Official Publication of the California New Car Dealers Association CALIFORNIA ISSUE 2, 2022 8 Women’s Perspective: Encouraging Talent 14 Combating Catalytic Converter Theft 22 Current and Future FTC Regulations Will Likely Impact the Advertising and Sale of Vehicles at Your Dealership
• 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.
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4 ©2022 California New Car Dealers Association (CNCDA) | The newsLINK Group, LLC. All rights reserved. The California New Car Dealer Quarterly is published four times each year by The newsLINK Group, LLC for the CNCDA and is the official publication for this association. The information contained in this publication is intended to provide general information for review, consideration and dealer education. The contents do not constitute legal advice and should not be relied on as such. If you need legal advice or assistance, it is strongly recommended that you contact an attorney as to your specific circumstances. The statements and opinions expressed in this publication are those of the individual authors and do not necessarily represent the views of the CNCDA, its board of directors, or the publisher. Likewise, the appearance of advertisements within this publication does not constitute an endorsement or recommendation of any product or service advertised. The California New Car Dealer Quarterly is a collective work, and as such, some articles are submitted by authors who are independent of the CNCDA. While the California New Car Dealer Quarterly encourages a first-print policy, in cases where this is not possible, every effort has been made to comply with any known reprint guidelines or restrictions. Content may not be reproduced or reprinted without prior written permission. For further information, please contact the publisher at 855.747.4003. 22 CONTENTS 8 14 ISSUE 2, 2022 6 President’s Message: New Car Dealers Are All-In on EVs 8 Women’s Perspective: Encouraging Talent 10 2022 Officers and Directors 14 Combating Catalytic Converter Theft 17 2022 Upcoming Events 20 Automotive Technician Shortage: What will be the Impact of the EV Revolution? 22 Current and Future FTC Regulations Will Likely Impact the Advertising and Sale of Vehicles at Your Dealership 24 California Auto Outlook
6 BRIAN MAAS President California New Car Dealers Association President’s Message: NewCar Dealers Are All-In on EVs Electric vehicles. We’re all in, and we know you are too. With 2035 approaching quickly, California has its sights on an electrified future. With an unprecedented number of new electric vehicle makes and models, and as federal and state investments reach historic levels, there has never been a better time for consumers to purchase an EV. But the goal of phasing out internal combustion engine vehicle sales by 2035 is ambitious, to say the least. What will the role of new car dealers be? How can you help facilitate this electrified transition? There is no question that new car dealers play a critical role in helping consumers make the transition to EVs. Local dealers are where consumers can shop for the make and model of their liking, learn about the differences in EVs, inquire about available incentives and rebates, and get assistance installing chargers and accessing public charging stations. Dealers also make substantial investments in our workforces and facilities to sell and service electric vehicles. But as our economy continues to reel from high inflation, pandemic-induced supply chain challenges and critical material shortages, California needs to level set about how we get to an EV future. Production shortages and inventory-demand imbalances are driving up the costs of EVs, making them generally harder to reach and even more so for those who are moderate- to low-income. As industry professionals, we can see the writing on the wall. Car dealers can only sell the vehicles we have on our lots. Without significantly more supply, it is impossible for California to reach its goal. Communicating this to legislators and regulators has been a priority for our team this summer. That’s why we submitted comments on the California Air Resources Board’s Advanced Clean Cars Regulations and why we continue to actively participate in the proceeding. As an organization representing the interests of more than 1,200 new car dealer members, collective concerns need to be recognized because, without you, California’s all-electric future is nothing more than a headline. Dealers have decades of experience and understand the opportunities and challenges of such a dramatic shift in new vehicle development and adoption. You will be a critical step in helping the Golden State reach its electrification goals. As your voice in Sacramento, we’ll continue to advocate for new car dealers as California barrels toward 2035. Remarkable dealers like you keep us going, and we’re always here to provide you with what you need to keep your dealership running smoothly. As always, please contact our team if you need compliance support, have questions about new rules and regulations, want to be informed about pending legislation and how it could affect your business, or if you’d like to attend one of our upcoming events. Thank you for your support and membership. 3 Remarkable dealers like you keep us going, and we’re always here to provide you with what you need to keep your dealership running smoothly.
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8 Women’s Perspective: Encouraging Talent You’ve probably noticed it’s harder to find qualified people to hire lately. The Macrotrends website says the U.S. population in 2022 is slightly less than 385 million people. The 2020 census found that more than 55 million people (about 14%) had retired. The labor force participation rate was 62.2% in April 2022, and the unemployment rate was 3.6%. There were already job shortages before the pandemic, but the pandemic worsened it. However, even though many people chose to retire during the pandemic, about 1.5 million came back into the workforce later. Any sentence with the word “millions” sounds like shortages should not be a problem, but everything is relative. March 29, 2022, Jeff Cox at CNBC reported five million more jobs open than workers to fill them. That is, employers with 18 jobs have to compete for 10 people. Employers can no longer afford to hire only men when they need to fill jobs. The U.S. is approximately half male and half female, but there are slightly more women than men. To take the statistic above and recast it slightly, suppose you have 18 jobs and 10 job candidates, but five are women. If you default to hiring a man, those five men will compete for 18 jobs, and it’s no wonder you can’t find enough people to hire. Hiring women starts with recruiting them. That can be challenging because many women don’t consider working at a dealership, and the turnover rate (according to CDK research) is 88%. But women make or influence the decision to buy a vehicle most of the time. Many people in the industry think women are more likely to buy vehicles from other women, so companies that ignore women are losing out on a great sales opportunity. Bottom line: women dealer employees can lead to more sales. Many companies in the auto industry have gotten the message. At CNCDA, 75% of our staff are women. Additionally, our Board of Directors includes the incredible talents of Hilary Haron (Haron Jaguar Land Rover Volvo), Cheryl Bedford (Sunset Auto Center), and Anne Boland (Bob Smith BMW). And our NextGen group is spearheaded by Hilary Haron and Ellena Sweet (Fresno Acura). We appreciate the perspective, leadership and value they bring to our organization. General Motors’ board is one of the most gender-diverse boards in the country. The CEO is Mary Barra, and 58% of the board members are women. Most of the committee chairs are women, too. Other industry CEOs include: • Liza Borches (Carter Myers Automotive) • Mary Buchzeiger (Lucerne International) • Flavia De Veny (Camaco-Amvian) • Corina Diehl (Diehl Automotive Group) • Aicha Evans (Zoox) • Gail Faulkner (Faulkner Auto Group) • Julia Fream (Original Equipment Suppliers Association) • Linda Hasenfranz (Linamar Corp.) • Jennifer Johnson (Kendrick Plastics) • Abigail Kampmann (Principle Auto) By CNCDA Staff
9 • Lisa Lunsford (GS3 Global) • Claudia Marquez (Hyundai Motor Mexico) • Sejal Pietrzak (DealerSocket) • Kimberly Rodriguez (Dura Automotive Services) • Rosa Santana (Forma Automotive) • Anuja Sonalker (STEER Tech) • Sandy Stojkovski (Vitesco Technologies North America) • Chrissy Taylor (Enterprise Holdings).1 That’s a long list, and maybe you haven’t heard of every company listed after these names, but it’s encouraging so many women are CEOs as long as you don’t think about the number of men who are CEOs. Still, it’s progress. How do you encourage women to apply for work at your dealership? Think about what you can do to encourage women to take classes to help them get dealership jobs. Reach out to local schools and teachers at those schools. In addition to public and private schools, talk to people at universities and community colleges. Attend career fairs and support organizations that encourage all students to gain valuable trade skills. Consider awarding scholarships and offering apprenticeships. Even a relatively modest scholarship can still help students pay for their training. Most people will visit the website before they visit the dealership. Make sure yours sends the right message. For example, look at your dealership website and post pictures of a diverse workforce you want to encourage. People notice inclusive content; have prominent pictures of female employees on the website. Hiring women to work at your dealership is a good idea, but listening to them once hired is just as important. You want to create a collaborative and supportive work environment for all employees. Talk to them about the demands on their time, personal and professional. Would job sharing, flexible hours, or work-at-home options help? Offer everything you can that is situationally appropriate. If your DMS system requires a VPN, switch to a cloudnative solution so employees can log in from home. Promotions and pay raises encourage employees to stay with their companies. They are helpful, but make sure you don’t reward one gender and exclude the other. Given gender biases of the past, it can be easy to favor men over women unconsciously regardless of performance. Are women doing work that benefits the company but isn’t included in their job description? It’s important to identify and reward high-performing employees and provide mentorship, training and opportunities for career growth for every employee, regardless of gender. In an article by Bonnie Marcus that appeared on the Forbes website Oct. 13, 2021, she noted women had been encouraged to speak up about workplace injustices ever since the #MeToo movement, but sometimes no one takes action after listening to them. That’s a problem. People who get ignored tend to stop giving feedback, and when they have the chance to go somewhere else, they are likely to take it. The result is high employee turnover. Any company with high turnover, including dealerships, will not be as profitable as it could be. The article noted that 75% of women are discriminated against in the workplace because of age and gender chose to do nothing. More than two-thirds (70%) didn’t think talking would help. About one-fourth didn’t trust the human resources department, and a little less than a fourth thought talking would cost them their job. That leaves the 25% who did speak up. Some spoke with a manager, but 61% were dissatisfied with the result. Others spoke with HR; 71% thought that didn’t help either. When women feel ignored in the workplace, they may start thinking about exiting, or worse: filing lawsuits. Wouldn’t it be better to listen and take action to make them feel valued? What can you do at your dealership to change the dynamic? First of all, work toward making sure men do not outnumber women. According to David Mielach on the Business News Daily website on Dec. 1, 2021, women are 75% less likely to speak than men when they are in a minority. Groups without women reached different decisions than groups with women. The situation worsens when decisions are made by the majority instead of requiring a unanimous vote. They might not take as much time to speak and may not feel as powerful. Interestingly, asking for votes to be unanimous made it more likely for women to speak up because the group needed their vote to succeed. When women speak up, it’s important to hear what they have to say and assess how you can incorporate and respond to their suggestions. They have a different perspective than men, and hearing it will make your business more well-rounded and better connected with your customer base. Listening to the perspective of female employees will help you retain them as employees and help your dealership be more informed and able to communicate more effectively. Half your customers are women. Half your employees should be, too. But more than that, make sure they feel valued, respected, listened to, and part of the team. If that isn’t already the case at your dealership, you’ve got a great goal to work toward. 3 1To see a full list of 100 leading women in the North American Auto Industry, visit https://www.autonews.com/awards/100-leading-womennorth-american-auto-industry.
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 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 Ted Nicholas Three Way Chevrolet Gary Fenelli Frank Toyota Bruce Hamlin Guaranty Chevrolet Motors Inc. Greg Kaminsky Toyota/Honda of El Cajon John Oh Lexus of Westminster David Simpson Simpson Chevrolet of Irvine Anne Boland Bob Smith BMW Ron Charron Boulevard Cadillac Buick GMC K.C. Heidler Tom’s Truck Center Robb Hernandez Camino Real Chevrolet Darryl Holter Felix Chevrolet Devinder Singh Bains Turlock Chrysler Dodge Jeep Ram
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13 CONCERNED WITH THE COST, COMPLIANCE AND SERVICING OF YOUR DEALERSHIPS’ INSURANCE? EPIC CAN HELP WITH YOUR BENEFIT AND BUSINESS INSURANCE NEEDS • CNCDA's only licensed broker for Health and Business insurance • The largest insurer of auto dealers in the state • The only broker with proprietary products specific to dealerships • 15TH largest brokerage firm in the nation We know dealerships have specific needs and issues, we are here to help. Please contact us for a free evaluation of your insurance and HR/compliance packages. © EDGEWOOD PARTNERS INSURANCE CENTER | CA LICENSE 0B29370 EPICBROKERS.COM Alison McCallum 949.417.9136 alison.mccallum@epicbrokers.com Eric Shaw 916.832.0958 eric.shaw@epicbrokers.com Ron Joy 949.417.9134 ron.joy@epicbrokers.com
14 Combating Catalytic Converter Theft By CNCDA Staff Catalytic converter thefts present a growing problem for dealers and their customers. In 2021, the National Crime Bureau estimated that more than 52,000 catalytic converters were reported stolen, compared with 1,300 in 2018. That’s 40 times as many converter thefts, and it doesn’t include the number of unreported thefts. If the repair cost is the amount of someone’s deductible, they may not report the theft to the police or the insurance company since they will have to pay the money either way. Filing a report creates the possibility of increased insurance premiums; not filing maintains the status quo. Thieves value catalytic converters because they contain precious metals such as palladium, platinum, and rhodium. The metals’ values have increased exponentially. Worse, catalytic converters are easy to steal and hard to trace. Another problem caused by catalytic converter theft is the damage when thieves cut the converters from the car. They are in a hurry and don’t care about being precise, so they often damage the oxygen sensor and may take other parts of the exhaust system, such as the muffler. That means repairs after the theft often involve more than just replacing the catalytic converter itself. A stolen catalytic converter usually costs $500-$600 to the thief, but replacing it costs the owner approximately $3,500. Dealers both assist customers who have had the unfortunate experience of having their catalytic converter stolen and are victims themselves. What can be done about the issue of catalytic converter theft? • Increase enforcement on thieves and black-market facilities • Make it harder for thieves to get catalytic converters • Make it easier to trace stolen catalytic converters Largely due to media coverage and complaints from constituents, ten bills were introduced during the 2022 legislative year in California to try and address catalytic converter theft. New car dealers are supportive of bills to increase enforcement against bad actors stealing and dealing stolen catalytic converters and supportive of proposals aiming to inform customers about the availability of VIN-marking services. However, some of these proposals aimed to bar dealers from selling new and used vehicles without permanently marking the vehicle’s VIN on the catalytic converter themselves before sale. These bills were very problematic, as dealers do not manufacture the cars and thus should not be responsible for this work – and certainly not as a free service on behalf of vehicle manufacturers. Dealers are already facing a severe vehicle technician shortage, and a requirement like this would greatly exacerbate this shortage. How do you make it harder to steal a catalytic converter? Vehicles stored outside are more vulnerable than vehicles inside a garage, so dealerships are attractive targets for thieves. One dealer installed a 7,000-volt security system around the dealership. He hasn’t had any problems since. However, one of his customers had seven trucks. Thieves took all seven converters. It took eight weeks for replacement parts to arrive; thieves took all seven converters again one short month later. Experiences like that have made the third strategy more attractive (making it easier to trace stolen catalytic converters). In January 2022, Indiana Rep. Jim Baird introduced H.R. 6394, the Preventing Auto Recycling Theft (PART) Act, which NADA strongly supports. The bill is intended to increase traceability and enforcement. A day later, Jan. 14, 2022, it was referred to the Subcommittee on Highways and Transit. It still must pass
15 the House and Senate, so it is a long way from being signed into law by the president. If the bill passes, the idea would be to use a $7 million grant program to cover the cost of stamping VINS or other identifiers onto existing vehicles’ catalytic converters. The vehicle owner wouldn’t have to pay anything for this to be done. Dealers would also be able to use the grant program. While the $7 million grant program would be helpful, it wouldn’t come close to covering the cost of marking catalytic converters on vehicles on California dealers’ lots (we sell three million new and used vehicles a year) – but could serve as an interesting model for states to potentially copy. The bill would also require OEMs to stamp the VIN on catalytic converters when vehicles are built. Purchasers would have to check for and keep records of these numbers. Catalytic converter theft, sale, trafficking, or purchase (if the buyer knows the converter was stolen) would be a federal crime. Someone convicted under this law could spend up to five years in jail. In May 2022, 14 trade associations, other industry organizations, and NADA asked Congress to take up H.R. 6394 and get it moving. The signers specifically asked Congress to send it to the House Energy and Commerce Committee for a hearing. If you have dealt with catalytic converter theft, you recognize the importance of this issue. Now is the time to reach out to your representative and ask them to support H.R. 6394. For a full list of committee members, visit https://energycommerce.house.gov/ subcommittees/energy-andcommerce-117th-congress. We can help Congress and, later, the Senate understand how important this issue is, but we will only be successful if we put in the effort. Meanwhile, as of press time, many of the catalytic converter bills are still pending in California. CNCDA is vigorously fighting proposals to require dealers to permanently mark the VIN on catalytic converters of new and used vehicles before sale. However, we are very supportive of bills that aim to increase the enforcement on bad actors. What the California legislature chooses to do this year is important for all dealers, as it could set the tone for how other states address this issue. California’s legislative session ends on August 31, and as we are currently writing this article, we are tracking if the problematic proposal makes it to Governor Newsom’s desk and we will ask for a veto. 3 California Ford Dealership for Sale Congratulations on your retirement Tim and Tom Fuller. National Business Brokers was proud to facilitate the sale of Tim and Tom Fuller’s third generation family dealership, Hunter DCJR Fiat in Lancaster. NationalBusinessBrokers.com info@nationalbusinessbrokers.com 949-770-7451 NBB is CNCDA’S only licensed vendor for bull/sell transactions. Scan to inquire • Newly imaged facility • Freeway location in large market • Excellent opportunity for strong operator
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17 REGISTER NOW AT www.cncda.org/events SEPTEMBER 19 Buy/Sel l Tips for Smart Buyers in a Sel ler’s Market 10 a.m. - 11 a.m. DECEMBER 15 New Laws Webinar Series Part I: 10 a.m. - 11:30 a.m. Part II: 2 p.m. - 3:30 p.m. SEPTEMBER 8 Cal ifornia Dealership HR Bootcamp Part III 2 p.m. - 3:30 p.m. Webinars: 2022 UPCOMING EVENTS In-Person Events: OCTOBER 25 Member Appreciation Dinner Top of the Market 6 p.m. - 10 p.m. San Diego, CA SEPTEMBER 27 The Safeguards are Coming: FTC Revised Rule Becomes Effective in December 10 a.m. - 11:30 a.m OCTOBER 2 - 5 CNCDA Annual Convention The Ritz-Carlton Laguna Niguel, CA DECEMBER 6 New Laws Seminar 9:30 a.m. - 11:30 a.m. Anaheim, CA DECEMBER 5 New Laws Seminar 9:30 a.m. - 11:30 a.m. San Diego, CA DECEMBER 7 New Laws Seminar 9:30 a.m. - 11:30 a.m. Burbank, CA DECEMBER 12 New Laws Seminar 9:30 a.m. - 11:30 a.m. Walnut Creek, CA DECEMBER 13 New Laws Seminar 9:30 a.m. - 11:30 a.m. Fresno, CA DECEMBER 14 New Laws Seminar 9:30 a.m. - 11:30 a.m. Sacramento, CA ON EVENTS BY VISITING STAY UP-TO-DATE www.cncda.org/events
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20 Automotive Technician Shortage: By Les Swizer, Staff Counsel Any new car dealer will tell you that talent retention is a challenge, specifically in the service department. The pool of qualified auto technicians in the industry has been dwindling for some time, and the pandemic wreaked havoc on an already waning supply. The so-called “Great Resignation,” coupled with a mass exodus of baby boomers retiring from the industry, has created an even larger vacuum. The industry predicts to be short over 600,000 automotive, collision, and diesel technicians between 2020 and 2024. The baby boomer generation alone anticipates leaving a deficit of over 100,000 techs upon retirement in the next decade or so. But won’t the Electric Vehicle (EV) revolution naturally fix this deficit because EVs need less maintenance? In short, no. The EV revolution will likely exacerbate the issue, given the new skill set required to diagnose and repair these complex systems. While standard maintenance (such as fluid exchanges) is not required on EVs, these vehicles still have components that wear and are not immune to malfunction. Given that EV tech is still evolving, diagnostic and repair times will be longer, especially in the nascent stages of each manufacturer’s new EV model launch. This means more techs will be needed to handle the flow of vehicles because techs will be held up longer per vehicle. ICE vehicles are not going to disappear as of 2035. While California is in the process of adopting regulations requiring all new vehicles sold by 2035 to be zero emission, that doesn’t mean internal combustion engine (ICE) vehicles will be banned, nor will it prevent people from bringing ICE vehicles into the state. Considering many people are priced out of EVs, it is not unreasonable to expect people to hold on to their ICE vehicles longer, which necessarily equates to more time in the service drive. How can dealers prepare for the impact of the EV revolution in their service drives? Dealers are already ahead of the game by being involved in their communities, contributing to high school automotive and shop programs, offering apprenticeships, providing training on emerging vehicle technologies, and creating a clean and respectful environment both on the sales floor and the shop floor. Some areas may need examining if you struggle to recruit or retain talent. What will be the Impact of the EV Revolution?
21 Inclusion: As a former tech, I can attest to one area often neglected regarding techs: inclusion. Many dealers make the mistake of focusing heavily on sales staff performance, taking sales staff out to dinner or lunch, or even inviting the top performer to tee off with the dealer principal. Dealers should keep this type of thing in mind if retention is an issue. In my experience, techs don’t need big gestures of recognition for a job well done; they just need some recognition. So, take your best tech out to lunch or give them a tool truck gift card (the average tech spends tens of thousands of dollars on tools throughout their career). The investment will be worth it to keep your best performers, and seeing that little bit extra will motivate your undiscovered top performers. Training. Be sure existing techs are allowed to attend as many trainings as possible and senior techs in the shop are trained in the EV technology and how to train others generally. Enhancing the soft skills of existing techs will create an environment that fosters growth and illuminates a path of upward mobility for the newer techs. If feasible, offering an apprenticeship program could attract new talent who already possesses the foundational knowledge necessary to efficiently diagnose and repair EVs. Outside Help. If all else fails and you still struggle to recruit and retain, consider hiring a recruiter or consultant. Having an outsider examine your service drive and hiring methods can offer a new perspective that may shed some light on the issues preventing your service drive from getting and staying staffed with quality techs. Community Involvement. Numerous programs are working to create job pipelines from local schools to dealerships. Stay involved with your local communities and reach out to your local officials for resources and ways to get involved in programs facilitating careers in the trades. Many of these programs are in their earliest stages but could use support and input on how to ensure the successful transition from school to a job at a dealership. CNCDA Foundation. Get involved in the CNCDA Foundation and have the opportunity to see bright young automotive techs in your region gain their education and find their way to dealership careers. The CNCDA Foundation has worked to support the demand for auto and truck technician and management roles by awarding scholarships to over 1,300 students since its inception. For more information about the Foundation or to get involved, visit www.cncda.org/foundation. 3 RS18001-CarDealerAd-jy04-final3-outlines.indd 1 12/11/18 1:28 PM
22 Current and Future FTC Regulations Will Likely Impact the Advertising and Sale of Vehicles at Your Dealership By Anthony Bento, Director of Legal and Regulatory Affairs Current and proposed rules by the Federal Trade Commission (FTC) are worth reviewing, as they may directly impact your dealership’s operations. First, let’s discuss a rule that’s been in effect for many years but is gaining new significance due to today’s unique combination of inventory shortages and online sales. The FTC has long maintained its “Mail, Internet, or Telephone Order Merchandise Rule,” which applies to most goods consumers order by mail, telephone, fax, or Internet. The Rule requires that when businesses advertise merchandise, there is an expectation that the order will ship within 30 days unless the business clearly and conspicuously represents the shipment will not be made by such a date. Moreover, the rule requires customer consent to extend an order in case of a delayed shipment. If your dealership engages in online sales, we strongly encourage you to contact competent counsel and/or review the FTC’s guide on the Rule, which is accessible on the FTC’s website at https://bit.ly/3bW5F9x. Second, on June 23, 2022, the FTC proposed a rule to “ban junk fees and bait-and-switch advertising tactics that can plague consumers throughout the car-buying experience.” Formally called the “Motor Vehicle Dealers Trade Regulation Rule,” this overbroad proposal would dramatically impact dealers throughout the United States. The proposed rule would impose additional regulations on how vehicles are advertised, especially concerning pricing. For example, the rule states dealers must advertise the vehicle’s price inclusive of all charges except government fees and taxes. This is different than current California law, which states dealers can exclude certain charges (such as the document processing charge) from the advertised price of a vehicle. The rule would also impose requirements on how proposed monthly payments can be presented to customers. The proposed rule will also require dealers to “obtain express informed consent before any charges” for any product or service related to the sale, financing, or lease of a vehicle. This would expand and modify current pre-contract disclosure statement requirements for California dealers. Perhaps most troubling is a proposed ban on “any add-on product or service that confers no benefit to the consumer.” This requirement could be weaponized against dealers that charge GAP in circumstances where the federal government deems such sale inappropriate. Finally, the proposed rule would also impose a two-year records retention requirement on all “materially different advertisements, sales scripts, training materials, and marketing materials regarding the price, financing or lease of a motor vehicle.” Records related to lists of optional products, add-ons, service contracts, GAP Agreements, and related materials must also be maintained for two years. Additionally, customer complaints must also be retained. These expanded retention requirements empower government officials and plaintiffs’ attorneys.3 CNCDA is closely working with NADA to push back against the FTC’s proposed rule. In the coming months, you’ll likely hear more from us on these potential requirements.
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 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 perfor ed globally by banking affiliates f Bank of America Corporation, including Bank of America, N.A., Member FDIC. Trading in securities and fin cial instrum nts, and strategic advisory, and other investment banking ctivities, are performed gl bally by investment banking affiliates of Bank of America Corporation (“Investment Banking Affiliates”), including, the United States, BofA Secu ities, Inc. and Merrill Ly ch Professional Cl aring Corp., both of which are registered broker-dealers and Members of SIPC, and, in other jurisdiction , by locally registered entities. BofA Securi ies, I c. and Mer ill Lynch Professional Clearing C rp. are regist red 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 No Bank Gu rante d | May Lose Value | ©2022 Bank of Am ica Corporation. All rights reserved. 4826555 08-22-0145
24 California Auto Outlook Comprehensive Information on the California Vehicle Market Volume 18, Number 3 Released August 2022 Covering Second Quarter 2022 TM Publication Sponsored By: California New Vehicle Registrations Predicted to Decline Slightly in 2022 California New Light Vehicle Registrations and U.S. New Vehicle Sales - YTD ‘21 and YTD ‘22 thru June 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 Lean vehicle supplies continue to impact the California market. New vehicle registrations in the state are predicted to fall to 1.8 million units this year, a 3.2 percent decline from 2021. Demand for new vehicles is likely to soften in the coming months due to lower economic growth and weakening consumer affordability, but it’s not expected to lead to a sharp drop in sales. Inventory shortages have already pushed sales to low levels and accumulating pent up demand will provide a boost when supplies improve. New light vehicle registrations in California declined 17.9 percent during the first six months of this year versus year earlier, in line with the 18.3 percent drop in the Nation. Light truck registrations fell by less than the overall industry and market share increased by 2.7 share points. Domestic brand registrations (including GM, Ford, Stellantis, and Tesla) declined by just 6.3 percent. QUARTERLY RESULTS California Quarterly New Light Vehicle Registrations Percent Change vs. Year Earlier As expected, Second Quarter registrations declined sharply as supply constraints continued and the market struggled to approach elevated year-earlier levels. Second Quarter registrations this year fell 21.6 percent versus 2021, the third consecutive quarterly decline that exceeded 10 percent. 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 1.80 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. YTD '21 YTD '22 Change YTD '21 YTD '22 Change Registrations TOTAL 1,039,229 853,347 -17.9% 8,360,820 6,831,596 -18.3% Car 356,441 270,052 -24.2% 1,952,458 1,441,485 -26.2% Light Truck 682,788 583,295 -14.6% 6,408,362 5,390,111 -15.9% Domestic 323,161 302,701 -6.3% 3,411,941 3,037,177 -11.0% European 157,450 123,661 -21.5% 871,052 700,518 -19.6% Japanese 475,692 353,909 -25.6% 3,272,883 2,391,026 -26.9% Korean 82,926 73,076 -11.9% 804,944 702,875 -12.7% Market Share Car 34.3 31.6 -2.7 23.4 21.1 -2.3 Light Truck 65.7 68.4 2.7 76.6 78.9 2.3 Domestic 31.1 35.5 4.4 40.8 44.5 3.7 European 15.2 14.5 -0.7 10.4 10.3 -0.1 Japanese 45.9 41.5 -4.4 39.1 35.0 -4.1 Korean 8.0 8.6 0.6 9.6 10.3 0.7 -2.9% 96.0% 7.8% -15.5% -13.8% -21.6% 1Q '21 vs. 1Q '20 2Q '21 vs. 2Q '20 3Q '21 vs. 3Q '20 4Q '21 vs. 4Q '20 1Q '22 vs. 1Q '21 2Q '22 vs. 2Q '21 % change vs. year earlier Source for California new vehicle registrations: AutoCount data from Experian. Source for U.S. sales: Automotive News.
25 Page 2 California Auto Outlook Non-Luxury SUVs, 35% Luxury SUVs, 17% Pickups and Vans, 17% Small Cars, 11% Luxury & Sports Cars, 11% Non-Luxury MidSize & Large Cars, 9% Non-Luxury SUVs, 34% Luxury SUVs, 15% Pickups and Vans, 17% Small Cars, 16% Luxury & Sports Cars, 8% Non-Luxury MidSize & Large Cars, 10% SEGMENT MARKET SHARE TRENDS Small Car Market Share Declined by Five Points So Far This Year HYBRID AND ELECTRIC VEHICLES Estimated Electric Vehicle Market Share Reached 15.1% in First Half of 2022 Segment Market Shares in California YTD 2021 thru June Segment Market Shares in California YTD 2022 thru June The two graphs above show market shares for primary segments during the first six months of 2021 and 2022. Data Source: AutoCount data from Experian. Data Source: AutoCount data from Experian. Non-Luxury SUV Share YTD ‘21: 34% Hybrid/electric vehicle market share, YTD ‘22: 29.6% Estimated Hybrid and Electric Vehicle Market Share The graph above shows the estimated hybrid powertrain and electric vehicle market share in the state. Registrations by powertrain for vehicles equipped with multiple engine types were estimated by Auto Outlook. The estimates are based on model registrations compiled by Experian, and engine installation rates collected from other sources. Non-Luxury SUV Share YTD ‘22: 35% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 2016 2017 2018 2019 2020 2021 YTD '22 Market Share Electric Hybrid (excl. plug ins) Plug in Hybrid Estimated Hybrid and Electric New Vehicle Registrations and Market Share 2018 2019 2020 2021 YTD 2022 Electric registrations 99121 106752 101628 176357 128855 Electric share 4.6% 5.1% 6.2% 9.5% 15.1% Hybrid regs. (excl. plug ins) 92658 117218 113103 196777 99842 Hybrid share (excl. plug ins) 4.3% 5.6% 6.9% 10.6% 11.7% Plug in hybrid regs. 64644 52329 31144 61261 23894 Plug in hybrid share 3.0% 2.5% 1.9% 3.3% 2.8%
26 Covering Second Quarter 2022 Page 3 The table below shows the top five selling models during the first six months of 2022 in 20 segments. In addition to unit registrations, it also shows each model’s market share in its respective segment. Sales results in the first half of this year were primarily determined by vehicle production and availability. New registrations of the Honda Civic and Toyota Camry, two perennial top-sellers in the state, were impacted by diminished inventories. MODEL RANKINGS Tesla Model Y Retains Top Spot in California Market BEST SELLERS IN PRIMARY SEGMENTS Compact Car: Toyota Corolla Full Size Pickup: Chevrolet Silverado Mid-Size Car: Toyota Camry Compact SUV: Toyota RAV4 Near Luxury Car: Tesla Model 3 Mid-Size SUV: Toyota Highlander Comp./Mid Pickup: Toyota Tacoma 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 1293 23.7 Toyota Corolla 22391 27.9 Ford Mustang 4466 40.8 Toyota Camry 28745 40.5 Toyota Mirai 1172 21.5 Honda Civic 18302 22.8 Dodge Challenger 2641 24.1 Honda Accord 18384 25.9 Kia Rio 914 16.8 Kia Forte 8071 10.1 Toyota 86 1213 11.1 Nissan Altima 10259 14.5 Mitsubishi Mirage 740 13.6 Nissan Sentra 6020 7.5 Chevrolet Camaro 1096 10.0 Chevrolet Malibu 6072 8.6 Nissan Versa 575 10.6 Toyota Prius 5952 7.4 Subaru BRZ 506 4.6 Kia K5/Optima 4752 6.7 Model Regs. Share Model Regs. Share Model Regs. Share Model Regs. Share Dodge Charger 4739 65.3 BMW 2-Series 1557 35.8 Tesla Model 3 38993 60.8 Tesla Model S 5791 21.7 Toyota Avalon 987 13.6 Acura ILX 1110 25.5 Lexus ES 5159 8.0 BMW 5-Series 2792 10.5 Kia Stinger 761 10.5 Mercedes A-Class 937 21.6 BMW 3-Series 4041 6.3 Mercedes S-Class 2629 9.9 Chrysler 300 429 5.9 Audi A3 692 15.9 BMW 4-Series 3243 5.1 Mercedes E-Class 2405 9.0 Nissan Maxima 337 4.6 Acura Integra 44 1.0 Lexus IS 2694 4.2 Chevrolet Corvette 1699 6.4 Model Regs. Share Model Regs. Share Model Regs. Share Model Regs. Share Toyota Tacoma 17777 42.6 Chevrolet Silverado 20349 28.1 Toyota Sienna 6170 42.6 Ford Transit Connect 4722 35.7 Ford Maverick 4888 11.7 Ford F-Series 18598 25.7 Chrysler Pacifica 4906 33.9 Mercedes Sprinter 4106 31.0 Nissan Frontier 4706 11.3 Ram Pickup 17412 24.1 Honda Odyssey 2283 15.8 Ram Promaster 3003 22.7 Ford Ranger 3956 9.5 GMC Sierra 8947 12.4 Kia Carnival 721 5.0 Chevrolet Express 791 6.0 Chevrolet Colorado 3389 8.1 Toyota Tundra 4253 5.9 Chrysler Voyager 381 2.6 Mercedes Metris 374 2.8 Model Regs. Share Model Regs. Share Model Regs. Share Model Regs. Share Subaru Crosstrek 10181 18.8 Toyota RAV4 31599 25.7 Toyota Highlander 15867 14.7 Chevrolet Tahoe 3384 25.0 Honda HR-V 10015 18.5 Honda CR-V 13547 11.0 Subaru Outback 8450 7.8 Jeep Grand Wagoneer 3131 23.2 Kia Niro 5157 9.5 Mazda CX-5 9302 7.6 Ford Explorer 8226 7.6 Chevrolet Suburban 1908 14.1 Nissan Kicks 4350 8.0 Jeep Wrangler 8461 6.9 Toyota 4Runner 7090 6.6 GMC Yukon 1642 12.1 Volkswagen Taos 3173 5.9 Hyundai Tucson 6469 5.3 Jeep Grand Cherokee 5485 5.1 GMC Yukon XL 1421 10.5 Model Regs. Share Model Regs. Share Model Regs. Share Model Regs. Share Mercedes GLB-Class 2143 22.0 Tesla Model Y 42320 54.2 Lexus RX 8796 19.5 Cadillac Escalade 2400 24.9 Audi Q3 2003 20.6 Mercedes GLC-Class 7856 10.1 Mercedes GLE-Class 6367 14.1 Mercedes GLS-Class 2229 23.2 Lexus UX 1796 18.5 BMW X3 5364 6.9 BMW X5 5779 12.8 BMW X7 1877 19.5 Mercedes GLA-Class 1303 13.4 Audi Q5 4650 6.0 Tesla Model X 3791 8.4 Land Rover Range Rover 892 9.3 Volvo XC40 1106 11.4 Lexus NX 3780 4.8 Acura MDX 2785 6.2 Mercedes G-Class 849 8.8 Compact/Mid-Size Pickup Full Size Pickup Mini Van Large Van Top Selling Models in Each Segment - New Light Vehicle Registrations (YTD 2022, thru June) Cars Subcompact Compact Sports/Pony Cars Mid-Size Large Entry Luxury Near Luxury Luxury and High-End Sports Cars Light Trucks Subcompact SUV Compact SUV Mid-Size SUV Large SUV Luxury Subcompact SUV Luxury Compact SUV Luxury Mid-Size SUV Luxury Large SUV
27 Page 4 California Auto Outlook 2.1% 4.0% 5.6% 1.9% 2.2% 5.0% 3.9% 2.6% 4.9% 5.3% 10.6% 6.6% 12.7% 3.3% 13.4% 2.1% 2.4% 2.9% 2.9% 3.5% 3.6% 3.8% 4.2% 4.5% 4.8% 6.2% 8.6% 8.7% 10.7% 17.9% 0.0% 5.0% 10.0% 15.0% 20.0% Mazda Ram Jeep Lexus BMW Hyundai Subaru Mercedes Kia Nissan Chevrolet Honda Ford Tesla Toyota Market Share State U.S. BRAND SUMMARY Registrations Declined for Most Brands as Supply Issues Continue to Restrict Sales Registrations increased for Tesla and Genesis. Kia, Mercedes, BMW, Ford, and Subaru had declines of less than 15 percent. California and U.S. Market Share - YTD 2022 thru June (Top 15 selling brands in state) Percent Change in Brand Registrations YTD 2022 thru June vs. YTD 2021 (Top 30 selling brands in state) Source for California new vehicle registrations: AutoCount data from Experian. Source for U.S. market share: Automotive News. Toyota, Tesla, Ford, Honda, and Chevrolet were market share leaders in California. -49.2% -44.1% -36.0% -35.7% -33.7% -32.1% -32.0% -30.9% -30.5% -28.8% -28.4% -24.9% -21.9% -21.9% -21.1% -20.3% -19.8% -18.3% -17.5% -17.4% -16.8% -15.3% -15.1% -14.8% -13.5% -11.9% -11.7% -5.4% 53.0% 82.2% -130.0% -80.0% -30.0% 20.0% 70.0% 120.0% Infiniti Land Rover Dodge Honda Volkswagen Mazda Audi Chevrolet Lincoln Acura Nissan Ram Hyundai Chrysler Cadillac Toyota Lexus Mitsubishi GMC Jeep MINI Volvo Porsche Subaru Ford BMW Mercedes Kia Genesis Tesla Percent change in registrations
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