Vol. 34 No. 2 A Publication of the Illinois Automobile Dealers Association Automobile Dealer News Impact of Federal Electric Vehicle (EV) Tax Credit on EV Production and Retail Sales: Insights for Franchised New Vehicle Dealers Leadership: Getting Back to Basics & Planning for the Future
Located in Central Illinois, we serve the entire state. We specialize in automobile dealers in the following areas: Certified Public Accountants Memberships in: AUTOCPA Group The American Institute of Certified Public Accountants The Illinois CPA Society Serving more than 250 Automobile Dealers throughout the United States Woodward & Associates, Inc. 1707 Clearwater Avenue ·P.O. Box 1584 ·Bloomington, IL 61702 (309) 662-8797 ·Fax (309)662-9438 ·Email woodwardassoc@cpaauto.com ·http://www.cpaauto.com Dealership valuations Automobile dealer legal support Buy-Sells for dealerships LIFO inventory computations Financial statement analysis Corporation Income Tax returns Personal Income Tax returns CPA prepared financial statements Dealer estate planning Employee theft consulting Internal control studies and audits Profit consulting Training office managers/CFO’s 401K Audits
Julie a. Cardosi, esq. 3040 spring Mill drive, suite B springfield, iL 62704 (217) 787-9782 jcardosi@autocounsel.com www.autocounsel.com EXCLUSIVE. STRATEGIC. RESULTS. ConCentrations: Dealership Mergers & Acquisitions Dealership Franchise Law Business Litigation / Motor Vehicle Review Board Disputes Manufacturer / Franchisor Relations Business & Commercial Law Advertising Compliance Review Consumer Complaints Dealership Succession Add Points Real Estate Law Employment & Labor Law Federal & State Regulatory Compliance BaCkground: Principal, Private Law Firm Former, IADA Legal Counsel Former, Illinois Assistant Attorney General, Deputy Chief, Consumer Protection Division Drafted Illinois Motor Vehicle Franchise Act Amendments Creating Motor Vehicle Review Board Drafted Illinois Motor Vehicle Advertising Regulations Exclusively representing the unique business interests of automobile dealers for over 30 years. LAW OFFICE OF JULIE A. CARDOSI, P.C.
CONTENTS Vol. 34 No. 2 Chairman David Parkhill / 217.352.4275 Sullivan Parkhill Automotive 440 W. Anthony Dr. Champaign, IL 61822 Vice Chairman John Alfirevich / 708.429.3000 Apple Chevrolet, Inc. 8585 W. 159th St. Tinley Park, IL 60477 Secretary/Treasurer Jamie Auffenberg / 618.624.2277 St. Clair Auto Mall Auffenberg Auto Mall 1130 Auffenberg Ave. Shiloh, IL 62269 Executive Director Joe McMahon / 217.753.0220 Illinois Automobile Dealers Association 300 W. Edwards, Springfield, IL 62704 2023 OFFICERS ©2023 Illinois Automobile Dealer News | The newsLINK Group, LLC. All rights reserved. Illinois Automobile Dealer News is published four times each year by The newsLINK Group, LLC for the Illinois Automobile Dealers Association (IADA) and is the official publication for this association. The information contained in this publication is intended to provide general information for review, consideration and 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 circumstances. The statements and opinions expressed in this publication are those of the individual authors and do not necessarily represent the views of the IADA, 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 Illinois Automobile Dealer News is a collective work, and as such, some articles are submitted by authors who are independent of the IADA. While the Illinois Automobile Dealer News 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. Illinois Automobile Dealers Association 300 W. Edwards St. Springfield, IL 62704 T 217.753.0220 / F 217.753.3424 IllinoisDealers.com 8 Scan here to check out the new, interactive IllinoisDealers.com website! 20 6 Executive Director’s Message Once Again — IADA Makes It Easier to Send Your Managers to NADA Professional Series By Joe McMahon, Executive Director, Illinois Automobile Dealers Association 8 Bringing Leadership Home 10 ATC vs. Competitors 12 Consultant's Corner - Leadership: Getting Back to Basics & Planning for the Future By Joel Kansanback, Executive Vice President, Brown & Brown Dealer Services 14 Counselor’s Corner - Impact of Federal Electric Vehicle (EV) Tax Credit on EV Production and Retail Sales: Insights for Franchised New Vehicle Dealers By Julie Cardosi, Law Office of Julie A. Cardosi, P.C. 16 EVs and the Service Department By Justin Carr, Vice President, Warranty Processing Company 20 Positioning for the Future of EV Market Growth 22 The Great Retention Tips to Retain Your Employees In 2023 24 Planning for Dealership Succession Dividing Multiple Dealerships Amongst Family By Duncan Moseley, Managing Director, Business Transition Advisory Group, Truist Wealth
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Executive Director’s Message Once Again — IADA Makes It Easier to Send Your Managers to NADA Professional Series JOE MCMAHON EXECUTIVE DIRECTOR Illinois Automobile Dealers Association Springfield, IL Beginning on September 5, IADA is excited to offer the 2nd Annual NADA Professional Series right here in Illinois at our IADA office. We provide the most efficient and affordable way to offer this bestin-class training to your dealership managers without having to fly to other parts of the country and spend extra nights in hotels. The Series covers all parts of your dealership: • Office Management • Parts Management • Sales Management • Service Management The classes will be limited to 20 participants per category, so register now. Secure a spot today by scanning the QR code. https://www.nada.org/nada/ education-consulting/nadaprofessional-series Classes are $2,995 for members — or get all NADA Professional Series classes and Academy Seminars for every employee at your store with an annual subscription, $699/month for the initial dealership and $399/month for any an additional dealership (12-month subscription required)! To learn more about subscription information, scan the QR code. https://www.nada.org/nada/nadaeducation-subscriptions If you have any questions about the class arrangement or content, feel free to give us a call at (217) 753-0220. 6 Illinois Automobile Dealer News
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Logan Gastman, 22, is a third-generation leader at Roanoke Motors in Roanoke, Illinois. He recently graduated from the prestigious NADA Academy in Washington, D.C. Proud to be representing Illinois and his Central Illinois dealership, he is a member of Academy class N402, which included 33 students from around the country. “It was a true honor to be able to complete this program and to learn from the Academy teachers who are the best in the auto business,” Gastman explains. Learning the Business Like Gastman, all Academy students are sponsored by a dealership that covers the cost of the course and travel expenses. Students typically include successors like Gastman, but also include staff like General Managers, Service Managers, Office Managers, and other department employee leaders with a drive to commit to the curriculum, course work, and the auto dealership industry. The NADA Academy program is taught over a 10-month period with students traveling to D.C. for approximately four days every six weeks. In between, they return to their home dealership to perform their jobs. The Academy course sections include Financial Management, Parts Management, Service Management, Vehicle Inventory and Marketing Management, Vehicle Sales and Associate Management, and Business Leadership. “As a college accounting major, I enjoyed the finance courses, but I really appreciated being exposed to the fixed operations side, like parts and service, and learned more about how those fit into the overall business,” Gastman says. Bringing Leadership Home (L to R) John Gastman, Matt Gastman, and Logan Gastman. 8 Illinois Automobile Dealer News
“I also enjoyed the culture curriculum because employees today want different things from employers than they have in the past.” Student Bonding Gastman also enjoyed creating lasting bonds with other Academy students and had the opportunity to connect fellow Illinois Academy students with U.S. Representative Darin LaHood (R-IL) who greeted the Academy class on the steps of the U.S. Capitol one day after class. The full list of recent NADA Academy graduates from Illinois includes: • Derick Anderson, General Manager, Mike Miller Auto Park, Peoria • Doron Benjamin, Manager, Currie Motors, Frankfort • Tony Borgic, Sales Manager, Gateway Truck and Refrigeration, Collinsville • Nikki Gaieck, Manager, Fair Oaks Ford Lincoln, Naperville • Logan Gastman, Manager, Roanoke Motor Company, Roanoke • Jordan Hale, Manager, Ford Square, Mt. Vernon • John Jepson, Manager, Northwest Trucks, Palatine • Bret Kruse, Truck Centers, Inc., Troy • Joseph Moore, Corporate Sales and Finance Director, Napleton Cadillac, Northbrook • Raymond Scarpelli, Sales and Marketing Director, Ray Chrysler Dodge Jeep Ram, Fox Lake • Joe Schlauch, Fixed Operation Manager, Loeber Motors, Lincolnwood • Mark Schmidt, Sales Consultant, Roy Schmidt Honda, Effingham • Ben Scribner, General Sales Manager, Honda of Downtown Chicago, Chicago • Nicholas Skwierczynski, General Manager, Al Piemonte Chevrolet, East Dundee IADA Professional Series For dealership leaders who may not be able to make the time or travel commitment to the NADA Academy, the IADA has created an Academy program of its own. Dubbed the NADA Professional Series, it has proven to be the most efficient and affordable way to offer this best-in-class training to dealership managers without having to fly to other parts of the country and spend extra nights in hotels. The Series covers all critical areas of running a dealership, including Office Management, Parts Management, Sales Management, and Service Management. With the success of the inaugural classes, the IADA plans to continue hosting the series at the IADA office in the future. If you have any questions about entrance requirements or content, feel free to contact the IADA or scan the QR Code for more information. Logan Gastman with U.S. Congressman Darin LaHood (R-IL). https://votervoice.s3.amazonaws.com/groups/ilada/attachments/D22-0388Professional Series-MediaKit-Illinios_mailer.pdf 9 Illinois Automobile Dealer News
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We’re more than a financial partner. We’re an invested one. True relationships matter. We don’t take this lightly. The best are built on a deep understanding of your short- and long-term goals and always backed by thoughtful, strategic advice in support of your vision. With full-service financial solutions and a deep bench of industry expertise, we’ll build a team around your organization to focus on your success. So, let’s drive further—together. To learn more, visit us at Truist.com/DealerServices. © 2022 Truist Financial Corporation, Truist, Truist purple and the Truist logo are service marks of Truist Financial Corporation. All rights reserved. Truist Securities is the trade name for the corporate and investment banking services of Truist Financial Corporation and its subsidiaries. Securities and strategic advisory services are provided by Truist Securities, Inc., member FINRA and SIPC. | Lending, financial risk management, and treasury and payment solutions are offered by Truist Bank. | Deposit products are offered by Truist Bank, Member FDIC.
LEADERSHIP: Getting Back to Basics & Planning for the Future By Joel Kansanback, Executive Vice President, Brown & Brown Dealer Services Consultant's Corner Part of being a leader is to look around corners and anticipate what may come next. Look into the future and develop a strategic plan to respond to the inevitable shifts in the market. 12 Illinois Automobile Dealer News
If your dealership is finding it challenging to get back to basics, your leadership team may want to strategically look back over the previous few years to better understand what worked, what did not work and how you can best leverage your leaders and their roles to plan for the future. Leaders help set direction and drive results. They assemble teams and help remove barriers to success. They also mentor and coach teammates. Leaders can devise strategic roadmaps and can articulate a holistic view of the future that others may not be able to see. The COVID-19 pandemic created many unique leadership challenges for dealerships. First, there was an immediate drop in car sales and, in turn, significant uncertainty. Then, depending on the marketplace, your dealership may have been considered an essential business and was open but not able to utilize showrooms. From an employee perspective, they may have had those concerns about getting themselves or someone close to them sick, faced difficult decisions on staffing, and struggled to get people to return to work. As the landscape of the pandemic began to improve, expenses were driven down by low inventories, reduced employee headcount, low to no advertising costs and very low interest rates. Consumers began to spend stimulus money. Grosses increased, the industry saw incredible turn rates, F&I and Service numbers skyrocketed, and turnover went down. The outlook for dealerships improved. However, the market has once again begun to shift. Interest rates are up, and F&I grosses, while still at a good rate, are down from their highs. Consumers are going back to their old shopping behaviors. In dealerships across America, managers are talking about getting back to basics, focusing on tactics that may have stopped during the pandemic and immediately after due to the change in the marketplace. These basics include doing walk arounds, test drives, inspecting the car when it’s delivered and phone work. While none of us could have predicted living through a global pandemic, leaders should have been able to anticipate the leveling off from this rebound at some point. How can you help your dealership get back to basics? Part of being a leader is to look around corners and anticipate what may come next. Look into the future and develop a strategic plan to respond to the inevitable shifts in the market. Create a playbook that outlines the baseline activities that drive your business but leaves room for flexibility should the unexpected occur. Identify accountability measures to help ensure that you have insights into your performance that will help prepare your dealership for the future. For more information, please contact Francis Fagan with Brown & Brown Dealer Services at 312-608-4979 or francis.fagan@bbrown.com. Francis is the Regional Training Director for Illinois and Indiana. At Brown & Brown Dealer Services we put the emphasis on training. Visit our website for our training calendar and to meet our nationally renowned trainers at www.bbdealerservices.com. JOEL KANSANBACK EXECUTIVE VICE PRESIDENT Brown & Brown Dealer Services 13 Illinois Automobile Dealer News
Counselor’s Corner JULIE CARDOSI Law Office of Julie A. Cardosi, P.C. Impact of Federal Electric Vehicle (EV) Tax Credit on EV Production and Retail Sales: Insights for Franchised New Vehicle Dealers As the automotive industry continues its march towards vehicle electrification, the role of EVs is becoming increasingly prominent. As an accelerant, state and federal governments have implemented financial incentives, including tax credits. In August 2022, the federal Inflation Reduction Act (IRA) was signed into law and among other provisions, introduced a federal tax credit for qualified EV purchases. The new federal tax credits became effective April 18, 2023. Questions remain about the potential impact of these tax credits on EV production and retail sales and the significance to franchised dealers and their customers. The federal EV tax credit has been touted as an enticement to purchase electric vehicles. The tax credit allows eligible buyers to claim up to $7,500, depending on fulfillment of certain IRA requirements. The manufacturers ascertain whether a particular vehicle qualifies depending on certain criteria, including the vehicle’s battery components and origin of manufacture, and source of minerals. A further criterion relates to the manufacturer’s suggested retail price. Additionally, to qualify for the tax credits, consumers must satisfy certain income threshold requirements, along with having an affirmative tax liability amount in the purchase year that is equal to the credit. Finally, the dealer is required to provide customers with requisite disclosures to claim the tax credit, as well as report to the Internal Revenue Service the vehicle sales at the end of each year. Some argue that the tax credit has the potential to stimulate EV production in several ways. For example, by offering a financial incentive, the tax credit reduces upfront EV manufacturing costs, encouraging investment in expansion of EV production capacities 14 Illinois Automobile Dealer News
and contributing to an increase in EV supply and availability for purchase by consumers. Additionally, elimination of the prior cap on vehicle production per manufacturer eliminates a potential roadblock for popular EV brands. As such, manufacturers continue to benefit from the federal tax credit, maintaining their competitive edge and driving further investment in EV production. Others assert, however, that because the number of EV models meeting the regulatory criteria for the tax credit is minimal, few EV purchases will actually qualify. For example, models may not comply with the regulations because of where the batteries and parts are sourced. Presently, many of the vehicles eligible to receive credits are expensive and in limited supply. For franchised dealers, expansion of EV production represents an opportunity to diversify inventory and cater to the growing demand for EVs. Dealers are leading in the arena of EV and infrastructure investments, which include equipment acquisitions, charging station installations, and staff training — all to better serve their customers. Success of the federal tax credit in stimulating EV retail sales is important for franchised dealers if it has the effect of reducing the purchase price of electric vehicles, making them more affordable and attractive to more consumers. In turn, this may incentivize consumers’ EV purchases as a cost-effective alternative to internal combustion engine vehicles. For dealers, the tax credit would then present an opportunity to increase EV sales and expand their customer base. By actively promoting the benefits of EVs and educating consumers about available incentives, dealers can position themselves as trusted advisors in the EV market. However, based on price mark-ups implemented by manufacturers, including around the time the IRA was enacted last year, the benefits of the tax credits to dealers and their customers are debatable. Some within the industry have suggested that the tax credits “pass-through” consumers and are effectively a transfer of funds into the pockets of manufacturers. Franchised dealers should be aware of additional challenges associated with the federal EV tax credits. While an earlier version of the tax credit was subject to a phase-out period once a manufacturer reached a volume cap of a number of units, as amended by the IRA, the cap was eliminated. Such limitations, however, if instituted in the future, may impact the long-term availability of the tax credit and associated sales incentives. Additionally, with the recent banking crisis, coupled with rising inflation and interest rates, lenders have become more cautious, with many institutions withdrawing from the dealership floorplan finance space. At the time of the writing of this article, legislation had been introduced (i.e., H.R. 2811) in the 118th U.S. Congress seeking to repeal or modify tax credits for EVs as part of the proposed increases to the federal debt limit. Moreover, the success of the tax credit in stimulating EV sales relies on EV adoption at scale which will of necessity require significant investment in and enhancements of the charging infrastructure nationwide. The tax credit offers opportunities for franchised dealers to diversify their inventory, cater to the growing demand for electric vehicles, and position themselves as key players vital to the successful distribution, sale and servicing of electric vehicles. However, there remain significant obstacles in the road ahead. Julie A. Cardosi is Principal of the private firm, Law Office of Julie A. Cardosi, P.C., of Springfield, Illinois. She has practiced law for over 35 years and represents the business interests of franchised motor vehicle dealers throughout Illinois. Formerly in-house staff legal counsel for the Illinois Automobile Dealers Association, she concentrates her private practice in the areas of dealership compliance matters, transfers of ownership, mergers and acquisitions, franchise law, commercial real estate transfers, dealership employment and other areas impacting day-to-day dealership operations. She has also served as former Illinois Assistant Attorney General and Deputy Chief of the Consumer Fraud Bureau of the Attorney General’s Office. The material discussed in this article is for general information only and is not intended as legal advice and should not be acted upon as such. Dealers should consult their own private legal counsel for application to their specific circumstances. For more information, Julie can be reached at jcardosi@autocounsel.com, or at 217-787-9782, ext. 1. Success of the federal tax credit in stimulating EV retail sales is important for franchised dealers if it has the effect of reducing the purchase price of electric vehicles, making them more affordable and attractive to more consumers. 15 Illinois Automobile Dealer News
Change is tough, but a lot of good can come from it. We’ve seen this repeatedly as disruptors redefine and restore balance to industries. EVs will cause a big shift, complete with changes to policy and procedure. However, as electric vehicles go mainstream, there will still be plenty to do in dealership service departments. EVs need maintenance and repairs despite dealer concerns that EVs require less maintenance than other vehicles because they have fewer parts and no need for engine-oil changes or regular service visits. For many dealerships, the service department’s bread-and-butter revenue mainly comes from work involving alignments, brakes, electrical systems, suspensions and tires. So it will help worried dealers to remember what’s on EVs: brakes, electrical systems, tires, steering systems and suspensions. Lube, oil and filter services have been the entry point for most service departments. Still, because EV batteries are heavy, EVs weigh more than otherwise similar vehicles with gas-powered engines. The weight wears out tires faster. Since EV tires need to be rotated and replaced more often, tire maintenance and replacement will be the new entry point for EVs. Additionally, EV repairs are usually expensive. History tells us that new technologies need an ironout period, and EVs are no exception. Components break, and batteries have issues. As the vehicles evolve, there will be new opportunities for service. Starting with Ford, manufacturers seem to be giving the impression that they want to copy Tesla’s methods for handling repairs and eliminate the labor rate or parts markups they currently pay when dealers are involved. Doing so would increase their EVs and the Service Department By Justin Carr, Vice President, Warranty Processing Company 16 Illinois Automobile Dealer News
control and improve their bottom line, so manufacturers are putting requirements in place regarding the repairs a dealer can do. For example, Ford won’t allow dealer service departments to fix certain vehicles without having a specific equipment set. It will be interesting to see how this power play ends. We know dealers must protect the value of their service departments, and we also know that dealers understand service better than the manufacturers do. What are the first steps in finding a better solution? Recognize what the market is today and how it affects you. Also, continue planning for the future by getting clients in the door to repair and service their vehicles, and give them the best experience possible. A general manager may not have an expert to explain why a cost-cutting decision in the service department is a mistake, and it’s easy to miss important variables that drive revenue in the service department when you make decisions from 30,000 feet. Getting parts will continue to be a problem, and some repairs will take longer than others. As a dealer, do what you can to control processes, training and oversight. If you don’t have the bandwidth, find a strong partner who can fill in the gaps and work closely with your team. People are trying to automate the warranty process. It is nice when you can get simple repairs handled, but not everything is cookie-cutter. Your bread and butter comes from a few areas. One is maximizing the bigger repairs and understanding how to get the most out of that newly acquired labor rate or parts mark-up percentage increase. Another is creating efficiencies and processes that benefit the entire service department team. Education is still the key to growth and progress in service departments. Since EV tires need to be rotated and replaced more often, tire maintenance and replacement will be the new entry point for EVs. 17 Illinois Automobile Dealer News
When managers see markets drop, it’s easy to make hasty decisions without understanding the impact of that decision on the service department. Managers might think they can find cheaper ways to do things, but then receivables shrink or inefficiencies cut into profit margins. Claims fall, revenue decreases, and management doesn’t get the same knowledgeable reporting. That’s why it is important to think about how decisions affect everyone down the line as well as planning for the future. Everything will fall into place if we make good moves that benefit everyone. The service department must ensure their people understand their role and do their jobs to legitimately maximize warranty dollars. If the department can structure itself properly, which includes processes and efficiencies, they will be ready for the future. That future includes a rebounding market. When that happens, you want to be ready to absorb the full level of profitability by making sure the service department can deal with increased work without hiring staff. Manufacturers always make changes, so you need to hire and retain staff with the knowledge to direct repair orders. A Service Manager, Technician, or Service Advisor like that can bring everyone else up. Even though it can be hard to find and hire staff with tribal knowledge, a lower-cost person doesn’t have the same skills. Skilled team players are expensive because they know their roles and what they should be doing. They stay in front, training and lifting the department. Hiring the right person or partner is like deciding whether to buy steak or jello. Jello costs much less, but it is no substitute for steak. If you end up hiring inexperienced staff in critical positions, in the absence of having a lot of senior people, it is easy for bad habits to spread. Then you have bigger problems to fix and miss out on the money you could have been earning. Cleaning up these types of internal messes pulls your critical team members down rabbit holes they shouldn’t be in. Although many dealers don’t have the time and money to train in-house, they can create partnerships by consulting and outsourcing with a good outside company that acts like a life coach and mentor for their business. The dealership can use a consulting company to keep employees on track and responsible, including new people. The consultants can do stand-in work when employees are gone, lift teams, and keep them on track. The right company will actively find patterns of problems, spoon-feed dealers the information they need and give them options to improve. Dealers can then learn from the consultant’s processes and keep moving forward. With a nonbiased partner, you can find ways to help everybody and grow the service department. It’s important to know why you are doing something because you will get stuck or slide backward if you do things for the wrong reasons. Success comes from acting purposefully for all the right reasons. Although EVs are a big change, they offer dealers many new opportunities. Justin Carr is a VP at Warranty Processing Company, which recently relocated to Texas. Justin works with dealers nationwide to increase efficiencies within service departments and educates dealer staff on why efficiencies matter. EVs need maintenance and repairs despite dealer concerns that EVs require less maintenance than other vehicles because they have fewer parts and no need for engine-oil changes or regular service visits. 18 Illinois Automobile Dealer News
NEW NAME SAME PEOPLE AND SERVICE YOU’VE KNOWN FOR YEARS We are pleased to announce that Somerset CPAs and Advisors has joined CBIZ and MHM. Together, CBIZ and MHM are one of the nation’s Top 15 accounting providers.* 800.469.7206 | cbiz.com Effective Feb. ’23 *Accounting Today – March 2023 CBIZ is a business consulting, tax and financial services provider and works closely with MHM (Mayer Hoffman McCann P.C.), an independent CPA firm providing audit, review and attest services. CBIZ and MHM are members of Kreston Global, a worldwide network of independent accounting firms. © Copyright 2023. CBIZ, Inc. NYSE Listed: CBZ. All rights reserved. Hit your target market. Get more exposure • Increase revenue To advertise in this magazine, contact us today. 801.676.9722 | 855.747.4003 thenewslinkgroup.org | sales@thenewslinkgroup.com 19 Illinois Automobile Dealer News
Elon Musk recently commented that he couldn’t see his closest competitor in the EV market with a telescope. Those are admittedly bold words, and that kind of posturing is typical as the jockeying within the EV market heats up. But many dealers selling OEM brands think Mr. Musk doesn’t need a telescope; he needs a mirror. And since objects in mirrors can be much closer than they appear, he should put down his telescope and turn around instead. It’s true that from 2018–2020, approximately 80% of the EV market belonged to Tesla. But the market balance is shifting. It decreased to 71% in 2021 and 65% during the first nine months of 2022. The biggest market gains were for cars selling at less than $50,000. By 2025, experts like John Murphy, the Managing Director and Lead Auto Analyst at Bank of America Merrill Lynch, think Tesla’s market share will drop to the low teens. Other companies have been working on more than a dozen new options that will start selling within the next year. Experienced and powerful competitors such as General Motors, Ford and Mercedes-Benz are actively competing with Tesla. Registration data on a national level shows that their work is being rewarded, and people are buying new EV models from manufacturers other than Tesla. There’s a name for what Tesla has experienced: “first-mover advantage.” Michelle Craig, an Executive Analyst at Cox Automotive, said she always expected Tesla’s market share to go down at some point after the competition began to catch up with them. Tesla has revolutionized the auto industry by focusing on impressive battery power. Still, as she pointed out, people want the affordable, eco-friendly EVs that are starting to hit the market. They will appreciate the chance to buy those EVs from trusted manufacturers at a lower price than what Tesla currently offers. Tesla’s inadequate support system for auto repairs will also persuade customers to choose something other than a Tesla when they decide to buy or replace an EV. Even though Tesla has been dropping its price on some vehicles and plans to offer at least one more-affordable option soon, that still doesn’t solve the company’s biggest weakness: being unable to repair its vehicles quickly. It also doesn’t erase the fact that other manufacturers will compete head-to-head on aspects such as equal or better technology and production build. Legacy manufacturers have been preparing to capture market share in the EV race: • Ford sold 61,575 vehicles in the U.S. in 2022 and now plans to meet the demand by doubling its production target. What do customers want to buy from Ford? Electric vans, Mustangs and trucks. Car and Driver magazine named Ford’s Mustang Mach-E model the 2021 “Electric Vehicle of the Year.” It was number three in sales of electric sport utility vehicles. Ford unveiled the F-150 Lightning in May 2022, then took 200,000 reservations. Threefourths of them were buyers who had never bought a Ford before. According to a survey conducted by Cox Automotive, respondents Positioning for the Future of EV Market Growth 20 Illinois Automobile Dealer News
preferred the Ford F-150 to Tesla’s Cybertruck. They chose the Ford F-150 because of its price, driving performance, size and design. • Volkswagen is spending tens of billions to meet a goal: moving half its U.S. sales to EVs by 2030. The company plans to produce 1.5 million EVs by 2025 to meet new EU emission targets. • Hyundai’s award-winning IONIQ 5 has been named the Best Electric Vehicle by Cars.com in its Best of 2023 Awards. The IONIQ 5 surpassed all the 2023 EVs in the market tested by the company’s editorial team of expert car reviewers. Other manufacturers to consider are General Motors, Volvo and Xpeng. The Detroit Bureau expects a dozen or more all-electric pickups to be available by 2025. In addition to vehicles manufactured by Toyota, Hyundai and others, people will buy the Chevrolet Silverado EV, Ford’s F-150 Lightning, the GMC Hummer and Sierra SUV and the Ram 1500 EV. Don’t discount Chinese companies like Nio and Xpeng, even though they seem too unfamiliar for Americans to worry about. Elon Musk has said he considers his biggest competitors to be Chinese automobile manufacturers, even though (characteristically) he thinks everyone is so far behind Tesla that they are a “distant second.” But despite Tesla having an advantage in its worldwide Supercharging network, Consumer Reports rates it seventh on Advanced Driver Assistance Systems. (The best Driver Assistance systems in the U.S. were Ford BlueCruise and GM SuperCruise.) Also, the German Level 3 system made by Mercedes-Benz surpasses Tesla’s Level 2 system. Just how fast is the market for EVs growing? In 2011, manufacturers sold 45,000 vehicles globally. The number was 3.24 million in 2020. Experts think 27 million vehicles will be sold by 2030. Tesla has done well financially. In 2012, annual sales were $400 million. They were $31.5 billion in 2020. However, maintaining that growth may prove impossible as other companies get involved and make the investments necessary to meet their goals. The drop in Tesla prices was good news for prospective owners but bad for existing owners. After all, there’s nothing quite like seeing the value of an expensive vehicle drop 20% in one day. In addition, Tesla vehicles have had construction problems and stale designs, and the federal government has been investigating 16 Tesla crashes that involved Autopilot or Traffic-Aware Cruise Control. Having stores where people can bring their vehicles for service and repair is a big advantage for dealerships. Earthweb estimated 2.5 million Tesla vehicles on the road at the end of 2022. According to Electrek in an online article dated June 2022, Tesla had more than 673 stores and service centers and more than 1,372 mobile service vehicles. Although Elon Musk said about the same time that his goal was to improve service in North America, he hasn’t been able to close that gap adequately yet. The reality for many Tesla owners is that they might not be close to any service center or mobile service vehicle. Even if they are, they might have to wait weeks or months for service from an authorized center. Elon Musk hoped that Tesla vehicles would need so little service that the shortage of repair places would have been no problem, but it hasn’t worked out that way. For example, Tesla windshields crack like windshields in other cars, but nobody has them in stock for next-day repair. Tesla’s inadequate service network creates an opportunity for its competitors. According to Mark Reuss, GM’s president, GM dealers started repairing Teslas in 2021. Other companies are doing the same thing. There’s even a website (fixyourtesla.com) with a national directory of thirdparty Tesla service shops. The world is moving to electric vehicles, and that will change the automotive landscape, but Tesla doesn’t have a lock on what that future will be in terms of market share. Tesla benefited from U.S. prosperity and a lack of competition. Those days are done. Legacy vehicle manufacturers are finding ways to adopt Tesla’s best ideas without dismantling the dealership model that has been developed and proven over time. 21 Illinois Automobile Dealer News
Over the past year, and largely fueled by the pandemic, the term “Great Resignation” has become all too familiar with employers as well as the headache of employee turnover. According to the U.S. Bureau of Labor Statistics, approximately 38.6 million resignations occurred between January and September 2022, and the number of employees quitting has remained fairly steady month over month. Today, a fair number of employers are experiencing the adverse impacts of workforce turnover. In terms of financial loss, the cost of replacing an employee can range from one-half to two times the employee’s annual salary, depending on their role. Additionally, declining productivity, a lack of engagement and low morale are present as remaining associates must often pick up the slack from departing team members. This can lead to even more employees quitting. One might ask the question: Is there an end in sight to the revolving door of employee turnover? It is essential for employers to dig deeper into this problem to understand what is happening and to start the process of turning the Great Resignation into the Great Retention this year. In a recent survey by iHire, 2,665 U.S. workers named the top five reasons employees left jobs in the past 12 months: • Unhappy with their manager/supervisor (43.7%) • Unsatisfactory pay/salary (43.4%) • Poor work/life balance (35.4%) • Lack of recognition/appreciation (29.7%) • Few growth/advancement opportunities (28.3%) It is not a surprise that “unsatisfactory pay” was on the list at number two. Having a competitive compensation strategy is crucial to retention, especially in the economic climate we have today. However, it’s important to note that the other four reasons listed for turnover revolve around the employer needing to put its people first and improving the company culture. Benefits like health insurance, profit sharing and paid time off have become fundamental expectations in the wake of the pandemic. Not to underestimate their value because they are important, but benefits are not driving employee retention. To open the door to the Great Retention, company culture must be addressed. The Great Retention Tips to Retain Your Employees In 2023 22 Illinois Automobile Dealer News
Creating a Positive Work Environment. Getting your managers on board is the first step to creating a positive work environment. Difficulties with management was the top reason employees left a job this past year. Setting standards for transparency in communication can strengthen the employee/ manager relationship. This can be accomplished by holding frequent meetings, actively listening, and maintaining an open-door policy. You may need to offer additional training to ensure managers are approachable and helpful. Other ways you can enhance your work environment and improve the employee experience is to expand your diversity and inclusion efforts, institute a regular recognition program to celebrate your employees and, if possible, expand options for how work gets done (e.g., remote, hybrid, flex time, job sharing, etc.). Employee Well-Being Poor mental health due to work-related issues is on the rise. According to a recent study by Corporate Wellness Magazine, 31% of workers experienced a decline in their mental health over the past year. That is up 24% from the end of 2020. You can start addressing your employees’ well-being by offering subscriptions to meditation apps, mental health benefits like an Employee Assistance Program (EAP), online counseling, and mental health PTO. It is also a good idea to make sure that your company’s health insurance covers mental health services. Being flexible with your employees can help prevent burnout and improve mental health while assisting them in establishing a good work/life balance. Don’t forget about the financial side of well-being — giving employees access to a lifestyle savings account or stipends for home office equipment, student loans, travel to and from the office expenses, and more can up the ante. Career Growth Today’s workforce wants the ability to plan for their future and know whether they can see themselves working with you long-term. Remaining status quo can lead to employee disengagement, a slow, quiet quitting, and eventually, can result in them walking out the door for good. Providing your employees with opportunities to enrich their skills and grow professionally pays off. Offering training and reimbursing associates for those expenses (coursework, advanced degrees and certifications) is a great way to invest in your employees. Encourage your managers to work with their teams and clearly define employee career goals. Then create a plan for how they can achieve them. Your company mission should be shared with employees and talked about from time to time. Employees should be familiar with it and understand its importance. Make sure it’s clear to your employees how their roles contribute to the success of the company moving forward. This can engage them and makes their work fulfilling and meaningful. When their work is fulfilling and meaningful, it can increase the likelihood of them staying and growing with your organization. Stay Interviews One more thing to think about is stay interviews. They are a highly effective retention tactic that is often overlooked. These interviews involve holding structured conversations — verbally or in writing — with your current employees to learn more about what concerns they might have and what they need to maintain job satisfaction. In other words, you need to learn what will make the employee want to stay and keep working for you. Some organizations make a mistake by assuming that, just because their employee shows up to work, they are happy. Be open to honest feedback, but don’t push too hard if an employee doesn’t want to elaborate on their comments. This practice should be done yearly and can help you take action and proactively address issues and devise a retention plan before it’s too late. As a bonus, stay interviews can contribute to building and fostering a culture of transparency and trust. Sample stay interview questions might include: • What aspects of your job do you enjoy the most? Why? • If nothing was off the table, what would you change about your job to make it more satisfying? • What would cause you to look for another job? • Can you tell me about a frustrating day at work you’ve had recently? A great one? Conclusion As workforce turnover continues, companies must work hard to overcome losing costly talent by creating a positive, inclusive and flexible work environment that supports employees’ well-being and career growth goals. And many of the retention efforts described above are doable for businesses of any size and come with no significant added cost. Now is the time to create a plan and implement retention strategies in your company. Take care of your employees, and you can make 2023 the year of the Great Retention. 23 Illinois Automobile Dealer News
Planning for Dealership Succession Dividing Multiple Dealerships Amongst Family By Duncan Moseley, Managing Director, Business Transition Advisory Group, Truist Wealth Middle-market business transitions are rarely simple, and family dealership transitions are among the most complex. Typically, a dealership begins after one family member opens a dealership and then decides to add more over time. Indeed, successful dealers say the best way to expand wealth in the industry is to increase the number of dealerships held. As the number of dealerships grows, so too does the number of family members involved in the business. An owner’s children may decide to work in the business, and some might even make it their career, while others may choose to work in another field. As their children become adults, dealership owners begin to wonder how they can plan for the succession of their business and the distribution of its assets amongst their children without risking the business itself or family relationships. When owners have multiple dealerships and several children working in the business, they ask, “Should I put my children in business together, should I separate the dealerships and divide them amongst my children, or should I just sell the business altogether?” When owners decide to keep the business, they want to know how to provide for their children with other careers. Take Marty, for instance. He started with one dealership and now has five, with a combined worth estimated at $150 million. Additionally, Marty owns the land where the dealerships are located, which is worth a combined $50 million. Outside the business, Marty has about $10 million in assets, including a $3 million home and a $3 million beach property enjoyed by the entire family. But most of his wealth — like the airplane available to all family members — is tied up in the business. Marty has three children. Alton and Betty grew up working at the dealerships and want to continue working in the family business. While they have quite different personalities, neither can run the business alone. The third child, Carl, is happy with his own career outside the business. Marty’s total estate is $210 million, or $70 million per child. He has three goals: expanding the dealerships under the family name, giving each child a fair share of the wealth, and doing so in a way that maintains family harmony. 24 Illinois Automobile Dealer News
However, accomplishing these goals may become complicated. For example: • If Marty divides his estate by three, there aren’t enough personal assets for Carl to receive an equivalent value to that of his siblings without including some business interest. • If all three children receive a third of the business assets, the dealerships may suffer if they disagree on business goals. Moreover, Carl may resent salaries paid to his siblings, and they may resent him for taking a third of the profits when he doesn’t contribute. • If Alton and Betty can’t run the business together, there isn’t an even number of dealerships to divide between them, and the dealerships may lose value by not being part of a larger group. • The airplane and beach home may present a source of conflict if certain family members lose access to an asset they’ve enjoyed for years. And so, Marty is left with two crucial questions: “How do I treat each child fairly? And does the division have to be equal to be fair?” Eight Key Points for a Succession Strategy 1. Interview your children to determine the intent and desires of each. Do they want to work in the business? Can they succeed together? Can they manage the business as a whole? 2. Educate your children about what it means to be in business together. 3. Explain how assets are not equal. Why might a fair share not be an equal share? Why is $20 million in cash not equivalent to a dealership valued at $20 million? 4. Set clear expectations on what your children must do to maximize the benefits of your plan. 5. Involve your children in the business so you can mentor them, assess their capabilities, and examine their ability to work together. 6. Guide your children on managing their own personal financial lives and assess their ability to use the business’s assets responsibly. 7. Set a plan for children not involved in the business. If your children can work together but don’t all want to work in the business, consider including the other children as non-voting owners, communicating clearly what they might receive based on your projected growth strategy. 25 Illinois Automobile Dealer News
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