Automotive News - March 21, 2022 - 54

54 * March 21, 2022
Dealers wary of Biden's direction on autos
Survey: Most don't
support ZEV target
Audrey LaForest
alaforest@crain.com
Despite another year of record-high
profitability, undeterred by new-vehicle
inventory constraints and global
supply chain woes, dealers are hesitant
to praise the Biden administration,
including its plan to boost U.S.
sales of electric vehicles.
In fact, a majority of dealers say the
transition to the current White House
leadership negatively affected their
businesses in 2021, according to Automotive
News' 2022 Dealer Outlook Survey
of 196 dealers and dealership managers.
Respondents
cited soaring inflation,
high gasoline prices, government regulation
and a rush to EVs ahead of
market demand as main drivers of
their discontent during President Joe
Biden's first year in office.
As 2022 progresses, Biden is faced
with multiple crises, from Russia's
deadly invasion of Ukraine to skyrocketing
prices on consumer goods and
lingering effects of the COVID-19 pandemic,
including supply chain bottlenecks.
" If
it hadn't been for the chip shortage,
I think the Biden administration
would have already put the auto industry
into a recession, " one survey
respondent wrote.
" I believe he has had a negative effect,
and it will continue to be a 'wait
and see' with many tax issues looming
over us, " another said.
A majority of respondents also said
they don't support Biden's goal for
half of all new vehicles sold in the U.S.
in 2030 to be zero-emission, which includes
battery-electrics, plug-in hybrids
and fuel cells.
Major automakers including the Detroit
3, Toyota Motor North America
and Volkswagen Group of America
announced their support of that goal,
but some dealership executives are
doubtful.
One respondent said the 50 percent
goal is too aggressive and, instead, exEVS
Dealers
wary of moving
to an agency model
continued from Page 1
retailer delivers it.
Dealers shouldn't have to accept smaller profits
or a business model change just because the
powertrain is different, said Mike Sullivan, president
of LAcarGuy dealerships in the Los Angeles
area. Margins on EVs at his stores are not discernibly
lower, he said.
" I'm not going to settle for smaller margins under
the guise that they'll pay my flooring or increase
my co-op advertising, " Sullivan said during
a panel discussion on EVs at the Automotive
News Retail Forum: NADA. " I think that leads to a
very dangerous place if we go from 13 to 6 percent.
I suspect that the next call would be, 'I bet
we could get him to go for 5.75 or 5 [percent].' "
The concern is not theoretical, as brands including
Mercedes-Benz and Mini have asked
dealers to accept lower margins on EVs.
Contrast with Tesla
But against a proliferation of new, EV-only
brands, it's imperative that retailers and manufacturers
team up, said Inder Dosanjh, chairman
of the Cadillac National Dealer Council and CEO
of Dosanjh Family Auto Group, which includes
Politics and policy
The following questions were presented to 196 dealers and dealership managers regarding their sentiments on the federal government in Automotive
News' 2022 Dealer Outlook Survey.
Q: How did the transition to the
Biden administration affect
your business in 2021?
Respondents: 170
11%
POSITIVELY
22%
38%
NO EFFECT
51%
NEGATIVELY
62%
NO
43%
NO
UNSURE
16%
YES
Q: Do you support President Joe
Biden's goal for half of all new
vehicles sold in the U.S. in 2030
to be zero-emission?
Respondents: 173
Q: Should the federal government
provide incentives and other
funding to accelerate the
adoption of electric vehicles and
the deployment of charging
infrastructure?
Respondents: 174
13%
UNSURE
44%
YES
27%
47%
NO
YES, BUT ONLY IF
THE UNION ASSEMBLY
REQUIREMENT
IS DROPPED
Note: Not every executive answered every question.
pects the market will only be at 20 percent
by 2030. Others said the goal isn't
feasible and to just let automakers decide
what to produce and consumers
decide what to buy.
" I can appreciate wanting to go
green and do things like that but, in my
opinion, they're almost trying to force
the electrification process, " Paul Tracy,
owner of Auto Wholesale, a used-car
dealership in Wilmington, N.C., told
Automotive News.
" I think the biggest problem is
they're trying to put the cart before the
horse, " he said. " The infrastructure is
not there, and there's no system of how
people with electric vehicles are going
to help take care of the roads. "
'Upside down'
Lee Wilson, COO of Timbrook Automotive,
which sells Chevrolet, Ford,
Honda, Nissan and other brands
throughout Maryland, Pennsylvania,
West Virginia and Virginia, said Biden
is disrupting the industry.
" An entire industry is being turned
upside down in a short period of time.
It's extremely hard for us to adapt to
something that new very quickly and
be profitable, " said Wilson, citing major
expenses such as acquiring new
tools and equipment for EVs as well as
revamping stores and installing EV
chargers.
Wilson said the federal government
should provide infrastructure for EVs,
while automakers should help dealers
attract and retain skilled labor.
" Training our people is a huge issue
for us because it's hard for us to get
employees, and then we have to get
employees that are willing to work on
these EVs, " he explained.
Kjell Bergh, CEO of Borton Volvo
Cars in Golden Valley, Minn., and a retailer
for EV-only brand Polestar, said
the Biden administration has positively
affected his business,
citing the
president's persistent focus on a green
economy.
" We've been slow to adapt to electric
vehicles, but once we get close to the
tipping point, change happens extremely
fast, " said Bergh, noting Volvo's
commitment to be fully electric by 2030.
four Cadillac stores in the San Francisco Bay Area.
" There has to be adjustments, " he said during
the panel. " We have to work with the manufacturers
at this point. It can't be them and us. "
A healthy dealership network, said Dosanjh, is
the advantage traditional brands have over EV
specialists that use direct sales, such as Tesla, Lucid
and Rivian.
While many consumers have a good impression
of the Tesla brand, they don't necessarily prefer its
consumer experience, said Mike Dovorany, vice
president of automotive and mobility at Escalent,
a market research company. He conducted a massive
survey of likely future EV buyers about their
ideal approach to buying and servicing vehicles.
" We actually took the elements of the Tesla approach
and we sort of de-badged them, " Dovorany
said during an NADA Live session.
A major takeaway? The dealership model is a good
one for mainstream consumers buying their first EV.
Consumers overwhelmingly said they like going
to a dealership, having a human to interact with
and not having to schedule service only through
their phones, according to Escalent's research.
It " really had us kind of raise our hand and say,
'Hey, I know there's a lot of discussion about moving
towards this sort of more Tesla-like approach, but
when we talk to the consumers ... they're telling us
that's not their ideal' " experience, Dovorany said.
Dealers don't need to panic about EVs, said retail
analyst Glenn Mercer, but they better get
ready to sell them.
" There has now been a very, very
rapid increase in interest on electric
vehicles, so we've most certainly benefited
from that, " he said. " I think that
needs to be acknowledged, regardless
of whatever political persuasion you
might subscribe to. "
EV support
Survey respondents were mixed on
whether the federal government
should provide incentives and other
funding to accelerate the adoption of
EVs and the deployment of charging
infrastructure.
The bipartisan infrastructure law enacted
last year unleashed $550 billion
of new spending, including $7.5 billion
to help build a national network of
EV charging stations. But the future of
Biden's Build Back Better legislation -
the centerpiece of his economic and
climate plans - remains cloudy.
The package includes a controversial
EV tax credit with a bonus incentive
for union-made electric vehicles. Most
respondents said they don't support
the provision, though some said they
Getting ready
Most dealers are preparing for the EV future,
according to respondents to Automotive
News' 2022 Dealer Outlook Survey. Here's
what they're doing.
Installed charging infrastructure
Purchased and installed service department
equipment to maintain and repair EVs
Trained/hired technicians to maintain
and repair EVs
Trained/hired sales representatives
to learn about and sell EVs
Other
10 20 30 40 50 60 70 80
0 10 20 30 40 50 60 70 80
PERCENT
Mercer, president of GM Automotive in Shaker
Heights, Ohio, presented his latest " Dealership of Tomorrow "
report in a workshop at the NADA Show.
The goal of the report was to stimulate longterm
planning among dealers, and that's especially
important when it comes to EVs, he said.
'Expensive endeavor'
Some dealers have been selling EVs for years,
thanks to nameplates such as the Nissan Leaf and
Chevrolet Bolt. Others are taking their first steps
now to do so with waves of fresh EVs inbound.
As part of Automotive News' 2022 Dealer Outlook
Survey, respondents were asked whether
Q: A provision in the stalled
Build Back Better legislation
would offer a consumer EV tax
credit of $7,500 plus an
additional $4,500 incentive if
those vehicles were assembled
by union workers. Do you
support this provision?
Respondents: 175
10%
UNSURE
16%
YES
would if the union assembly requirement
was removed.
Biden has continued to press Congress
to take action on clean-energy
legislation, including investments and
tax credits that he said can lower the
price of EVs.
" There is no doubt that incentives for
the purchase of an EV and the infrastructure
of charging stations will
speed up the country moving to the EV
world, " said Doug Jones, president of
Faulkner Subaru Harrisburg in Pennsylvania.
The
initial cost of EVs and the installation
of chargers is " substantial and
will be a hindrance, " Jones said, but " if
the federal government can offset
some of the expense, consumers and
dealerships will get on board much
quicker. "
Tracy, of Auto Wholesale, said the
current $7,500 EV tax credit for consumers
is " a little too high " and would prefer
to see a level of up to $5,000 instead.
As for a $4,500 bonus for unionmade
EVs, " I just think it's overkill, " he
said. a
they were currently selling or preparing their
dealership to sell EVs. The vast majority of the 196
dealers and dealership managers who answered
the survey, 80 percent, said yes.
Installing charging infrastructure; training and
hiring technicians to maintain and repair EVs;
and purchasing and installing service department
equipment for EVs were the most commonly
cited preparations.
Expressway Toyota in Boston is upgrading its
first charging system, which can charge one vehicle
at a time, to a free-standing charger from
ChargePoint, said Robert Boch, dealer principal. It
will offer a quicker charge and two cables, he said.
Boch said the Toyota bZ4X electric crossover
should arrive at his dealership in late May or early
June. If he ends up selling 10 bZ4Xs per month,
" that would be pretty good, " he said. " That would
represent, in today's environment, maybe 5 percent
of our new-car sales. "
Randy Hoffman, COO at Ed Morse Automotive
Group, of Delray Beach, Fla., said the group has
signed on for EVs at each of its dealerships. Ed
Morse has about 30 franchised dealerships in Florida,
Illinois, Oklahoma, Missouri, Texas and Iowa.
" That's an expensive endeavor, " Hoffman said.
" My concern with EV is that the technology is improving
so rapidly that what we're investing today
may be antiquated within just a few years. " c
Melissa Burden and Jim Henry contributed
to this report.

Automotive News - March 21, 2022

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