Services, Inc. (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. SamCelly BChEMChE JD Certified Safety Professional sam@cellyservices.com • Compliance with EPA/OSHA regulations • Spill Prevention Control & Countermeasures Plan • Newsletters on emerging EPA/OSHA Issues • Phase 1 Environmental Assessment • Permitting with EPA, BAR, & AQMD • Hazardous Waste Management • Hazardous Material Release Response Plan • Respiratory Protection Program • Representation in OSHA/EPA Enforcement • DOT Hazmat Shipping Certification OUR SERVICES
23 CAR CAREERS Scholarship SHIFT YOUR AUTO TECH CAREER INTO GEAR! $5,000 award for 20 regional awardees + an additional $5,000 for the statewide finalist. NEW! Thanks to a partnership with Ford Motor Company, the Foundation will be offering 6 more scholarships of $2,500 each specifically for students pursuing Ford Technical Career Entry Programs (TCEP) training. ELIGIBILITY CRITERIA ABOUT THE SCHOLARSHIP The California New Car Dealers Association Foundation's “CAR CAREERS” Scholarship Program supports the future automotive workforce by awarding scholarships each year to college students currently studying auto technology in California. APPLICATION PROCESS CNCDA.ORG/FOUNDATION/SCHOLARSHIPINFORMATION/ Scholarship deadline is May 3, 2022. scan or visit Be a resident of California. Be a high school senior or graduate, or current college student. Pursuing an Automotive Technology degree. Enrolled or plan on enrolling in study at an accredited college or vocational technical school for the entire upcoming academic year. Maintain at least a part-time status of 6 units each term. Have a minimum grade point average of 2.5 on a 4.0 scale (or its equivalent). CONTACT SCHOLARSHIP@CNCDA.ORG CALIFORNIA NEW CAR DEALERS ASSOCIATION FOUNDATION
24 The Ins &Outs Of Dealership Communication Communication within your dealership can make a world of difference for your customers, your employees, and your staff. Even if you believe your dealership is great at communicating inside and out, improvement is always possible. Working toward more effective communication can mean: • Increased Revenue – Do your service technicians spend a lot of time walking back and forth to the parts back counter to discuss and retrieve parts needed for a vehicle? Are your service advisors waiting for customer authorization on services? How long do customers need to wait at the dealership to get updates on their vehicles and pay? This time adds up to fewer cars serviced, fewer cars sold, and money left on the table. • Happier Employees – Businesses that present more transparency and communication improve employee morale. This means more engaged team members. In fact, according to the McKinsey Global Institute, effective communication can improve productivity in any workplace by up to 25%. Happier employees also mean reduced turnover. • A Fulfilling Customer Experience – Put yourself in the shoes of a customer for a moment. Which sounds better: spending the day in a dealership waiting room, or going about their day with the trust that they know their car is in good hands? People are known to take better care of their cars over their own health. Your customers want to take their vehicles somewhere where they will be frequently updated on services. • Transparency in Your Dealership – If you communicate better and more frequently with your employees they are more likely to communicate better with you. This means problems are solved quicker, your staff is more relaxed, and your customers come back. If one or more of these would be beneficial at your dealership, now is the time to start. Barriers to Effective Internal Communication If communication is lacking throughout the dealership, there might be a physical or psychological barrier causing it. The cause may be deeply rooted or something easily fixable. Do any of these sound familiar? A Lack of Transparency There could be any number of reasons why staff members might not be in sync. Often it’s because nobody understands the goal. For example, if you expect your
25 dealership to service 1,200 vehicles a month, does everybody in your service department focus on that? If so, are they aware of how they are performing? Not being transparent about information like expectations or even the vision of the business can get in the way of meeting goals. Clearly defined goals set the right expectations. There should be a process or tool to help maintain an easy flow of internal communication. Unclear Direction from Managers An easy mistake a manager can make is to point out an issue without involving employees in finding a solution. Let’s say a service manager received complaints from customers about paint scratches on serviced vehicles. Relaying this to the service staff without a prevention plan going forward may not help. Reminding employees to be careful with vehicles is reasonable, but what if the vehicles were damaged prior to arriving at the dealership? Your team may suggest implementing a more consistent check-in inspection of the vehicle’s condition upon arrival. This inspection could actually lead to higher service revenue in repairs to these damages along with more trust from the customer. Employees Can’t Ask Questions Do you remember the old saying, “There are no stupid questions”? Is that what your employees actually believe? Fostering an environment where your team feels comfortable speaking up will strengthen your dealership. Creating a habit where experienced employees are encouraged to mentor others will improve their morale and allow new employees to get up to speed more quickly. Not Recognizing and Celebrating Good Work Staffing issues can mean that teams are stretched more thinly than before. With everyone so busy, it is easy to forget to show appreciation. The perception of being unappreciated can lower morale and lead to burnout. When employees feel recognized and seen by managers, they feel more open to voicing their ideas. Satisfied employees are far more likely to provide superior customer service and productivity. Stressful Training The more difficulty new employees have with their training, the less likely they will be comfortable asking questions or communicating well with others. According to a 2016 study by the National Auto Dealers Association, 28% of dealership terminations occur within an employee’s first 90 days. Starting a new job often demands learning a lot of information. Investing in effective training programs can pay dividends in quicker new hire productivity while reducing turnover. How to Improve Dealership Communication There are several ways a dealership can implement to increase and improve communication between departments. These tips can break down many of the barriers listed earlier that prevent good communication within the dealership. Start with Yourself You are in charge. This means you influence a lot of what happens at your dealership for better and for worse. Create a culture of good communication. Set up ways to promote transparency in your dealership. Spend more time with your staff to create a comfort level for employees to ask questions, understand expectations, and feel more recognized. This should result in better goal attainment, a happier workforce, and more satisfied customers. Communicate Digitally It is hard to beat a face-to-face conversation, but that is not always possible or efficient. Digital communication is better than none at all. There are paid and even free options available for sending messages between departments. It may even be functionality that is already available. Using an internal chat tool can provide quick answers to keep your business running at its peak. Create One Source of Truth for Information A dealership typically invests in many different types of software, with different and sometimes redundant sources of information. Between your DMS, your CRM, and other tools in use at dealerships today, it can be confusing and inconsistent. A best practice is to choose one system to be the source of truth that all employees rely on. This will make transparency easier, and provide the foundation to communicate across departments. Between all of the benefits, barriers, and tips discussed, there is one overarching theme: effective internal communication is important for a successful dealership, and it starts with you as the manager. It offers many benefits and prevents a lot of potential problems. Overall, it can improve productivity, boost profitability, and create a positive employee and customer experience. If you are unsure where to start, take a look at your dealer management system. See what features are available that may make following the tips provided easier. As a DMS provider ourselves, we strive to make important processes like internal communication easier for you with dashboards, chat features, and collaboration tools. 3 Dominion DMS is a pioneer in Microsoft-based management systems with decades of experience partnering with franchise dealerships to deliver a superior experience, reduce costs and protect their business. Our cloud-native VUE DMS offers digital security, flexibility and efficiency to help dealers meet today’s rapidly changing market. Explore more of our resources at VUEDMS.com.
26 As California Transitions to Electric Vehicles, Franchise Laws Are More Important Than Ever In November 2021, electric vehicle mania was in full swing on Wall Street. Rivian’s stock price hit over $170 per share, resulting in a market cap well over $100 billion. This young electric vehicle automaker was worth close to the combined value of Ford and GM, despite having delivered only a few hundred vehicles. Lucid, another EV automaker with only a few hundred vehicles delivered, was not far behind with a market cap of nearly $100 billion. And Tesla hit a stock price of over $1,200 per share, making it a $1 trillion company and Elon Musk the richest man in the world. 2022 has not been as kind to shareholders of any of these companies. As of March 18, 2022, stock prices are down by roughly 30% for Tesla and over 60% for Lucid and Rivian. Still, by any objective measure, valuations of EV automakers remain stratospheric. If I were CEO of a traditional automaker, I would view the valuations of these EV upstarts with a mixture of dismay and envy. I would also be thinking about ways to capture some of that EV magic to juice my company’s stock price. With this in mind, I was not shocked when Ford announced it would be launching a separate business for electric vehicles. The announcement seems to have had its intended impact – Ford’s stock price immediately jumped over 8%. For dealers, what comes next is critical. Will Ford use this transition as an opportunity to empower and train dealers By Anthony Bento, Director of Legal & Regulatory Affairs
27 In the coming years, it is more critical than ever for dealers to vigorously defend laws that prohibit manufacturers from competing against their own franchisees. to sell EVs, or will Ford use this transition to undermine its relationship with dealers? The potential threat to dealers is significant. Tesla, Rivian, and Lucid all sell directly to consumers, and state franchise law prohibiting direct sales are increasingly challenged. However, the greatest threat to dealers is not direct sales from the likes of Tesla or Rivian. It’s direct competition from a dealer’s own manufacturer. California’s franchise laws have never prohibited direct sales. Instead, the Golden State bars manufacturers from competing against their own franchisees. In other words, a manufacturer can operate as both a dealer and a manufacturer, so long as it doesn’t have independent franchisees. Defending this law is the top priority for CNCDA. That’s why we filed a petition against Volvo on the Care by Volvo program, which sought to transform dealers into mere agents of the manufacturer. Thankfully, the New Motor Vehicle Board and the Department of Motor Vehicles agreed that the program violated California law and discontinued it in our state. In the coming years, it is more critical than ever for dealers to vigorously defend laws that prohibit manufacturers from competing against their own franchisees. These laws are just and represent sound public policy. Dealers invest millions of dollars in facilities and employees, which enrich local communities. In making these investments, dealers understand that they will face incredible competition (from dealers within the same line and other lines), and success is far from assured. However, dealers should be able to rely on the reasonable assumption that their manufacturer partner, who is the sole provider of new vehicles to a dealership, will not directly compete against them. 3
28 California Auto Outlook Comprehensive information on the California vehicle market Volume 18, Number 1 Released February 2022 Covering Fourth Quarter 2021 TM Publication Sponsored By: California New Vehicle Registrations Should Approach 2 Million Units in 2022 California New Light Vehicle Registrations and U.S. New Vehicle Sales - 2020 and 2021 TWO YEAR PERSPECTIVE Historical data source: AutoCount data from Experian. *2022 forecast by Auto Outlook. California Annual New Light Vehicle Registrations - 2008 thru 2022 ANNUAL TRENDS New vehicle registrations in California are predicted to exceed 1.9 million units this year and increase by approximately 4 percent from 2021. Demand for new vehicles may ease in 2022 due to slower economic growth, increasing inflation, and rising interest rates, but lean inventories will continue to be the controlling factor. Softening demand might reign in some of the upward pressure on vehicle prices, but it’s not likely to have an impact on sales levels. California new light vehicle registrations improved 13.3 percent last year, higher than the 3.3 percent increase in the nation. The larger percentage increase in the state last year was primarily a result of the sharper decline that occurred in 2020. The California market was hit especially hard when the pandemic emerged two years ago. California new vehicle registrations fell by about 22 percent from 2019 to 2020 versus a 14 percent drop in the Nation. The state market experienced a steeper drop in 2020 and a stronger recovery in 2021. QUARTERLY RESULTS California Quarterly New Light Vehicle Registrations Percent Change vs. Year Earlier New vehicle registrations in the state fell by more than 15 percent in the Fourth Quarter of 2021 versus year earlier. The drop followed a 7.8 percent increase in the Third Quarter, and a big jump in the Second Quarter as the market recovered from weak year earlier results. Lean inventories led to the Fourth Quarter decline. Registrations are expected to fall in the first half of this year, and increase versus year earlier levels in the second half. Data source: AutoCount data from Experian. 1.45 1.04 1.17 1.29 1.62 1.80 1.93 2.16 2.21 2.20 2.15 2.09 1.64 1.86 1.93 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* New vehicle regs. (millions) Years California U.S. 2020 2021 Change 2020 2021 Change Registrations TOTAL 1,639,166 1,856,391 13.3% 14,575,255 15,060,287 3.3% Car 582,908 624,391 7.1% 3,463,479 3,364,513 -2.9% Light Truck 1,056,258 1,232,000 16.6% 11,111,776 11,695,774 5.3% Domestic 532,471 584,936 9.9% 6,557,138 6,164,521 -6.0% European 248,196 281,524 13.4% 1,455,832 1,611,515 10.7% Japanese 739,680 833,993 12.8% 5,337,527 5,795,133 8.6% Korean 118,819 155,938 31.2% 1,224,758 1,489,118 21.6% Market Share Car 35.6 33.6 -2.0 23.8 22.3 -1.5 Light Truck 64.4 66.4 2.0 76.2 77.7 1.5 Domestic 32.5 31.5 -1.0 45.0 40.9 -4.1 European 15.1 15.2 0.1 10.0 10.7 0.7 Japanese 45.2 44.9 -0.3 36.6 38.5 1.9 Korean 7.2 8.4 1.2 8.4 9.9 1.5 -19.6% -12.6% -2.9% 96.0% 7.8% -15.5% 3Q '20 vs. 3Q '19 4Q '20 vs. 4Q '19 1Q '21 vs. 1Q '20 2Q '21 vs. 2Q '20 3Q '21 vs. 3Q '20 4Q '21 vs. 4Q '20 % chgange vs. year earlier Source for California new vehicle registrations: AutoCount data from Experian. Source for U.S. sales: Automotive News.
29 Page 2 California Auto Outlook Non Luxury SUVs, 34% Pickups and Vans, 17% Luxury SUVs, 15% Small Cars, 15% Non Luxury Mid Size & Large Cars, 10% Luxury & Sports Cars, 9% Non Luxury SUVs, 33% Pickups and Vans, 18% Luxury SUVs, 13% Small Cars, 16% Non Luxury Mid Size & Large Cars, 11% Luxury & Sports Cars, 9% SEGMENT MARKET SHARE TRENDS Non Luxury SUVs Accounted for 34 Percent of State Market HYBRID AND ELECTRIC VEHICLES Estimated Electric Vehicle Market Share Increased to 9.5 Percent in 2021 Segment Market Shares in California 2020 Segment Market Shares in California 2021 The two graphs above show market shares for primary segments in 2020 and 2021. Data Source: AutoCount data from Experian. Data Source: AutoCount data from Experian. Non Luxury SUV Share YTD ‘20: 33% Hybrid/electric vehicle market share in 2021: 23.4 percent Estimated Hybrid and Electric Vehicle Market Share The graph above shows 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 ‘20: 34% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 2015 2016 2017 2018 2019 2020 2021 Market Share Electric Hybrid (excl. plug ins) Plug In Hybrid Estimated Hybrid and Electric New Vehicle Registrations and Market Share 2017 2018 2019 2020 2021 Electric registrations 59388 99121 106752 101628 176357 Electric share 2.7% 4.6% 5.1% 6.2% 9.5% Hybrid regs. (excl. plug ins) 101180 92658 117218 113103 196777 Hybrid share (excl. plug ins) 4.6% 4.3% 5.6% 6.9% 10.6% Plug in hybrid regs. 48391 64644 52329 31144 61261 Plug in hybrid share 2.2% 3.0% 2.5% 1.9% 3.3%
30 Covering Fourth Quarter 2021 Page 3 The table below shows the top five selling models during 2021 in 20 segments. In addition to unit registrations, it also shows each model’s market share in its respective segment. MODEL RANKINGS Toyota Camry Was Best Seller in California New Vehicle Market During 2021 BEST SELLERS IN PRIMARY SEGMENTS Compact Car: Honda Civic Full Size Pickup: Ford F-Series Mid Size Car: Toyota Camry Compact SUV: Toyota RAV4 Near Luxury Car: Tesla Model 3 Mid Size SUV: Toyota Highlander Luxury Car: BMW 5-Series Luxury Compact SUV: Tesla Model Y Data Source: AutoCount data from Experian. Figures for Prius include Prius Prime. Model Regs. Share Model Regs. Share Model Regs. Share Model Regs. Share Chevrolet Bolt 9971 31.5 Honda Civic 59818 27.1 Ford Mustang 7393 33.8 Toyota Camry 61599 39.5 Nissan Versa 8391 26.5 Toyota Corolla 48915 22.2 Dodge Challenger 7270 33.3 Honda Accord 44576 28.6 Chevrolet Spark 3107 9.8 Toyota Prius 22310 10.1 Chevrolet Camaro 2788 12.8 Kia K5/Optima 13360 8.6 Kia Rio 2352 7.4 Nissan Sentra 17093 7.7 Mazda MX5 1909 8.7 Nissan Altima 12522 8.0 Toyota Mirai 2295 7.2 Kia Forte 15491 7.0 Toyota Supra 1439 6.6 Hyundai Sonata 10051 6.4 Model Regs. Share Model Regs. Share Model Regs. Share Model Regs. Share Dodge Charger 10779 58.0 BMW 2-Series 3525 31.2 Tesla Model 3 53572 47.0 BMW 5-Series 6055 13.0 Toyota Avalon 2481 13.4 Mercedes A-Class 2288 20.3 BMW 3-Series 12324 10.8 Mercedes E-Class 5232 11.2 Kia Stinger 1982 10.7 Acura ILX 2072 18.3 Lexus ES 10804 9.5 Tesla Model S 4860 10.4 Chrysler 300 1672 9.0 Mercedes CLA-Class 1787 15.8 Mercedes C-Class 8634 7.6 Chevrolet Corvette 3635 7.8 Nissan Maxima 1596 8.6 BMW i3 1021 9.0 BMW 4-Series 4723 4.1 Mercedes S-Class 3469 7.4 Model Regs. Share Model Regs. Share Model Regs. Share Model Regs. Share Toyota Tacoma 44484 53.3 Ford F-Series 46817 28.7 Toyota Sienna 16793 46.7 Ford Transit Connect 14877 39.4 Ford Ranger 11933 14.3 Chevrolet Silverado 44670 27.4 Honda Odyssey 8219 22.9 Ram Promaster 8123 21.5 Jeep Gladiator 7373 8.8 Ram Pickup 41225 25.3 Chrysler Pacifica 6458 18.0 Mercedes Sprinter 6490 17.2 Chevrolet Colorado 6681 8.0 GMC Sierra 19291 11.8 Chrysler Voyager 2615 7.3 Nissan NV 4155 11.0 Nissan Frontier 6210 7.4 Toyota Tundra 8792 5.4 Kia Carnival 1535 4.3 Chevrolet Express 2751 7.3 Model Regs. Share Model Regs. Share Model Regs. Share Model Regs. Share Subaru Crosstrek 18758 15.4 Toyota RAV4 59157 23.6 Toyota Highlander 29598 13.1 Chevrolet Tahoe 7872 28.1 Honda HR-V 18056 14.8 Honda CR-V 39405 15.7 Ford Explorer 19534 8.7 Ford Expedition 4850 17.3 Nissan Kicks 10838 8.9 Mazda CX5 21404 8.5 Toyota 4Runner 16281 7.2 Chevrolet Suburban 3893 13.9 Hyundai Kona 9164 7.5 Jeep Wrangler 20651 8.2 Subaru Outback 15878 7.0 GMC Yukon 3708 13.2 Kia Niro 7494 6.1 Subaru Forester 16021 6.4 Jeep Grand Cherokee 15768 7.0 Ford Bronco 2487 8.9 Model Regs. Share Model Regs. Share Model Regs. Share Model Regs. Share Audi Q3 6256 21.3 Tesla Model Y 60394 43.8 Lexus RX 18563 20.8 Cadillac Escalade 4726 21.1 Mercedes GLB-Class 5877 20.0 Lexus NX 12191 8.8 Mercedes GLE-Class 12935 14.5 Mercedes GLS-Class 4311 19.3 Lexus UX 4912 16.7 Audi Q5 11792 8.6 BMW X5 10151 11.4 Land Rover Range Rover 3405 15.2 Mercedes GLA-Class 3785 12.9 BMW X3 10838 7.9 Acura MDX 6056 6.8 BMW X7 3205 14.3 BMW X1 3496 11.9 Mercedes GLC-Class 10327 7.5 Volvo XC90 5356 6.0 Mercedes G-Class 2475 11.1 Subcompact SUV Compact SUV Mid Size SUV Large SUV Luxury Subcompact SUV Luxury Compact SUV Luxury Mid Size SUV Luxury Large SUV Compact/Mid Size Pickup Full Size Pickup Mini Van Large Van Top Selling Models in Each Segment - New Light Vehicle Registrations (2021, Annual Totals) Cars Subcompact Compact Sports/Pony Cars Mid Size Large Entry Luxury Near Luxury Luxury and High End Sports Cars Light Trucks
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