dealer SAN DIEGO SUMMER 2022 OFF ICIAL PUBL ICAT ION OF THE NEW CAR DEALERS ASSOCIAT ION SAN DI EGO COUNTY San Diego County Dealers Engage with Legislators at CNCDA Dealer Day Page 6
• 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.
PUB YR 10 2021-2022 | ISSUE 3 1 NCDA STAFF DEAN MANSF I ELD PRES I DENT SCOT T WEBB D I REC TOR OF MARKE T I NG AND OPERAT I ONS D I ANA S I LVA ACCOUNT I NG AND ADMI N I STRAT I ON MANAGER CLAUD I A OLVERA MEE T I NG AND FAC I L I T I ES COORD I NATOR ROBERT HE I NTZ CAL I FORN I A SALES TRA I N I NG ACADEMY I NSTRUC TOR © 2022 New Car Dealers Association® San Diego County (NCDA) | The newsLINK Group, LLC. All rights reserved. San Diego Dealer is published four times each year by The newsLINK Group, LLC for the NCDA 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 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 NCDA, 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. San Diego Dealer is a collective work, and as such, some articles are submitted by authors who are independent of the NCDA. While San Diego Dealer 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. CHAIRMAN V I NCENT CASTRO. . . . . . . . . . . . . . . . . . . . .D I STR I C T 2 VICE CHAIRMAN RON FORNACA . . . . . . . . . . . . . . . . . . . . . . . . . D I STR I C T 6 SECRETARY/TREASURER DAVE MCCRACKEN . . . . . . . . . . . . . . . . . . .D I STR I C T 3 PAST CHAIRMAN JASEN POWEL L . . . . . . . . . . . . . . . . . . . . . . . . D I STR I C T 2 BOARD MEMBERS CHR I S BAKER…. . . . . . . . . . . . . . . . . . . . . . . . D I S T R I C T 1 JOHN BAL L…. . . . . . . . . . . . . . . . . . . . . . . . . . . D I S T R I C T 6 PAUL DYKE…. . . . . . . . . . . . . . . . . . . . . . . . . . . D I S T R I C T 4 CHR I S GEORGE . . . . . . . . . . . . . . . . . . . . . . . . .D I STR I C T 4 SCOT T K I EFNER…. . . . . . . . . . . . . . . . . . . . D I STR I C T 2 JASON MOSSY…. . . . . . . . . . . . . . . . . . . . . . D I STR I C T 5 JOHN SEGAL . . . . . .…. . . . . . . . . . . . . . . . . . . D I STR I C T 1 ER I C TRACY. . . . . .…. . . . . . . . . . . . . . . . . . . . . D I STR I C T 1 JUST I N TRUE . . . . . . . . . . . . . . . . . . . . . . . .….D I STR I C T 5 Contents 10065 Mesa Ridge Court San Diego, CA 92121-2916 Tel: (858) 550-0080 Fax: (858) 550-9537 ncda.com 4 Chairman’s Letter 6 San Diego County Dealers Engage with Legislators at CNCDA Dealer Day 8 Pandemic Dealership Trends That Are Here to Stay 10 Expanded Enforcement Authority & Subpoena Powers for Cal/OSHA 12 NCDA 2022 Economic Impact Report 16 The Ins & Outs of Dealership Communication 18 Auto Buying Preferences 20 Weighing In on EVs and the Value of Dealerships 22 San Diego Auto Outlook 1st Quarter 2022
2 San Diego Dealer WE HELP DEALERSHIPS NAVIGATE COMPLIANCE With over 33 years in the automotive EHS business, we understand compliance in California. Fromproactivemanagement to oil rebates, we can help you stay ahead of ever changing regulations and keep your employees and customers safe. Contact Us sam@cellyservices.com (562) 716-6100 • Compliance with EPA/OSHA regulations • Spill Prevention Control & Countermeasures Plan • Newsletters on Emerging EPA/OSHA Issues • Phase 1 Environmental Assessment • Permitting with EPA, BAR, AQMD • Hazardous WasteManagement • Hazmat Release Response • Respiratory Protection Program • Representation in OSHA/EPA Enforcement • DOT Hazmat Shipping Certification OUR SERVICES Celly Services, Inc 444West Ocean Blvd Ste. 1020 Long Beach, CA 90802 Lance, Soll & Lunghard, LLP | CPAs & Advisors | lslcpas.com | (714) 672-0022 Brea Sacramento “We have a fantastic relationship with the LSL team. They keep our interests top of mind and maintain a positive reputation in the industry.” Santa Ana -Craig Whetter, President, David Wilson Automotive Group (relationship since 1983) Donald Slater, CPA Automotive Services Partner donald.slater@lslcpas.com Mike Mangold, CPA Automotive Services Partner mike.mangold@lslcpas.com David Myers, CPA Automotive Tax Partner dave.myers@lslcpas.com
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4 San Diego Dealer Vincent Castro CHAIRMAN’S LETTER Dear Dealer Members, To start, I’d like to thank those dealers who took time out of their busy schedules to make the trip to Sacramento for Dealer Day. Those dealers who attended spent the day meeting with various assembly members and senators to discuss many important issues that affect our industry, including SB 1249. This dealersupported bill will modernize the Document Processing Charge and preserve critical consumer protections and conveniences. If you were unable to attend Dealer Day, I strongly recommend you take time to meet with representatives from your district. It is imperative that we stay engaged with our local officials so they continue to understand the importance of your business to the region’s economy and the important role your dealership plays in their district’s short- and long-term economic health. To that end, we’ve included our 2022 Economic Impact Report in this issue, which is also available for download on the NCDA website. I am excited to attend the NCDA Golf Tournament and Annual Meeting/Luncheon on Monday, June 13. This year, we decided to combine both events into one and shift to a morning/afternoon format. We’ll also be at a new venue in Poway: the beautiful Maderas Golf Club. We haven’t been able to gather together since 2019, and I look forward to spending the day with my fellow dealers, event sponsors and associate members. Also, on the event front, we’re presently working with each manufacturer to define their presence at the 2023 San Diego International Auto Show, which will take place December 30 through January 2. The auto show is a once-a-year opportunity for our brands to reach a 100% qualified audience who attend the show to make purchase decisions. Surveys tell us that the show creates a strong and lasting impression with consumers and that brands that are not present often drop from consideration. It’s also important to remind ourselves that the auto show is the primary revenue generator for the association as a whole and funds the many wonderful benefits we’ve come to enjoy and expect. As such, it is imperative that dealers fully support the show by ensuring that each and every brand sold by San Diego County dealers is represented. 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 Kitei 949.417.9145 eric.kitei@epicbrokers.com
Tommy Struchen and his team service about 450 vehicles a month. To move all these cars through the dealership efficiently, he needed to streamline communications between dealership employees as well as with customers. With VUE, the Service team can communicate immediately with other employees within the DMS. Technicians can take notes and send them to their advisors, so there is no miscommunication about the repair orders. When advisors inspect vehicles, technicians can see what tickets are assigned to them and appropriately plan for it in real time. EASE OF USE. CONSIDER VUE DMS. RECONSIDER Since the install, processes have been a lot more seamless. From technicians to service advisors to including even the parts department. It made everyone’s job so much easier. Tommy Struchen Service Manager, Mack Grubbs Hyundai CONSIDER VUE DMS 866.928.3210 | VUEDMS .COM/CALIFORNIA
6 San Diego Dealer San Diego County Dealers Engage with Legislators at CNCDA Dealer Day The annual CNCDA Dealer Day is one of the most anticipated and important events for NCDA members. By connecting dealers directly with key legislators in exclusive meetings and at social events, dealers have a unique opportunity to engage in the legislative process and influence policy decisions. In addition, all in attendance benefit from legislative panel discussions and keynote speakers, as well as networking with dealer colleagues and officials from across the state. The NCDA had a strong showing of dealers attending Dealer Day this year to support one of the most important dealer bills in recent history, SB 1249, which modernizes the Document Processing Charge to preserve critical consumer protections and conveniences. Those in attendance from San Diego County included: NCDA Board Members Paul Dyke, Scott Keifner and Chris George, dealers Greg Kaminsky and Gary Fenelli, NCDA President Dean Mansfield, and NCDA Director of Marketing & Operations Scott Webb. Organized by the California New Car Dealers Association, the day began with a Face the Dealers roundtable discussion where dealers heard from three candidates for the California State Legislature with strong dealer ties and experience. Dr. Jasmeet Bains (D), running for State Assembly to represent the Antelope Valley, worked at her father’s dealerships in Kern County. Assemblyman Roger Niello (R), running for State Senate to represent the Sacramento area, owned and operated The Niello Company auto dealer group with his brothers David and Rick. Matt Gunderson (R), running for State Senate to represent South Orange County and Coastal San Diego County, owned three dealerships in Orange County, which he recently sold. Discussions involved their motivations for serving in public office, the origins of their political careers and their opinions about policy. The Meeting of the Members’ Issues Briefing and Luncheon followed, during which dealers heard from keynote speaker, Eleni Kounalakis, California’s Lieutenant Governor. Also during the luncheon, CNCDA leadership helped prepare dealers for their afternoon legislative appointments. Several pieces of legislation were identified as priorities by the CNCDA, and Alisa Reinhardt, CNCDA’s director of government affairs, explained why these bills are important to dealers. Perhaps the most meaningful aspect of Dealer Day is the opportunity for dealers to meet directly with the legislators who represent them. These meetings provide important personal interaction between legislators and dealers that help build relationships and influence legislation. And after the formal meetings concluded, legislators and dealers met at a nearby restaurant to socialize over cocktails and dinner. All in all, NCDA members were able to meet with several legislators and/or their senior staff members to discuss important legislation, in addition to sharing our Economic Impact Report to remind legislators how big an impact new car dealers have on San Diego County’s economy each year. From L to R: Greg Kaminsky, Chris George, Dean Mansfield, Paul Dyke, Senator Brian Jones and Scott Kiefner after a meeting in Senator Jones’ office.
PUB YR 10 2021-2022 | ISSUE 3 7 California Legislative candidates Assemblyman Roger Niello (R), Dr. Jasmeet Bains (D) and Matt Gunderson (R) participated in the Face the Dealers roundtable discussion. Frank Toyota’s Gary Fenelli met with Alessandra Magnasco of Senator Rosilicie Ochoa Bogh’s office. Mossy Auto Group’s Scott Kiefner with Assembymember Laurie Davies and Assemblyman Dr. Steven Choi California Lieutenant Governor Eleni Kounalakis gave a keynote speech during the Meeting of the Members Issue Briefing and Luncheon. El Cajon Ford’s Paul Dyke with Assemblymember Dr. Akilah Weber at the evening reception Chris George and Dean Mansfield with Senator Pat Bates
8 San Diego Dealer Pandemic Dealership Trends That Are Here to Stay COVID-19 changed every aspect of our society, including the way dealerships operate and how consumers purchase vehicles. Now that states have reopened and businesses returned to relatively normal operations, some key trends that emerged during COVID will likely continue even after the coronavirus has subsided. Here is what you might expect to see in the post-pandemic world and how to position your dealership for success in the long run. Online Car Shopping and Purchasing According to Haig Partners, 30% of new car sales last year in the U.S. were conducted online, compared to 2% pre-pandemic. Millennial shoppers, in particular, want to buy or lease through their smartphones and just come to the dealership to close the deal. In fact, studies show that 40% of new car buyers visited only one dealership during their last vehicle purchase. To meet this demand, many dealers have produced a better car buying experience by creating a virtual sales manager role and investing in tools that streamline the online car buying process. It’s also important for dealers to invest in secure virtual payment options to ensure that customers efficiently proceed through the purchase funnel and feel confident about the service your dealership provides. Telecommuting and Remote Operations The lockdowns forced some dealerships to temporarily close their doors at a time when consumers moved away from ridesharing to car ownership. Many dealers allowed their staff to work from home and continue helping customers through their buying journey to minimize disruption. Many dealers realized that sales staff can be more efficient in a remote environment by using their DMS to: • Setup prospective deals and quickly offer different payment options on the fly • Schedule appointments to test drive cars and have the vehicle delivered to their home • Enable customers to complete most, or all, of their contracts and payments digitally Mobile Service Drives Even though the pandemic kept most people home for months at a time, vehicle maintenance and repair were essential services. Many dealers who began offering mobile service options, such as picking up and dropping off customer vehicles, continue to provide these options today. What was once considered a concierge luxury service is becoming more common and can give a dealer an edge over the competition. Digital Marketing and Promotions Consumers are more internet savvy than ever before, and COVID made digital advertising even more essential. Dealers ramped up efforts to identify websites and social channels where their customers were “hanging out” during the pandemic so that they could engage with them. Dealers need to leverage advanced social advertising capabilities to target specific audiences and get your dealership in front of people who may not know your brand or the special offers you are running. Cyberattacks As more dealer operations and transactions moved online during the pandemic, cybercriminals often targeted automotive dealerships due to the high volume of sensitive data. With the rise in remote work and more car buyers on the market, this threat will continue. According to Blum Shapiro, dealerships that invest in cloud technology are well positioned due to higher security protocols. A cloud-native DMS, for example, can help protect your data through immediate security patches and updates. It can also backup your records in the cloud, so you don’t lose critical information in the event of a hack. Many of these changes that were accelerated during the coronavirus pandemic were long overdue to improve the customer experience. And despite the emergence of online used car marketplaces, such as Vroom and Carvana, dealers proved our industry’s ability to adapt and succeed under unprecedented circumstances. The goal now is to stay ahead of competitors for the long haul by implementing an agile workforce, robust processes and modern cloud solutions that enable you to maximize productivity, customer satisfaction and profitability.
— Answers support calls 24/7 — Chats and shares screens during business hours — Regularly checks in with your dealership — Works with you to minimize errors and penalties — Analyzes and corrects DMS Fees — Audits each deal for accuracy and compliance — Scans deals for easy access in DMVdesk — Sends audited bundles to DMV — Mails plates, registration and stickers directly to your customers — National title & registration takes care of your out-of-state buyers — Run inquiries (KSR, NMVTIS and more) — Create and print Temp Tags and Reports of Sale — Oer customers free vehicle registration renewal reminders with Vitu Driver — Finalize and submit eFile transactions electronically — Prepare and mail bundles to Vitu for auditing — Send errors to SPU for processing Takes the stress off of your staff DMVdesk is built with your dealership’s security and compliance in mind DMV COMPLIANCE AWARD-WINNING SUPPORT Positively impacts your CSI scores! Translates into real Cost Savings! For you remaining 20% of non-DMVdesk users, discover what a true partnership means. Visit dmvdesk.com or call 877-368-3375 to learn more and schedule a demo. WHY DO OVER 80% OF SAN DIEGO FRANCHISE DEALERS TRUST THEIR TITLE AND REG PROCESSING TO DMVDESK?
10 San Diego Dealer Senate Bill 606 makes amendments to California Labor Code that became effective Jan. 1, 2022, giving Cal/OSHA expanded powers and increased penalties. The bill creates two new categories of violations; “enterprise-wide” and “egregious.” The bill also authorizes Cal/OSHA to issue a subpoena should an employer fail to provide Cal/OSHA with information related to an investigation. Citations for enterprise-wide violations have the same penalties as willful or repeat violations, with a maximum penalty of up to $136,532 per violation. Below, we discuss these categories and subpoena powers with their potential impact on California employers. ENTERPRISE-WIDE VIOLATIONS (SECTION 6317 of California Labor Code) The bill creates a rebuttable presumption of an enterprise-wide violation when Cal/OSHA finds either of the two conditions below: • The employer has a written policy or procedure that violates any Cal/OSHA rule, order, or regulation as stated in the California Labor Code. • Cal/OSHA has evidence of a pattern or practice of the same violation or violations committed by the employer at multiple worksites. When Cal/OSHA enforcement recognizes that an employer has multiple worksites that may have common policies and procedures, an enterprise-wide citation and abatement orders can be issued. The employer will then have to prove that the other worksites have different policies, procedures, and written programs and hence the violation cannot be enterprise-wide. The penalties for enterprise-wide violations are the same as the current penalties for repeat violations with a maximum of $136,532 per violation. This can be problematic for employers with multiple worksites in California that share a common safety program such as Illness & Injury Prevention Plan (IIPP) or COVID-19 Prevention Plan (CPP). EGREGIOUS VIOLATION (SECTION 6317.8 of California Labor Code) Cal/OSHA finds an employer has committed an “egregious violation” if one or more of the following are true: • The employer, intentionally, through conscious, voluntary action or inaction, made no reasonable effort to eliminate the known violation. • The violations resulted in worker fatalities, a worksite catastrophe, or a large number of injuries or illnesses. For purposes of this paragraph, “catastrophe” means inpatient hospitalization, regardless of duration, of three or more employees resulting from an injury, illness, or exposure caused by a workplace hazard or condition. • The violations resulted in persistently high rates of worker injuries or illnesses. • The employer has an extensive history of prior violations. • The employer has intentionally disregarded their health and safety responsibilities. • The employer’s conduct, taken as a whole, amounts to clear bad faith in the performance of their duties. • The employer has committed a large number of violations so as to undermine significantly the effectiveness of any safety and health program that may be in place. SB 606 requires Cal/OSHA to treat each employee exposed to an egregious violation as a separate violation and issue fines and penalties commensurate with such violations. The employer can be subject to a significant multiplier in penalties when many violations are found to have impacted multiple employees. Cal/OSHA has issued multiple penalties under COVID-19 Emergency Temporary Standards when the employer failed to implement policies such as separation, sanitizing or face mask protocols. Expanded Enforcement Authority & Subpoena Powers for Cal/OSHA By Sam Celly, BChE MChE JD CSP
PUB YR 10 2021-2022 | ISSUE 3 11 SUBPOENA POWERS (SECTION 6317.9 of California Labor Code) The bill provides Cal/OSHA with subpoena powers for information related to an investigation. Cal/OSHA has already had a formal document request process during investigations. (https://www.dir.ca.gov/DOSHPol/Document_ Request1AY_072308.pdf). The bill adds that Cal/OSHA can issue a subpoena if the employer or related entity fails to promptly provide the requested information within a reasonable period of time. We have observed that DOSH Legal has, in the past, issued “Requests for Discovery” following an employer appeal of serious citations. The subpoena power adds a layer to the discovery tools available to Cal/OSHA. The term ‘reasonable time’ is not defined in the bill making it subject to the discretion of the Cal/OSHA District Manager conducting the investigation. The new law also allows Cal/OSHA to seek injunctive relief from the Superior Court restraining the use of an equipment or process at a specific worksite if the Division has grounds to issue a citation without any bond requirements. This is another addition to the enforcement powers of Cal/OSHA. In the past, injunctive relief was only available when the “…machine, device or apparatus or equipment constitutes a serious menace to the lives or safety …” Summary: Employers with multiple locations must have their written safety programs and policies reviewed and vetted by professionals and ensure compliance across sites as risks and penalties can be significant. Subpoena power and other discovery tools may lead Cal/OSHA to add citations and related penalties. Special attention should be given to programs including, but not limited to, CPP’s, IIPP’s, Hazard Communication Program, and Personal Protective Equipment Program. Where applicable, making safety programs location-specific may also help. Last, but not least, employers should treat Cal/OSHA citations with urgency and caution. Employers have 15 days to file an appeal. If a timely appeal is not filed, the citations and penalties cannot be contested. In high-stakes cases, competent counsel should be retained to handle investigations, file appeals for citations, if any, and provide a professional defense. Source: https://leginfo.legislature.ca.gov/faces/billNavClient. xhtml?bill_id=202120220SB606 US Supreme Court &Workers’ Comp Reimbursement for Medical Marijuana: Employees injured at work have sought relief from pain by smoking marijuana. In certain instances, the treating physician has provided the injured employee access to medical marijuana and requested the Workers’ Comp carrier to pick up the tab. The Supreme Court of several states have held that the reimbursement by the insurance carrier violates the Federal Controlled Substances Act (CSA) of 1971. Thirty-seven states currently allow the medical use of marijuana. However, the rules for medical reimbursement for marijuana by Workers’ Comp carriers are all over the place. Some states have mandatory reimbursement laws, some strictly prohibit reimbursement, and some are silent on the matter. Arizona, California, and Nevada are amongst fourteen states that do not forbid medical marijuana reimbursement, but they have said that it is not required for workers’ comp insurers. Looking at this varied landscape and the appeals from states’ Supreme Courts that have ruled against reimbursement, the U.S. Supreme Court has decided to step in. It has asked the U.S. Solicitor General to submit an amicus brief on whether workers reimbursed for the cost of medical marijuana to treat on-the-job injuries are preempted by the CSA. The Supreme Court may grant certiorari and hear the cases. Hopefully, this will provide clear guidance to the states on the issue of reimbursement for marijuana use as a treatment for on-the-job injuries. On April 1, 2022, the U.S. House of Representatives passed legislation to legalize marijuana and eliminate the longstanding criminal penalties for anyone who distributes or possesses it. We note that Senate clearance in the past has been negative. Hence, it is unlikely that this will become law. DISCLAIMER: The contents of this newsletter are for informational purposes only and are not to be considered as legal advice. Employers must consult their lawyer for legal matters and EPA/OSHA consultants for matters related to Environmental, Health & Safety. The article was authored by Sam Celly of Celly Services, Inc. who has been helping automobile dealers in Arizona, California, Hawaii, Idaho, Nevada, NewMexico, New York, Texas, and Virginia comply with EPA and OSHA regulations for over 34 years. Sam is a Certified Safety Professional (No. 16515) certified by the National Board of Certified Safety Professionals. Sam received his BE (1984) and MS (1986) in Chemical Engineering, followed by a J.D. from Southwestern University School of Law (1997). Our newsletters can be accessed at www.epaoshablog.com. Your comments/ questions are always welcome. Please send them to sam@cellyservices.com. Considine & Considine is a full service public accounting firm offering professional and personalized services to business and professional practice owners in the areas of audit, taxation, accounting, estate and retirement planning. Philip Smith, CPA Considine & Considine 8989 Rio San Diego Drive, Suite 250 San Diego, CA 92108 619-231-1977 x103 www.cccpa.com prs@cccpa.com Let us help guide your business development.
12 San Diego Dealer
PUB YR 10 2021-2022 | ISSUE 3 13 REGIONAL ECONOMIC GENERATOR Despite inventory-related setbacks, San Diego County’s Franchised New Car Dealers continued to be a substantial regional economic generator in 2021, actually showing improvements in nearly every category over 2020. Sales of new and used vehicles rebounded from last year’s decline, and combined with revenue increases from service and parts sales, total dealership sales reached $13.9 billion. The extraordinary economic impact of San Diego County’s franchised new car dealers is spread throughout the region. There are dealerships in every major municipality, including: Carlsbad, Chula Vista, El Cajon, Encinitas, Escondido, La Jolla, La Mesa, Lemon Grove, National City, Oceanside, Pacific Beach, Poway, San Diego and Vista. San Diego County dealers employed nearly 13,000 full and part time employees in 2021 with a payroll exceeding $1 billion for the first time. Additionally, dealers made purchases from other California businesses totaling more than $242 million. CHARITABLE CONTRIBUTIONS: $3.5 MILLION For decades San Diego County’s franchised new car dealers have financially supported a wide range of local organizations with annual donations. In 2021, dealers contributed a record $3.5 million to benefit the San Diego County community. Additionally, individual dealerships support youth sports teams and civic organization throughout the county, and several dealers serve on boards of directors for local and regional charities, schools and other non-profit organizations. 2021 SAN DIEGO COUNTY DEALERSHIP SALES: $13.9 BILLION New Vehicle Sales: $7,840,630,476 Used Vehicle Sales: $3,650,652,684 Parts & Accessories: $939,414,294 Service Department: $681,382,170 Finance & Insurance: $533,132,460 Other Departments: $248,802,372 Emerging from the Coronavirus and yet challenged by inventory shortages, franchised new car dealers increased overall dealership sales, exceeding pre-pandemic levels. Dealers continued to draw consumers to dealerships to purchase a widening range of new and redesigned models as they replaced existing vehicles. New vehicle sales increased by $1.5 billion in 2021 vs. 2020 (including fleet sales). Sales of pre-owned vehicles were up by over $900 million last year as well.
14 San Diego Dealer EMPLOYMENT & PAYROLL: $1.1 BILLION Franchised new car dealers serve as one of the region’s largest sources of employment in San Diego County. In addition, 98% of new car dealers provide access to health care benefits for their employees and their families. Most important, the jobs created at the county’s franchised new car dealerships remain in San Diego County, and provide substantial economic benefits for the region as a whole. Dealers employed nearly 13,000 full-time and part-time employees in San Diego County, and employee payrolls reached a record $1.1 billion, an increase of $128 million over last year. Correspondingly, worker’s compensation premiums paid by dealers topped $15 million. TAXES & FEES PAID BY DEALERSHIPS: $1.2 BILLION Annually, San Diego County’s franchised new car dealerships collect and pay hundreds of millions of dollars in taxes and fees, with 2021 reaching $1.2 billion for the first time. These include federal and state payroll taxes, real estate taxes, state sales tax, and numerous state and local. DEALERSHIP ADVERTISING: $120 MILLION Another significant financial contribution to the region’s economy by franchised new car dealers is advertising. Last year dealers spent more than $120 million to advertise their dealerships, which is an increase of $7 million as compared to 2020. Internet advertising led all categories as a percentage of advertising expenditures for the ninth consecutive year. • Full-time employees: 12,348 • Part-time employees: 630 • Payroll: $1,077,628,482 • Worker’s Compensation Premiums Paid: $14,447,160 State Sales Tax: $793,638,468 Federal Payroll Taxes: $276,502,590 State Payroll Taxes: $66,568,698 Real Estate Taxes: $28,129,374 Other Taxes/Fees: $5,386,878 Total: $1,170,226,008 65% Internet 9% TV 8% Radio 8% Mail 6% Other 4% Paper
PUB YR 10 2021-2022 | ISSUE 3 15 $13,894,014,456 $7,840,630,476 $3,650,652,684 dealership sales Total Dealership Sales: NewVehicle Sales: Used Vehicle Sales: Parts & Accessories: Service Department: Finance & Insurance: Other Departments: $939,414,294 $681,382,170 $533,132,460 $248,802,372 dealership employment Full-time & part time employees: Payroll: Worker’s compensation premiums: 12,978 $1,077,628,482 $14,447,160 dealership purchasing $242,523,792 Purchases from CA businesses: Local Advertising: $120,026,088 dealership taxes & fees $1.2 Billion $793,638,468 $276,502,590 $66,568,698 $28,129,374 Total Dealership Taxes: Stat eSales Tax: Federal Payroll Taxes: State Payroll Taxes: Real Estate Taxes: O therTaxes/Fees: $5,386,878 FRANCHISED NEW CAR DEALERS AN ECONOMIC ENGINE FOR SAN DIEGO COUNTY Even during a pandemic and facing unprecedented inventory challenges, San Diego County’s franchised new car dealers play a major role in driving the region’s economy by providing employment, health care benefits and sales tax revenue. The following data showcases the measurable economic impact and financial contributions in 2021 by San Diego County’s franchised new car dealers. The New Car Dealers Association® San Diego County (NCDA) prepared the 2020 Economic Impact Report which highlights the significant financial and employment contributions generated by San Diego County’s franchised new car dealers to the region’s economy. Auto Outlook, Inc., an independent automotive analysis firm, collects the data presented in this report. New Car Dealers Association® San Diego County 10065 Mesa Ridge Court | San Diego, CA 92121 | 858.550.0080 | www.ncda.com ELECTRIC VEHICLES San Diego’s franchised new car dealers are all-in on EVs, having spent $1.7 million on EV charging infrastructure in 2021. This investment is expected to increase to $6.5 million in 2022, as EV sales increase from 3.4% to a projected 8.9% of new vehicle sales in San Diego County.
16 San Diego Dealer The Ins & Outs of Dealership Communication Communication within your dealership can make a world of difference for your customers, your employees, and your staff. Even if you believe your dealership is great at communicating inside and out, improvement is always possible. Working toward more effective communication can mean: • Increased Revenue – Do your service technicians spend a lot of time walking back and forth to the parts back counter to discuss and retrieve parts needed for a vehicle? Are you service advisors waiting for customer authorization on services? How long do customers need to wait at the dealership to get updates on their vehicles and pay? This time adds up to fewer cars serviced, fewer cars sold, and money left on the table. • Happier Employees – Businesses that present more transparency and communication improve employee morale. This means more engaged team members. In fact, according to the McKinsey Global Institute, effective communication can improve productivity in any workplace by up to 25%. Happier employees also mean reduced turnover. • A Fulfilling Customer Experience – Put yourself in the shoes of a customer for a moment. Which sounds better: spending the day in a dealership waiting room, or going about their day with the trust that they know their car is in good hands? People are known to take better care of their cars over their own health. Your customers want to take their vehicles somewhere where they will be frequently updated on services. • Transparency in Your Dealership – If you communicate better and more frequently with your employees they are more likely to communicate better with you. This means problems are solved quicker, your staff is more relaxed, and your customers come back. If one or more of these would be beneficial at your dealership, now is the time to start. Barriers to Effective Internal Communication If communication is lacking throughout the dealership, there might be a physical or psychological barrier causing it. The cause may be deeply rooted or something easily fixable. Do any of these sound familiar? A Lack of Transparency There could be any number of reasons why staff members might not be in sync. Often it’s because nobody understands the goal. For example, if you expect your dealership to service 1,200 vehicles a month, does everybody in your service department focus on that? If so, are they aware of how they are performing? Not being transparent about information like expectations or even the vision of the business can get in the way of meeting goals. Clearly defined goals set the right expectations. There should be a process or tool to help maintain an easy flow of internal communication.
PUB YR 10 2021-2022 | ISSUE 3 17 Unclear Direction from Managers An easy mistake a manager can make is to point out an issue without involving employees in finding a solution. Let’s say a service manager received complaints from customers about paint scratches on serviced vehicles. Relaying this to the service staff without a prevention plan going forward may not help. Reminding employees to be careful with vehicles is reasonable, but what if the vehicles were damaged prior to arriving at the dealership? Your team may suggest implementing a more consistent check-in inspection of the vehicle’s condition upon arrival. This inspection could actually lead to higher service revenue in repairs to these damages along with more trust from the customer. Employees Can’t Ask Questions Do you remember the old saying, “There are no stupid questions?” Is that what your employees actually believe? Fostering an environment where your team feels comfortable speaking up will strengthen your dealership. Creating a habit where experienced employees are encouraged to mentor others will improve their morale and allow new employees to get up to speed more quickly. Not Recognizing and Celebrating Good Work Staffing issues can mean that teams are stretched more thinly than before. With everyone so busy, it is easy to forget to show appreciation. The perception of being unappreciated can lower morale and lead to burnout. When employees feel recognized and seen by managers, they feel more open to voicing their ideas. Satisfied employees are far more likely to provide superior customer service and productivity. Stressful Training The more difficulty new employees have with their training, the less likely they will be comfortable asking questions or communicating well with others. According to a 2016 study by the National Auto Dealers Association, 28% of dealership terminations occur within an employee’s first 90 days. Starting a new job often demands learning a lot of information. Investing in effective training programs can pay dividends in quicker new hire productivity while reducing turnover. How to Improve Dealership Communication There are several ways a dealership can implement to increase and improve communication between departments. These tips can break down many of the barriers listed earlier that prevent good communication within the dealership. Start with Yourself You are in charge. This means you influence a lot of what happens at your dealership for better and for worse. Create a culture of good communication. Set up ways to promote transparency in your dealership. Spend more time with your staff to create a comfort level for employees to ask questions, understand expectations, and feel more recognized. This should result in better goal attainment, a happier workforce, and more satisfied customers. Communicate Digitally It is hard to beat a face-to-face conversation, but that is not always possible or efficient. Digital communication is better than none at all. There are paid and even free options available for sending messages between departments. It may even be functionality that is already available. Using an internal chat tool can provide quick answers to keep your business running at its peak. Create One Source of Truth for Information A dealership typically invests in many different types of software, with different and sometimes redundant sources of information. Between your DMS, your CRM, and other tools in use at dealerships today, it can be confusing and inconsistent. A best practice is to choose one system to be the source of truth that all employees rely on. This will make transparency easier, and provide the foundation to communicate across departments. Between all of the benefits, barriers, and tips discussed, there is one overarching theme: effective internal communication is important for a successful dealership, and it starts with you as the manager. It offers many benefits and prevents a lot of potential problems. Overall, it can improve productivity, boost profitability, and create a positive employee and customer experience. If you are unsure where to start, take a look at your dealer management system. See what features are available that may make following the tips provided easier. As a DMS provider ourselves, we strive to make important processes like internal communication easier for you with dashboards, chat features, and collaboration tools. We hope you found this content useful. Between all of the benefits, barriers, and tips discussed, there is one overarching theme: effective internal communication is important for a successful dealership, and it starts with you as the manager. It offers many benefits and prevents a lot of potential problems.
18 San Diego Dealer Auto Buying Preferences The auto industry is starting to undergo a massive switchover from ICE autos to EV autos, and there’s no shortage of people to tell you EVs are going to have a big impact on the industry. What’s less clear is how that implementation will occur. Many people expect direct retail from manufacturers to expand, but fewer people ask what customers want and like. Escalent is an analytics advisory company that focuses on business disruptions and transformations. The company conducted a survey, May 5-June 16, 2021, of 1,248 newvehicle buyers from a global database. Those who responded were selected based on age (18-80), gender and location, and the survey’s demographics were weighted to reflect actual vehicle sales based on the vehicle segment. The survey was done on an opt-in basis as part of a panel. What were the results? It wasn’t the slam-dunk for direct retail you might have expected. The majority of those surveyed (57%) prefer traditional car buying. Only 20% prefer direct retail. If you think the older segment skewed that result, think again: 94% of those less than 30 were satisfied with dealerships. Overall, 87% were satisfied. What about a hybrid buying experience? Again, the preference was for being in-person at the dealership for at least part of the transaction: • 75% for purchases • 60% for financing • 85% for taking delivery versus home delivery • 79% for repairs and services versus having a technician come to a customer’s home The obvious takeaway is that most people, including younger customers, want to conduct business at the dealership. In particular, 63% want to take EVs for a drive before buying them. Test drives got a higher approval rating than any other source of information. However, they are less interested in getting information from a dealership salesperson; 31% said a salesperson would be a primary information source. The 2021 Global Automotive Consumer Study, conducted by Deloitte, confirmed these survey results. Approximately 71% of customers want to buy their autos in person, and 64% are uncomfortable buying 100% online. When asked why they preferred going to the dealership, 75% said they wanted to see their vehicle before buying it, and 64% thought a test drive was necessary. Only 38% wanted to negotiate in person and face-to-face. That doesn’t mean they wanted to spend a lot of time there. They didn’t want to be at the dealership for more than an hour. That’s probably why car buyers also preferred doing online research and paperwork, including the financing portion. They wanted transparency and time while evaluating decisions such as buying extended warranties. For decades, consumer pain points have included the following: • Disliking long waits • Evaluating financing options while under pressure • Meeting too many people • Having too much paperwork Those pain points were a fact of life before the pandemic. Less than 2% of all vehicles were sold online. The pandemic changed that: 30% of U.S. new car sales in 2020 were sold online. But there’s a difference between doing something because you have to and doing something you want to. People like going to dealerships. But they don’t want to be there for hours. Buying a vehicle by using a hybrid process gives customers convenience and speed. It also allows them to see their vehicle in person and test drive it before making a final decision. As a dealer, the key to understanding these survey results is reducing the pain of buying a car and increasing the convenience. Seeing a car and taking it for a drive is not a pain point and can only be done in person. People are always going to want that part of the auto-buying experience. But there’s a great deal that can be done to make other parts of the experience more pleasant than they’ve been in the past. Dealerships aren’t going away. However, changing business practices to include better selling methods won’t go away, either. And that’s a good thing.
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20 San Diego Dealer Weighing In on EVs and the Value of Dealerships On Jan. 5, 2022, The Washington Post published an op-ed article by Liam Denning entitled “Car Dealership Laws Aren’t Fit for the Electric Age.” On Jan. 13, 2022, NADA’s president and CEO, Mike Stanton, responded. The following sections contain a summary of the op-ed and Mike Stanton’s response. An Admittedly Biased Summary of Liam Denning’s Article in The Washington Post The op-ed begins with Liam Denning’s view of the auto dealership world. It isn’t pretty. He sees dealerships as no more than a revolving door for products. (Isn’t that what any good retail store tries to be?) The pandemic and supply chain issues emptied lots, then kept them empty. He saw the dealerships’ response to the pandemic as an opportunity to raise auto prices as volume fell. To support that claim, he said volume for 2020 was 7% less than for 2019, but that gross margin almost doubled, making their response to the pandemic nothing more than a chance to raise prices while volume fell. He then notes that dealers have a “growing challenge” as they move forward. How accurate are his claims? They are misleading. Although he doesn’t talk about auto manufacturers or other industries, they too had unexpectedly profitable years after the pandemic shutdown. And although net profit was up for U.S. dealers, net profit included net operating profit and incentives paid by automakers to dealers who exceed sales targets. Also, chip shortages meant manufacturers focused on building SUVs and trucks because they have higher margins than small cars. Higher net profit is to be expected for everyone under those circumstances. The article then moves to an admiring analysis of EV manufacturers, with Rivian Automotive Inc. and Tesla Inc. mentioned by name. He says nothing about how direct sales affect EV profits, but he does say EV manufacturers are highly valued at the moment. He then talks about how the current system came to be. State laws passed decades ago were designed to prevent predatory behavior by big U.S. automakers and force them to use independent franchises for vehicle sales and service. After the history lesson, he claims that the current market is different from the 1950s market. Why? He says three U.S. brands no longer dominate the market. The current market, he claims, is too competitive to allow a repeat of the same issues that caused legislation to be written in the first place. Really? Tesla dwarfs all other EV manufacturers. And although Elon Musk has plans to fill the global market with Teslas, Denning ignores Musk’s gigafactories in Berlin, Shanghai and Texas. Even though Denning names Rivian and Tesla as two important companies in the developing EV market, citing sky-high valuations, he is wrong there, too. The three largest EV manufacturers are Tesla, VW and General Motors …not Rivian. Rivian is riding on expectations, not accomplishments. But since newcomer Tesla is the EV manufacturer currently dominating the EV market, why would anyone conclude states should throw away hard-earned legislative protections? Remember, too, that Musk – who is admittedly brilliant – will never remind anyone of the late Fred Rogers. Next, Denning says that high dealership margins come from selling vehicles and then taking care of them. He implies that EV sales departments meet several times with buyers while educating them about their potential purchases and that franchise dealers are all about the hard sell. Since EVs have fewer parts, though, he suggests service departments will be much less profitable in the future. It’s hard to know what to address first. Selling is selling, and doing it right means building a customer relationship. That’s why the best dealers have always made a point of helping their communities prosper. There are even many dealerships where the customers and employees are multigenerational. Dealerships like that do not fit a “hi, bye” model, especially in small communities. Dealerships have to care about customers, or they don’t last. And “less service” is not the same as “no service.” Tesla, in particular, has skimped so far on building up the service side of the business. As sales volumes increase, that’s going to be a problem. Denning then turns his attention to Michigan, Florida and New York. Yes, the market is changing, which means the way autos are built and sold will also change. Yes, dealerships have invested a great deal of time and energy working with legislators. Yes, Rivian and Tesla valuations are high and are affecting the market. None of that somehow makes dealers dishonest or irrelevant. That’s our summary of Liam Denning’s article. Read on for Mike Stanton’s excellent response, with which we fully agree. America’s car and truck dealers are all-in on EVs and raring to get going in promoting them.
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