Automotive News Canada - July 2021 - 22

22
* JULY 2021
Volpe: Canada will lead battery charge
APMA boss champions
Canadian suppliers as
global go-getters
By GREG LAYSON
DIGITAL AND MOBILE EDITOR
CANADA'S AUTO INDUSTRY
should not roll over and allow the
United States to emerge as the global
leader in producing electric-vehicle
batteries, says Flavio Volpe,
president of the Automotive Parts
Manufacturers' Association.
" We're up against the industrial
policy of the [Joe] Biden administration, "
Volpe said
on the June 29 episode
of Canada
Conversations
podcast. " The
president has
said: 'We are
interested in
being the battery
capital of the world. And while it
doesn't matter where the raw materials
come from, we're going to assemble
them here.' "
Canada, he said, " could just shake
hands and say: 'Well, the raw materials
can come from us. We'll send it
over in trucks. You guys build the batteries,
and everybody wins.' "
But this country has everything
from the necessary natural and industrial
resources to federal and provincial
government policies supporting
the development of a homegrown EV
battery supply chain, Volpe said.
" The fact of the matter is, is that
we got a little bit more leverage, " he
said. " I think we can land one or two
of these major giga battery plants in
Ontario and Quebec and then make
those examples be the best-selling
point for us around the world. "
Volpe, whose association is launching
Project Arrow, the first Canadianmade
zero-emission, connected vehicle,
also spoke on a range of issues facing
the sector:
ON THE CHALLENGES OF NEGOTIATING
A NEW CONTINENTAL TRADE DEAL WITH
THE DONALD TRUMP ADMINISTRATION:
We knew he was a moron, and we
knew that he was hardheaded, and we
knew that he was surrounded by very
smart people who were trade hawks.
And so there was a dangerous combination
because he would refuse [parts
of the deal], and they would throw gas
on it.
ON HOW CANADA'S AUTO INDUSTRY
HAS FARED IN THE FIRST YEAR OF
THE UNITED STATES-MEXICO-CANADA
AGREEMENT:
It's hard to tell. It really is. We're
having philosophical debates between
countries ... on how regional value
content on parts applies in the regional
content evaluation on cars. And so
that's causing some angst.
You know, if you ask me this question
six months from now ... we're
gonna have a hell of a lot more activity,
a lot more volume. I think we're
cleaning up the microchip shortage,
and the market's coming back: postCOVID,
I'll be able to give you something
a little better.
ON THE CERTAINTY THAT THE USMCA
AND THE NEW U.S. PRESIDENT BRING:
This administration ... they are
open about what their interpretation
of the cross-border relationship is.
We know they're going to be tough. A
new trade ambassador has said to us
that their interpretation of the U.S.
Embassy is something that protects
our trade avenues. This administration
has embraced industrial policy.
ON HOW PROJECT ARROW IS
PROGRESSING:
We've done the due diligence on
all the proposals in all the different
product categories. We know what
we don't have. We know what we do
have. What we do have is an exhaustive
list. What we don't have is sometimes
extra selection in very specific
areas on the ones that we know are
major components - body structure
and drivetrain, passenger-facing electronics,
that type of thing.
We are now selecting suppliers and
negotiating with them on terms... and
scope. And we are planning to pick
the engineering by this fall and then
start to get building on the vehicle for
2022.
ON THE ATTENTION PROJECT ARROW IS
GENERATING FOR CANADIAN SUPPLIERS:
We've got companies that are in
Quebec talking to companies in the
U.K. We've got companies in India
talking to companies in Ontario.
And some of that international interCan
Canada compete for battery
production supremacy with the
United States? Flavio Volpe's
answer: " The fact of the matter
is, is that we got a little bit more
leverage. " FILE PHOTO
est is saying, " Look, we'd love to be
involved in your project. " And we say,
" Look, it's a Canadian-based project,
but let me make the connections [with
Canadian companies] for you, " and it
has been fantastic.
We've got Italian companies working
with Mexican companies working
with Canadian firms. So we see
a tiny Italian glass company working
with Mexican solar power companies
working with the Canadian
power electronics company and saying,
" Well, could we come together
as a consortium? "
" Well, maybe, but I'm glad you
guys made that connection. " - ANC
Buy-sell deals heat up as pandemic cools
Microchip shortage,
inflation fears don't
deter acquisitions
By JOHN IRWIN
AUTOMOTIVE NEWS CANADA
THE MARKET FOR DEALERSHIP
mergers and acquisitions is in the
strongest shape it has been in more
than a year, indicating that buyers are
looking beyond the industry's shortterm
challenges, experts said.
Dealership valuations
have returned to levels not
seen since before the start
of the COVID-19 pandemic,
said Mike Lewicki, president
of Lewicki Automotive
Consulting.
" The supply of attractive
dealerships in attractive locations
is very finite, so when
one becomes available, it's in
certain cases a once-in-a-lifetime
opportunity to acquire
it, " Lewicki said. " And you
don't acquire these things for
five years. You acquire them
for 25 years. "
Lewicki:
Goodwill prices at new-vehicle
stores in larger markets are up
30 to 40 per cent from near the start
of the pandemic in 2020, Lewicki said.
Goodwill is the value of intangible
assets such as a dealership's reputaDealerships
haven't
been
this pricey
since before
the pandemic.
FILE PHOTO
tion, measured by calculating how
much the purchase price of a company
exceeds the fair market value of its
net assets.
Canada's brokers have been busier
than they were at the beginning of last
year, just before the pandemic brought
the economy to a near standstill.
BANNER YEAR
Samir Akhavan, managing partner
at Templeton Marsh, said his company
is on track to close on deals involving
50 dealership locations this year, a
record for the firm.
He said in late June that
his firm has " already had a
better year than any other
year in our 11-year history, "
he said. " And if everything we
have on the works gets done,
2021 will be better than [the
last six years] put together. "
That despite the ongoing
pandemic, rising inflation
and a microchip shortage that
has depleted Canadian dealers'
new-vehicle inventory
levels. Akhavan said retailers
are acting with foresight
and continuing to make deals,
despite the current business
climate.
" I don't believe any of that is an
impediment to doing business. And
I don't think there's anything down
the road that would be a significant
impediment to our business. "
'CONSTANTLY PICKING UP'
Large urban markets such as
Toronto, Montreal, Vancouver,
Calgary and Edmonton are particularly
hot right now, according to
Lewicki.
Transactions that were
delayed in the early days
of the pandemic are now
being completed, Lewicki
said. " Volumes are constantly
picking up across
the country, " he said.
" Dealerships with wellthought-out
marketing presentations
should fetch top
dollar once again. "
Akhavan said midsize
markets are also of particular
interest to dealers
because of land prices.
" Real estate in [large] markets
has become so expensive
that dealers are saying, 'Do
I really want to pay $37 million
for a piece of property for a dealership
in the [Greater Toronto area]?
In Kitchener, Ont., that would buy
me four stores, so why don't I talk to
a four-store dealer group and maybe
pay them a premium and acquire that
platform?' "
Akhavan said sellers are often
motivated by current valuations,
which are high. He said many dealers,
after more than a year of COVID19
that was preceded by a long stretch
of strong new-vehicle sales, do not
want to wait to see if their stores
might fetch a higher value in a few
years.
" They're thinking, 'I might get
more for my store now than I might
three years from now, or at
least I know what I can get
for my store today. I don't
know what I can get for it
five years from now. I'm 67,
so I'll sell.' "
Akhavan: Real
estate costs
in large urban
centres are
drawing some
buyers to
smaller markets.
FILE PHOTO
CROSS-BORDER DEALS
Cross-border transactions
have also continued, despite
pandemic border restrictions.
In May, Calgary's
Foundation Automotive
Corp. purchased a Colorado
Hyundai dealership - its
first - from AutoNation
Inc., the largest new-vehicle
retailer in the United States.
Foundation Automotive has
said it plans to buy more
than a dozen U.S. dealerships this
year.
That deal came just days after
Ontario-based Rafih Auto Group purchased
a four-store dealership group
in southeastern Michigan, expanding
its presence in the United States
about two years after buying stores
in Ohio. That same month, Quebecbased
HGregoire purchased two
Nissan dealerships in California, adding
to its collection of U.S. stores.
- ANC
Automotive News Canada - July 2021

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