Automotive News NADA Show Daily - January 26, 2014 - 4

20140126-SHOW--0004-NAT-CCI-AN_--

1/25/2014

7:31 PM

4 * JANUARY 26, 2014

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QUESTION
With industrywide newvehicle sales slowing, do
you expect an incentive war
for market share in 2014?
Daniel Bokan, general manager
of Shearer Chevrolet-BuickGMC-Cadillac in South
Burlington, Vt.: "That's
probably going to be the kneejerk reaction of the
manufacturers. It's unfortunate,
because it conditions the
customer base to wait around
for that next round of
incentives. I think you'll start to
see them putting up extra
money for dealerships to chase
bonuses based on volumes, and
that will get passed onto the
consumer."
Christian Kostelecky, general
manager of Sax Motor Co.
(Chevrolet-Cadillac) in
Dickinson, N.D.: "I do think
we'll see competition picking
up. We've seen that in the fullsized pickup market already,
where Ford really got aggressive
just as Chevy was launching the
new Silverado. Hopefully
manufacturers have learned
their lesson and won't chase
share too much, but I expect
we'll see some of that. It'll be a
balancing act."
Jim Dunn, general manager at
JM Lexus in Margate, Fla.: "If
it's true that growth is going to
slow, you will see inventories
build up and that will force the
manufacturers to get more
competitive. But I'm optimistic
that we'll see continued growth
with all of the pent-up demand
that we have out there still. Our
business was up 27 percent last
year, so I think there's plenty of
demand without the need for
bigger incentives right now."
Mike Schmitz, Schmitz
Automotive Group (MercedesHyundai-Mazda) in Dothan,
Ala.: "If it does slow down,
historically that's always led to
manufacturers getting more
aggressive on incentives. I'd
expect Hyundai to get more
competitive than they have
been. I think competition in the
small SUV segment could heat
up because there are more of
them and a lot of quality ones
out there now."
Dug Dugger, general manager
at Ourisman Rockmont
Chevrolet in Rockville, Md: "I
think we've seen a little bit
more production over the past
year than we really should have
had. I do think that will lead
manufacturers to step up
incentives where they see the
need. Right now Chevy is doing
a top off of customers' credit
cards. If somebody has $1,000,
they might top it off to $2,000
or $3,000. I think
manufacturers will turn to
incentives in more creative
ways like that."

Page 1

SUNDAY NADA DAILY

Volvo revamps facilities program
Diana T. Kurylko
dkurylko@crain.com

Volvo Cars of North America is rolling out a facilities improvement program and will pay dealers who renovate as much as $500 per car sold
for up to three years.
Tony Nicolosi, CEO of the U.S. sales arm, said
the program will run for three years and is
retroactive to Jan. 1 because some dealers began
the improvements last year and some already
meet the new standard.
In 2013, Volvo canceled a new facilities and
variable margin program because of low sales
and throughput, Nicolosi said. It has revised and
reinstated the facilities program. "This is not a
mandatory program - it is separate from margin," Nicolosi said.
The facilities plan, called the Volvo Facility
Support Initiative, was announced to dealers last

week and will be discussed at Monday's
our throughput doing the upgraded famake meeting with more than 100 Volcilities - these are the larger and higher
vo dealers expected to attend, he said.
volume dealers," he said.
Volvo has 306 dealers in the United
The new facilities program will give
States, and 47 - which account for 18
Volvo dealerships a consistent look. Fapercent of the brand's volume - are
cilities will have a cleaner appearance
compliant with the new program, Nibut still use the traditional white, blue
colosi said. Forty of those stores are
and silver colors.
stand-alone Volvo stores and seven Nicolosi: $500
"We know that customers shopping in
have separate showrooms and service per car sold for
our newer dealerships rate us higher
up to three years than shoppers in our older dealerareas, he said.
About 15 to 20 dealers started to upships," Nicolosi said.
grade last year before the program was canceled,
"The other thing is to support dealers who made
Nicolosi said. Another 42 dealers have signed let- investments - even during the difficult times.
ters of intent, he said.
Some of those guys are at a disadvantage - they
Dealers that don't have exclusive or separate have increased their cost of doing business."
showrooms and service areas will be paid $250
Nicolosi also reconfirmed Volvo's 2014 U.S.
per car sold if they upgrade, Nicolosi said.
sales target of 65,000 units, up from 61,233 last
"We would like to have at least 50 percent of year. c

Used-car price
drop expected

Matthew
Hoffman, left,
vice president
of Hoffman
Auto Group in
East Hartford,
Conn., greets
Nissan's Fred
Diaz before the
make meeting
Saturday.

Gabe Nelson
gnelson@crain.com

Used cars should get cheaper in 2014 after five
years of consistently rising prices, NADA economists say.
But analysts at the NADA Used Car Guide insist
this is not a sign of a bursting bubble.
The average price of a used car rose 18 percent
from 2007 to 2013 as cash-strapped consumers
bought used cars rather than new ones. Used-car
prices are now roughly 10 percent higher than
the average price of the past couple of decades.
Some analysts have examined that trend and
predicted a "correction" - a collapse in used-car
prices, bringing them closer to the historical average. ALG, the residual values specialist, predicted in late 2012 that used-car prices would fall
8 to 10 percent over the next few years.
"When you look at [the graph], it's frightening,"
says Jonathan Banks, executive automotive analyst for the NADA Used Car Guide. But he insists
the reality is not that scary.
Banks predicted that the price of used cars up to
8 years old will fall 0.5 to 1 percent in 2014, with
the drop being driven by a wave of off-lease cars
that were leased a few years ago as the recession
ended and financing became more available. But
he said the market remains in a solid position.
"We've seen prices improve based on fundamentals - not based on psychological changes
in demand like we saw with the housing bubble
or the Internet bubble," Banks said.
He said the elevated price of used cars is a "new
normal." Used-car supply remains depressed by
the collapse in new-car sales in 2008 and 2009. At
the same time, demand is high due to a growing
economy, falling unemployment and readily
available credit.
NADA predicted that 16.4 million new cars and
light trucks will be sold or leased in the United
States this year, up 6 percent. Banks predicted
that the used-car market would tick slightly upward in terms of sales, with roughly 42 million
units sold nationwide. c

JOE WILSSENS

Nissan dealers get stair-step relief
Lindsay Chappell
lchappell@crain.com

Nissan has modified its stair-step sales incentive
plan to cut dealers in some markets some slack.
Nissan launched its Dealer Growth Program
on Jan. 1, a detailed sales incentive plan that the
factory and its retailers spent more than a year
hammering out together. The program will be
rolling out through early April.
But the plan has received some last-minute
tweaks to avoid holding dealers in Nissan's more
challenging markets, such as the Midwest, to the
same performance yardstick as those in Nissan's
most successful markets, such as Texas and New
York, said Fred Diaz, Nissan senior vice president for U.S. sales, marketing, parts and service.
"We're going to do it state-by-state," said Diaz,
speaking outside the Nissan make meeting.
"Some markets are not as far along as some of
our others."
Nissan has a publicized goal of obtaining 10
percent of the U.S. auto market by April 2017, up
from 7.3 percent at the end of 2013. The au-

tomaker believes that stair-step programs - a
sometimes controversial industry practice that
rewards dealers for meeting aggressive temporary sales targets - are vital to hitting that target.
But Nissan recognizes that 10 percent needs to
be a national U.S. average - not a goal applied
equally in every market, says Brad Fenton, chairman of the Nissan National Dealer Advisory
Board and owner of six Nissan stores in Oklahoma and Missouri.
"We need to reach the goal on average," Fenton says. "Everyone is expected to grow individually to contribute to the effort. But the market
shares are different all over the country, and so
our individual targets will be different."
Nissan has penetrated many markets along the
perimeter of the country, including Dallas, Southern California and greater New York. But the U.S.
map is hardly homogeneous for the brand.
"In my market, we might already be at 10 percent," said Fernando Somoza, co-owner of Central Houston Nissan in Texas. "We might need to
go much higher than 10 percent." c

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Automotive News NADA Show Daily - January 26, 2014

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