Pub 20-2021-2022 Issue 1

N E W J E R S E Y C O A L I T I O N O F A U T O M O T I V E R E T A I L E R S I S S U E 1 | 2 0 2 1 10 new jersey auto retailer NADA Director’s MESSAGE | BY RICHARD A. DESILVA, SR. Carvana, Vroom and others continue to promote false stereotypes about the automotive franchise system. Tesla and others spread lies about our ability to sell electric vehicles. The industry (on both the state and federal levels) is fighting back. NJ CAR has been running a campaign targeting both legislators and the general public to pro- mote the many benefits of the franchise system for consumers. NADA has also publicly countered these stereotypes and lies that have long been avenues for attacks on our industry. Jonathan Collegio, NADA Senior Vice President of Public Affairs, recently posted a blog that deconstructs “The Sad, Lazy Myth of the ‘Middleman.’” Mike Stanton, NADA President and CEO, recently authored a piece titled “The Big Lie About EV Sales” that ran in Automotive News and was also posted to the NADA website. Below are shortened versions of both articles, which I encourage everyone to read. The Sad, Lazy Myth of the ‘Middleman’ The “Iron Law of Distribution” is the idea that changing who distributes a product does NOT change the costs associated with distributing the prod- uct. This is often misunderstood when people discuss the factory direct sales model. They say if factories own their own stores, there will be no “middle- man,” costs will go away, and the sav- ings are passed along to the customer. In reality, there are no savings because the factory store becomes the new “middleman.” The factory still needs to make its own profit retailing. And worst of all, customers are hurt in a vertically integrated model because it raises prices by reducing competition. When a factory decides to sell its products directly, they also incur the same costs of selling those products. In the automobile business that means buildings, land, equipment, inventory, insurance policies, utility bills and human capital. Manufacturers that experiment with selling directly always find that auto retail is complex. Having local dealers buying those cars off the factory line and selling and servicing them in their local communities makes a lot more sense as a business model. When factories own retail outlets, there is no competition. When was the last time you walked into an Apple retail Franchised Dealers Fight Back On Lies outlet and negotiated a price on an Apple product? When independent retailers com- pete, it creates price pressure and prices go down. One recent peer-reviewed academic study has shown that when dealerships compete, a vehicle’s average price goes down by about $500. Consumers win when dealerships compete. Local dealerships do more than sell cars. They compete at every stage of the ownership cycle, providing choices and competitive pric- ing for customers. That’s why locally-owned dealerships are good for consumers and the communities where they operate. You can read the entire column at: https:// blog.nada.org/2021/02/17/the-sad-lazy-myth-of- the-middleman/. The Big Lie About EV Sales For years, one of the great myths that have persisted about the auto industry has been that franchised dealers don’t want to sell electric vehicles. It’s long past time to call this myth out for what it is: A lie propagat- ed by companies that want to destroy the franchise system. More than a decade ago, there was dealer uneasiness about battery-electric vehicles that, at the time, had inadequate range, took forever to recharge, did not perform well, had terrible resale value, and were extremely expensive. It wasn’t that dealers didn’t want to sell them. Dealers didn’t want to be force-fed vehicles that OEMs were manufacturing largely in response to regulatory pressures. Given the imbalance in the OEM-dealer re- lationship, you can hardly blame dealers for this trepidation. But the world has changed. The level of investment that automakers have made in battery-electric technology is night-and-day different from five years ago, and it shows in the product. Several other things have also changed. Across the country, more advanced charging stations are popping up almost every day. The federal government may appropriate