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June 29, 2018Chairman’s Corner – Dealers Rally Against New Auto Tariffs
October 18, 2018I sell three Japanese brands in what has become a much globalized industry. Some of my lines are assembled in the U.S., others in Japan. The origin and percentage of parts content varies, but there is no doubt all would be affected by possible new tariffs on imports of autos and auto parts.
The issue came to a head at a U.S. Commerce Department public hearing on July 19, where just about every corner of the auto industry were united in opposition to the tariffs. Automakers, suppliers and dealer groups testified that tariffs would severely harm the industry and consumers.
NADA President Peter Welch said in his prepared testimony that while the association recognizes the importance to the U.S. of leveling the trade playing field, “a 25 percent tariff applied to all imports would hurt auto manufacturers, dealers, consumers and the economy as a whole. And the hardest hit would be our customers.”
AIADA President & CEO Cody Lusk reminded the Department of the value that international nameplate dealers bring to their communities across the U.S, and pointed out, “Tariffs that take the form of taxes on consumers would significantly impact new car sales through higher prices, reduced demand, restricted choice, and new obstacles for customers seeking auto loans.”
A study by the Center for Automotive Research, commissioned by NADA, forecasts that the price of a typical imported vehicle would rise $6,875. The price of a U.S.-assembled vehicle would jump $2,270. And should tariffs actually happen, some automakers say they will stop importing some models to the U.S.
In addition, CAR, a think tank supported by the auto industry, estimated that 2 million fewer vehicles would be sold and the industry would lose almost 750,000 jobs, including 117,500 at new-car dealerships, according to Automotive News.
I don’t know how this issue will shake out, and I have learned to roll with the punches in this business. But if you haven’t done so already, I would urge all dealers to make sure their voices are heard on this vital issue. Washington needs to be reminded that roughly 25% of our GDP is auto related.
In conjunction with the hearing, dealers were asked to “Drive The Message To The Hill” by taking action through AIADA’s online grassroots portal, and many answered the call by sharing the message that tariffs are taxes with their representatives in Washington. More information on the tariffs and a link to Congress and the Administration is also available on NADA.org.
What summer doldrums?
On a happier note, a look at the sales figures for June and year-to-year tells me Houston dealers are doing just fine. Despite a slight dip in sales from May (23,021 vs. 23,720) due to weaker fleet sales, June 2018 Houston Region total sales and retail sales are up 16.1% and 12.1%, respectively, year-over-year from June 2017, according to the latest TexAuto Facts Report published by InfoNation, Inc. for HADA.
Year-to-date total sales of 146,597 units through June 2018 were up 5.9% from 138,387 units year-to-date June 2017, while retail sales of 125,778 units for the same period were up 8.8% from 115,651 units.
But the standout figure for me was the split between cars and trucks. In June, truck/SUV sales accounted for 71.4% of retail sales and 71.9% of total sales. Retail sales by segment continued to be dominated by truck/SUV sales up year-to-date June 2018 by 13.8% while auto segment sales were down -1.8%.
Nationally, light duty truck market share was 67% through June. So it’s no surprise that Automakers are on pace to sell about 5.3 million cars this year, which would be the fewest since 1958! Just five years ago, U.S. vehicle sales were evenly split: 50 percent cars and 50 percent light trucks. But with the onslaught of SUVs and crossovers, light trucks outsell cars by a ratio of more than 2-to-1, and there’s no sign of a car rebound anytime soon.
I guess the lesson for dealers is pay attention to irrefutable trends. We keep getting warning signs about the “disruptors,” you know all those alternative fuel and autonomous vehicles on the horizon that will change the way we do business. We don’t want to be behind the curve, but with a lot of electric vehicles, I call them “rocks,” gathering dust on our lots, we don’t want to be too far out front either.
As I’ve said before, if they build a better mouse trap, I’ll sell it. In the meantime, keep on truckin’!
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