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March 2024 • Vol. 37 No. 3
The official publication of the Massachusetts State Automobile Dealers Association, Inc
EVs Reset Is the Euphoria Over for Good or Are We in a Time-Out?
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S ta f f D i r e c t o r y Robert O’Koniewski, Esq. Executive Vice President rokoniewski@msada.org Jean Fabrizio Director of Administration jfabrizio@msada.org Auto Dealer MAgazine Robert O’Koniewski, Esq. Executive Editor MSADA One McKinley Square Sixth Floor Boston, MA 02109 Subscriptions provided annually to Massachusetts member dealers. All address changes should be submitted to MSADA by e-mail: jfabrizio@msada.org Auto Dealer is published by the Massachusetts State Automobile Dealers Association, Inc. to provide information about the Bay State auto retail industry and news of MSADA and its membership.
Ad Directory ComplyAuto, 2 Driving Dealer Performance, 13 Ethos Group, 35 Merchant Advocate, 44 OCD Tech, 29 PlugStar/Plug In America, 41 Reynolds & Reynolds, 30 Sprague Energy, 27 Withum, 49 ADVERTISING RATES Inquire for multiple-insertion discounts or full Media Kit. E-mail jfabrizio@msada.org Quarter Page: $450 Half Page: $700 Full Page: $1,400
Back Cover: $1,800 Inside Front: $1,700 Inside Back: $1,600
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The official publication of the Massachusetts State Automobile Dealers Association, Inc
Table of Contents
4 From the President: Auto Show Returns 5 ASSOCIATE MEMBERS DIRECTORY 6 THE ROUNDUP: State Finances Hit Troubled Waters 11 MSADA 2023 Economic Impact Study Survey Form 12 LEGISLATIVE SCORECARD 14 AUTO OUTLOOK 18 Cover Story: EVs Reset – Is the Euphoria Over for Good or Are We in a Time-Out?
24 NEWS from Around the Horn 28 Accounting: Maximizing Profitability
31 Accounting: A Closer Look at Your 401k Plan 32 DEALER OPS: What’s Hiding in Your Merchant Statements? 34 DEALER OPS: The Five Cs of Attractive Leadership 36 LEGAL: Recent EPA, DOE Rules May Have Positive Impact on Auto Dealers
37 LEGAL: U.S. DOL Poised to Make More Dealership Employees Eligible for OT
38 NADA Market Beat 40 AIADA: A Presidential Rematch Looms 42 TRUCK CORNER: Tackling 2024 Priorities 45 nada update: Regulatory Fights Continue
Join us on X at @MassAutoDealers www.msada.org
Massachusetts Auto Dealer
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From the President
MSADA
Auto Show Returns April 25-28 at BCEC
By Jeb Balise, MSADA President This Spring we will see the return of our New England International Auto Show, April 25-28, at the Boston Convention and Exhibition Center, in South Boston. Derailed by Covid since our last Show in January 2020, our renewal of this event for 2024 is a great time to exhibit to consumers our latest car and truck offerings. Be sure to join us as we look forward to attendees – potential dealership customers – coming through the turnstiles after a four-year absence. You will be receiving a set of complimentary tickets for your customers. For more information on our Show, contact our Executive Vice President Robert O’Koniewski at rokoniewski@msada.org. We, moreover, have been promoting several new endorsement agreements with our vendors to assist you in improving your dealership operations: • Merchant Advocate works with retailers to analyze the credit card fees those businesses are charged and assessed in processing transactions. The savings can be considerable, as Merchant Advocate uncovers duplicate or unsubstantiated fees from the credit card companies. Over the last several years, they have saved retailers across the country over $380 million. • Plug In America, through its PlugStar program, works with dealerships in over 30 states to assist dealerships in the transition to EV sales and servicing by training personnel, including salespersons, to be able to best address your customers’ needs and questions regarding electric vehicles. • ComplyAuto works with dealers’ compliance efforts on privacy and cybersecurity platforms, FTC Safeguards Rule, advertising, AI-powered sales, workplace safety and OSHA-related rules, and HR policies and employee training. • Sprague Energy works with businesses to analyze their electric and gas charges to provide them with reduced charges for such services. Check out their ads – as well as those for long-time endorsed partners Ethos Group, Reynolds & Reynolds, and Withum – in this month’s magazine. Finally, we are seeing increased activities from regulatory bodies which could adversely impact your business. NADA, jointly with the Texas Auto Dealers Association, is challenging the FTC’s Vehicle Shopping Rule in federal court in the Lone Star State. NADA also has been lobbying for adjustments to the EPA’s greenhouse gas emissions rules for motor vehicles. Although the rule, finalized on March 20, was softened somewhat compared to the 2023 draft, it potentially will harm consumers’ ability to buy the types of vehicles they need and want. Litigation most likely will arise from affected industry groups. And here at home, we are lobbying on our Attorney General’s proposed junk fees regulations. There is never a dull moment in our industry. Hopefully Spring brings a renewed optimism and revitalized business activity as we move forward to meet all our challenges. t
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Massachusetts Auto Dealer www.msada.org
Msada Board Barnstable County
Brad Tracy, Tracy Volkswagen
Berkshire County
Brian Bedard, Bedard Brothers Auto Sales
Bristol County
Richard Mastria, Mastria Auto Group
Essex County
William DeLuca III, Bill DeLuca Family of Dealerships Paul Bertoli, Priority ChryslerJeep Dodge Ram
Franklin County [Open]
Hampden County
Jeb Balise, Balise Auto Group
Hampshire County
Bryan Burke, Burke Chevrolet
Middlesex County
Frank Hanenberger, MetroWest Subaru
Norfolk County
Jack Madden, Jr., Jack Madden Ford Charles Tufankjian, Toyota Scion of Braintree
Plymouth County
Christine Alicandro, Marty’s Buick GMC Isuzu
Suffolk County
Robert Boch, Expressway Toyota
Worcester County
Steven Sewell, Westboro Chrysler Dodge Ram Jeep Steve Salvadore, Salvadore Auto
Medium/Heavy-Duty Truck Dealer Director-at-Large [Open]
Immediate Past President
Chris Connolly, Jr., Herb Connolly Chevrolet
NADA Director
Scott Dube, McGovern Hyundai Rt.93
Officers
President, Jeb Balise Vice President, Steve Sewell Treasurer, Jack Madden, Jr. Clerk, Charles Tufankjian
Associate Members MSADA A ssociate M embers D irectory ACV Auctions Steve Sirko (856) 381-3914 ADESA Jack Neshe (508) 626-7000 Albin, Randall & Bennett Barton D. Haag (207) 772-1981 Ally Financial Maryanne Recupero (617) 997-9574 American Fidelity Assurance Co. Kathleen Weisenbach (402) 523-5945 America’s Auto Auction Boston Jim Lamb (781) 596-8500 Armatus Dealer Uplift Joe Jankowski (410) 391-5701 Auto Auction of New England Steven DeLuca (603) 437-5700 Automotive Search Group Howard Weisberg (508) 620-6300 Bank of America Merrill Lynch Dan Duda and Nancy Price (781) 534-8543 BCI Financial Corp. Timothy Rourke (203) 439-9400 Bellavia Blatt Leonard Bellavia (516) 873-3000 Broadway Equipment Company Fred Bauer (860) 798-5869 Brown & Brown Dealer Services Jason Bayko (508) 624-4344 Burns & Levinson LLP Paul Marshall Harris (617) 345-3854 Sarah Decatur Judge (617) 345-3211 CDK Global Rob Steele (508) 564-1346 Chase Auto Ken Miller (508) 902-8908 Clifton Larson Allen Rick Parmelee (860) 982-9307 Cooperative Systems Scott Spatz (860) 250-4965 Cox Automotive Ernest Lattimer (516) 547-2242 Creative Resources Group Charlie Rasak (508) 726-7544 CVR John Alviggi (267) 419-3261 Dave Cantin Group Woody Woodward (401) 465-7000 DealerSafeGuardSolutions Doug Fusco (972) 740-8638 Downey & Company Paul McGovern (781) 849-3100
DP Sales Distributors Andrew Prussack {631) 842-7549 Driving Dealer Performance Kimberly Guerin (978) 760-0322 Eastern Bank David Sawyer (617) 620-3484 EasyCare New England Greg Gomer (617) 967-0303 Electric Supply Center Jennifer Williams (781) 265-4272 Enterprise Rent-A-Car Timothy Allard (602) 818-3607 Ethos Group, Inc. Drew Spring (617) 694-9761 F&I Direct Sean Wiita (508) 414-0706 Michelle Salas (508) 599-0081 Federated Insurance Kevin Sundberg (559) 547-9694 Fisher Phillips LLP Joe Ambash (617) 532-9320 Jeff Fritz (617) 532-9325 Josh Nadreau (617) 532-9323 GW Marketing Services Gordon Wisbach (857) 404-0226 Hilb Group James Pietro (508) 791-5566 Huntington National Bank Michael Ham (740) 815-5085 JM&A Group Chris “KC” Hwang (954) 415-6961 John W. Furrh Associates Inc. Pamela Barr (508) 824-4939 Key Bank Mark Flibotte (617) 385-6232 KPA Abe Cohen (503) 902-6567 LoJack by Spireon Ashvir Toor and Robin Dukes (800) 557-1449 LotLinx Giovanna Scognemiglio (310) 526-1463 M & T Credit Corp. John Federici (508) 699-3576 Management Developers, Inc. Dale Boch (617) 312-2100 McWalter Volunteer Benefits Group Shawn Allen (617) 483-0359 Merchant Advocate, LLC Dan Giordano (973) 897-2778 Mintz Levin Kurt Steinkrauss (617) 542-6000
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Murtha Cullina Thomas Vangel (617) 457-4000 Nancy Phillips Associates, Inc. Nancy Phillips (603) 658-0004 NEAD Insurance Trust Charles Muise (781) 706-6944 Northeast Dealer Services Johna Cutlip (401) 243-7331 OCD Tech Michael Hammond (844) 623-8324 Performance Management Group, Inc. Dale Ducasse (508) 393-1400 Piper Consulting Jim Piper (207) 754-0789 Portfolio J. Gregory Hoffman (800) 761-4546 Pro-Vigil Sasha Lam-Plattes (408) 569-2385 Pullman & Comley LLC James F. Martin, Esq. (413) 314-6160 Reynolds & Reynolds Austin Ziske (802) 505-0016 Rockland Trust Co. Joseph Herzog (508)-830-3241 Samet & Company John J. Czyzewski (617) 731-1222 Santander Bank Richard Anderson (401) 432-0749 Chris Peck (508) 314-1283 Schlossberg, LLC Michael O’Neil, Esq. (781) 848-5028 Shepherd & Goldstein CPA Ron Masiello (508) 757-3311 Southern Auto Auction Joe Derohanian (860) 292-7500 Sprague Energy Rick Pasquatelli (508) 768-7640 The Towne Law Firm P.C. James T. Towne, Jr. (518) 452-1800 TrueCar Pat Watson (803) 360-6094 Truist Andrew Carmer (401) 409-9467 US Bank Vincent Gaglia (716) 649-0581 Wells Fargo Dealer Services Josh Tobin (508) 951-8334 Withum Kevin Carnes (617) 471-1120 Zurich American Insurance Company Steven Megee (774) 210-0092
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The Roundup
State Finances Hit Troubled Waters By Robert O’Koniewski, Esq. MSADA Executive Vice President
rokoniewski@msada.org Follow us on X (formerly Twitter) • @MassAutoDealers As we enter budget season at the State House, House legislative leaders right now are struggling with three financial realities simultaneously – revenue collections for the current 2024 fiscal year have not met projections in seven consecutive months since last June; the outlook for FY 2025, which begins on July 1 and for which the House is preparing a budget for deliberation in late April, may include considerable program reductions as a result of flagging revenues; and the on-going surge of migrants into the state continues to affect both scenarios’ bottom-lines. Since the start of FY24 in July, the Department of Revenue, as reported in early March, has collected $23.467 billion, which is $186 million or 0.8 percent less than actual collections during the same eight-month period of fiscal 2023 and $275 million or 1.2 percent less than what the Healey administration projected in January that it would have hauled in by this point in the calendar. March revenue numbers are due on April 3, and then May’s report will include data on the bulk of April’s income tax collections; these could bring some optimism for fiscal leaders. For now, the governor and the legislature have been implementing spending cuts and hiring freezes for the next four months to conclude FY24. For example, in early January, the Healey administration announced plans to cut $375 million from the FY24 budget amid flagging tax collections, to downgrade the amount of tax revenue expected this budget year by $1 billion, and to build the next state spending plan on the assumption that even less tax revenue will come in next year. The plan also called for the administration to grab $625 million in newly-tapped non-tax revenues to help balance this year’s budget. MARCH 2024
Massachusetts Auto Dealer www.msada.org
However, the migrant crisis has caused the state to pass supplemental budgets, which will total almost $1 billion when said and done, to address housing, health, education, and job training issues – costs that were not originally built into FY24’s $56 billion budget. Looking forward to the FY25 budget debate, the House will unveil its proposal in mid-April. Speaker of the House Ron Mariano (D-Quincy) and House Ways and Means Chairman Aaron Michlewitz (D-North End, Boston) are not optimistic on how that document will look. Recognizing the stress on revenue collections, each has expressed the inclusion of considerable budget cuts as well as tapping the state’s rainy day fund, which sits at over $8 billion, the highest in its history. In addition to revenue flow issues, the legislature is also looking at continued stresses coming from the unabated influx of migrants into the state. The crush of new arrivals into the Commonwealth has inundated emergency assistance family shelters and prompted lawmakers to negotiate imposing shelter stay limits to prevent the system from collapsing. Shelter costs are expected to approach $1 billion this fiscal year and next fiscal year, a major strain for budget-writers who must also make tough spending due to the state’s revenue slump. According to The State House News Service, HWM Chairman Michlewitz has said the budget and emergency assistance family shelter system are at a “breaking point” due to the migrant crisis, “and although our fiscal outlook is still pretty strong, and we built up our reserves to record highs, the budget before us today that we’re dealing with is going to be one of the most challenging I’ve had to deal with as the chair.” One thing legislators and the governor are not
MSADA talking about – for now – is broad-based tax increases and creating other revenue sources. Such a prospect is not good in any year, especially not now as the November elections approach. But one thing to always watch for is if the talk of taxes increases pops up once we get passed the legislative candidates’ May filing deadline for November. Further, as the immigrant issue begins to grow in intensity amongst voters, as polls continue to show, to what extent will Massachusetts citizens tolerate service cuts as migrant program funding begins to eat more and more of the state’s budget. Budget writing is always easy when there are surpluses, no emergencies, and the federal government sends billions our way. In tough times, it is an entirely different story. As Speaker Mariano recently stated, “You know, good times are great, and when there are good times, everyone, everyone really enjoys spending the money. And I enjoyed spending the money, but I’ve been through bad times in here when local aid has been cut, when everything in the budget has been on the table for a cut.” After the House approves a budget document, the Senate will create its own plan, usually in mid-May. A conference committee will then meet to resolve differences and send a final budget to the governor, hopefully for her review and signature before the July 1 start date of FY25.
Legislators Not Seeking Reelection In 2024 As of March 26, three senators and 15 representatives, most holding a leadership slot, have announced their plans to either seek a different office or not seek reelection later in 2024. Below is the list of legislators who will not be returning next year in their current positions: Senate: • Sen. Susan Moran (D-Falmouth): Current Senate chair of the Revenue Committee; running for Barnstable County Superior Court clerk. • Sen. Marc Pacheco (D-Taunton): Current Senate chair of the Emergency Preparedness and Management Committee, chair of the Senate Committee on Post Audit and Oversight, and dean of the
Senate; not seeking re-election. • Sen. Walter Timilty (D-Milton): Current Senate chair of the Public Safety Committee; running for Norfolk County clerk of courts. House: • Rep. Ruth Balser (D-Newton): Current House Third Division chair; not seeking re-election. • Rep. Jay Barrows (R-Mansfield): Current Third Assistant Minority Leader; not seeking re-election. • Rep. Peter Capano (D-Lynn): Current House vice chair of the Veterans and Federal Affairs Committee; not seeking re-election. • Rep. Daniel Carey (D-Easthampton): Current House vice chair of the Committee on Post Audit and Oversight; running for Hampshire County clerk of courts. • Rep. Gerard “Gerry” Cassidy (D-Brockton): Current House chair of the Veterans and Federal Affairs Committee; not seeking re-election. • Rep. Angelo D’Emilia (R-Bridgewater): Ranking minority member on House Committee on Bills in the Third Reading; not seeking re-election. • Rep. Bill Driscoll (D-Milton): Current House chair of the Emergency Preparedness and Management Committee; running for the Senate held by Sen. Timilty. • Rep. Dylan Fernandes (D-Falmouth): Current House vice chair of the Committee on Environment and Natural Resources; running for the Senate seat held by Sen. Moran. • Rep. Denise Garlick (D-Needham): Current House chair of the Education Committee; not seeking re-election. • Rep. Kay Khan (D-Newton): Not seeking re-election. • Rep. Mathew Muratore (R-Plymouth): Running for the Senate seat held by Sen. Moran. • Rep. Sarah Peake (D-Provincetown): Current House second assistant majority leader; not seeking re-election. • Rep. William “Smitty” Pignatelli (D-Lenox): Current House vice chair of the Rules Committee; not seeking re-election. • Rep. Paul Schmid (D-Westport): Current www.msada.org
House chair of the Agriculture Committee; not seeking re-election. • Rep. William Straus (D-Mattapoisett): Current House chair of the Transportation Committee; not seeking re-election.
New GOP State Rep Elected On March 5, Dudley Selectman John Marsi was elected to fill the House’s 6th Worcester seat left open by now-state Sen. Peter Durant, that chamber’s newest Republican. Durant was earlier elected to fill the Senate seat vacated when Democrat Sen. Anne Gobi resigned to take a position with the Healey-Driscoll administration. Marsi’s election was the second straight victory for a Republican in a special legislative election. Marsi has already declared he will stand for re-election in November.
MSADA Auto Show April 25-28, at BCEC Your Association is looking forward to revitalizing its New England International Auto Show for 2024. Last held in January 2020 and sidelined by the COVID pandemic and subsequent restrictions, this year’s Show will be held on Thursday, April 25, to Sunday, April 28, at the Boston Convention and Exhibition Center, in South Boston. We are excited to see the public come through the turnstiles and start making their future purchasing plans as they check out the latest offerings from our manufacturers. Let me know if you want complimentary tickets for your customers. We look forward to seeing you at our Show at the end of April.
GAO Issues RTR Report On March 21, the U.S. General Accounting Office, which works for Congress, issued a report on vehicle “right-to-repair.” Congress asked GAO to investigate the matter, as there is legislation currently before it and federal agencies have struggled with how to address such vehicle repair matters regulatorily. The report, Vehicle Repair: Information on Evolving Vehicle Technologies and Consumer Choice, is the result of considerable conversations with franchised auto dealers and associations, including Chris Connolly at Herb Connolly Chevrolet, Frank Massachusetts Auto Dealer
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THE ROUNDUP Hanenberger of MetroWest Subaru, and your MSADA, as well as representatives for vehicle manufacturers and independent repairers. The federal government has a limited role regarding vehicle repairs. The Department of Transportation’s National Highway Traffic Safety Administration is focused on vehicle safety and is involved in vehicle right-to-repair issues only when they affect vehicle safety. The Federal Trade Commission is involved in protecting consumers and promoting competition, including in the vehicle repair market. The GAO was asked to review the effects of changing vehicle technologies on vehicle right-to-repair. The report examines how changes in vehicle technologies could affect competition and consumer choice in the vehicle repair market and NHTSA’s and FTC’s actions related to this issue. Quoting from the report: “The term ‘right-to-repair’ refers to consumers’ ability to decide who repairs their products. For vehicles, this means consumers deciding whether to make their own repairs or take their vehicle to repair facilities. Repair facilities may be at businesses franchised with or owned by automakers, known as dealerships, or repair shops not associated with dealerships, known as independent repair shops. Vehicles are becoming more technologically advanced and increasingly transfer data, including repair data, wirelessly directly to automakers. This trend may cause challenges for independent repair shops in conducting repairs as they may not have access to that data as automakers may not share it with them.” The report includes four key take-aways: • Most automakers have been operating under a 2014 voluntary right-to-repair agreement that generally resulted in independent repair shops having access to the information, data, and tools needed for repairs. However, stakeholders we interviewed, and a nongeneralizable review of a set of complaints, suggest independent repair shops may face some access limitations. • Advanced vehicle technologies may make repairs more expensive and MARCH 2024
complex because they require additional knowledge, equipment, and other investments. Such issues could particularly affect some independent repair shops that are unable to make such investments. In addition, according to some independent repair stakeholders, the wireless transfer of data between vehicles and automakers may disadvantage independent repair shops compared to dealerships. • If independent repair shops face limitations in access to the information, data, and tools needed for repair, consumers might have fewer repair choices. If independent repair shops face disparities in access, it could make repairs more expensive or inconvenient for some consumers. • FTC is taking steps to better understand potential vehicle repair limitations by considering new ways to categorize and analyze potentially relevant consumer complaints. The full report is available at: https:// www.gao.gov/assets/d24106633.pdf.
RMV Issues Guidance on Lease Buyout Procedure On March 29, the Massachusetts Registry of Motor Vehicles issued information regarding the RMV’s rules and the vehicle lease buyout process implemented at dealerships. The RMV has received questions from dealerships about the process of purchasing a vehicle at the conclusion of a lease agreement, commonly known as a “Lease Buyout.” The inquiries reflect instances where the buyout has taken an extended amount of time (e.g., more than twenty business days) and the purchaser/ lessee had to rent a vehicle between the lease ending and when the dealer obtained the proper documentation to process a new Registration and Title transaction in the new owner’s (former lessee’s) name. The advisory is to remind dealerships that the law requires a dealer to have the vehicle title in hand before they can sell and deliver the vehicle to a customer. Several lease buyout questions were asked by dealers and agents as part of implementing the RMV’s “Vehicle Owner’s Limited Power
Massachusetts Auto Dealer www.msada.org
of Attorney Form and Policy.” These questions were collected, and responses were provided. To address these questions, an advisory (found at: https://www.mass.gov/ info-details/dealer-information#registry-of-motor-vehicles-(rmv)-reminder-regarding-lease-buyouts-) and a Lease Buyout Q&A document (found at: https:// www.mass.gov/doc/questions-and-answers-lease-buyouts-advisory/download) have been posted online on the RMV’s “Dealer Information” page found at https:// www.mass.gov/info-details/dealer-information. The advisory on the website reminds dealerships that the law requires a dealer to have the Title in hand before they can sell and deliver the vehicle to a customer. The Q&As outlines two common Lease Buyout scenarios and lists commonly asked questions and the corresponding answers under each scenario.
EPA Issues Newest Rule on Auto Emissions On March 20, the Environmental Protection Agency issued its final rule related to greenhouse gas (GHG) emissions requirements for new vehicles during Model Years 2027-2032. These standards, through their implementation, will effectively require OEMs to substantially increase their production of electric vehicles as a percentage of total vehicles sold. The final rule represents a minor relaxation of standards as initially presented in the EPA’s first iteration of the rule almost one year ago. The EPA’s official announcement on the rule is available at www.epa.gov. Your Association appreciates the efforts the EPA made to listen to critical comments provided to the Biden administration by thousands of franchised dealers from across the country, including scores located in the Commonwealth, and to improve the early years of the rule’s requirements. However, there appear to be issues that would need to be addressed down the line as the rule becomes fully implemented through Model Year 2032. Regardless of today’s EPA dictate on the OEMs, Massachusetts, as over ten other states do presently, must comply
MSADA with the California Air Resources Board’s vehicle sales requirements mandate of 100% ZEVs by 2035. Let the market disruption begin as consumers continue their slow embrace of EVs. For more information, please check out this month’s NADA column by Scott Dube and our cover story.
Corporate Transparency Act Struck Down Members may recall that, beginning January 1, 2024, under the Federal Corporate Transparency Act of 2021 (CTA), new federal regulations went into effect that require many corporations, limited liability companies, and other U.S. and foreign entities created in or registered to do business in the United States to report information about their beneficial owners—the persons who ultimately own or control the company—to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). These new reporting requirements were created to strengthen the integrity of the U.S. financial system by making it harder for illicit actors to use anonymous shell companies to launder their money or hide assets. Under Treasury’ rules, companies formed or registered before January 1, 2024, have until January 1, 2025, to file their initial beneficial ownership information (BOI) reports. Reporting companies created on or after January 1, 2024, and before January 1, 2025, must report their BOI within 90 days of their formation. After January 1, 2025, the BOI must be filed within 30 days. Reporting companies must report beneficial ownership information electronically through FinCEN’s website. Reports were to be accepted starting on January 1, 2024. On March 1, a U.S. District Court judge for the Northern District of Alabama ruled the CTA unconstitutional. The lawsuit was filed by the National Small Business Association in November 2022. In response, the U.S. Treasury Department said it is complying with the decision, but it did not yet say if the government would appeal the judge’s ruling. Members can keep an eye out for fu-
ture bulletins regarding this subject matter. Since existing corporate entities created prior to January 1, 2024, are not required to make a filing until January 1, 2025, there is no immediate urgency to corporate compliance.
NHTSA Adds New Search Tool for Recall Checks The National Highway Traffic Safety Administration announced this month, during national road safety week, that it was implementing a new means by which motor vehicle owners can check to see if their car, truck, or related item is subject to a recall notice. Under its new tool, consumers would only need to check a vehicle’s license plate number to learn about recalls associated with that vehicle. Previously, consumers could use their VIN to see if their vehicle was subject to a recall notice. The new tool will make it that much easier for a consumer to use. After all, just about everyone can remember one’s license plate, but how many car owners can remember a 17-character VIN or even locate it on the vehicle? According to new data from NHTSA, there were approximately 1,000 recalls issued in 2023 on motor vehicles, RVs, tires, and car seats. Almost 35 million vehicles alone were subject to recalls. The safety experts at NHTSA encourage twice-a-year checks for recall notifications. Here are some pertinent Q&As at www. nhtsa.gov/recalls: What information will display in the search results? • When searching by license plate or VIN, you’ll learn if a specific vehicle needs to be repaired as part of a recall. • When searching by a vehicle’s year, make and model, or for car seats, tires or equipment, you›ll get general results for recalls, investigations, complaints and manufacturer communications. What will the license plate and VIN search show? • An unrepaired recall for a vehicle from certain manufacturers. • If the vehicle has no unrepaired recalls, you will see the message: «0 unrepaired recalls associated with this VIN.» www.msada.org
What won’t the license plate and VIN search show? • A safety recall that has already been repaired. • Some recently announced safety recalls for which not all VINs have been identified. VINs are added continuously so please check regularly. • Safety recalls that are more than 15 years old (except where a manufacturer offers more coverage). • Safety recalls conducted by small vehicle manufacturers, including some ultra-luxury brands and specialty applications. • Manufacturer customer service or other non-safety recall campaigns. • A recall involving an international vehicle. Vehicle owners should check for open recalls at least twice a year. A good reminder is to always check when daylight saving time begins and ends.
New Fed Joint Employer Rule Struck Down On March 8, a federal court judge in Texas struck down the National Labor Relations Board’s controversial joint employer rule right before it was set to take effect on Monday, March 11. The NLRB had aimed to make it far easier for workers to be considered employees of more than one entity for labor relations purposes – a move that would have resulted in increased union organizing and collective bargaining efforts across the country – but the recent decision halted it in its tracks. The fight will continue, however, since there is little doubt the agency will appeal the decision in hopes of resurrecting the rule in the near future – and as a whole separate court battle over the same issue, prompted by an activist labor union, takes place in D.C. Information on the rule issued last October that the court has overturned can be found at www.fisherphillips.com. In a nutshell, the NLRB wanted to establish joint employment much more frequently: • A business would have been considered a joint employer not only when it had Massachusetts Auto Dealer
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THE ROUNDUP the right to exert control over terms and conditions of another company’s employees, but also when evidence exists of reserved, unexercised, or indirect control over any working conditions. • This would have included obvious situations like hiring and firing but also such other conditions as wages, benefits, scheduling, supervising, directing, and disciplining. • As you can imagine, this would have led to a tidal wave of new union activity involving all sorts of businesses, including those involved in franchising, contracting, and supply chains. Non-unionized businesses might have found themselves forced to engage in collective bargaining if they were found to be joint employers with a unionized employer, as just one example. A consortium of business groups led by the U.S. Chamber of Commerce filed a court action to block the rule. In overturning the rule, the federal judge, in the 31-page decision, said that the NLRB Board “failed to reasonably address the disruptive impact [that] the new rule [would have] on various industries.” The court’s ruling confirmed that the 2020 version (the pre-October 2023 version) of the joint employment standard remains in effect: • Under this status quo, an employer is only considered a joint employer of a separate employer’s employees if the two businesses share or co-determine the employees’ essential terms and conditions of employment. These include wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction. • Equally as important, a business must possess and actually exercise substantial direct and immediate control over the employees’ essential terms and conditions of employment in order to be considered a joint employer and in a manner that is not sporadic and isolated. The NLRB will have about a month to file an appeal, and it seems likely the agency will go down that path to try to breathe new life into its rule. After all, revising the joint employment standard has been one MARCH 2024
of the agency’s priorities. Any such appeal would be heard by judges from the conservative Fifth Circuit Court of Appeals. Complicating matters further, the SEIU union has filed a parallel lawsuit in the liberal Washington, D.C., federal court system, this one arguing that the rule does not go far enough. Thus, we may soon see a contrary order from a federal court clearing the rule for takeoff. Such a situation could lead to the case being consolidated and handed to a separate appeals court via a lottery selection system, and of course the issue could eventually wind its way all the way up to the U.S. Supreme Court. There is a lot of uncertainty ahead, but one fact we feel comfortable noting is that this entire process will take time. Typical appeals can take a year or more, and any eventual Supreme Court intervention might mean that we might not have final resolution of this issue until 2025 or even 2026. Even if the process is somehow accelerated, the soonest this new rule could take effect would be late in 2024.
FCC Issues Final Rule on TCPA Consent for “Robocalls” On March 5, the Federal Communications Commission published a final rule that clarifies several important factors for compliance with the Telephone Consumer Protection Act (TCPA). It specifically addresses the prohibition on so-called “robocalls” or “robotexts” and honoring consumer revocation of consent from receiving such calls or text messages. The TCPA restricts marketers (including dealerships) from sending text messages or making autodialed (or prerecorded) marketing phone calls to consumers unless they have received the prior express consent of the called party. Even if they obtain consent, marketers must promptly and accurately honor consumer requests to stop – that is, to revoke consent. Specifically, the FCC is adopting rules that: • Clarify that revocation of consent can be made in any reasonable manner, with examples; • Require that callers honor do-not-call and consent revocation requests within a
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reasonable time not to exceed 10 business days of receipt; • Limit text senders to a one-time text message confirming a consumer’s request that no further text messages be sent; and • Confirm that any revocation of consent applies only to those robocalls and robotexts for which consent is required. The rule generally takes effect on April 4, 2024. While many of the rules’ requirements are consistent with previous FCC (and NADA) guidance, dealers, their attorneys, and vendor partners should review the final rule to ensure that they can and do comply with these new TCPA requirements. This may require training of staff and working with your outside vendors, as well as taking steps to be able to demonstrate compliance with the new rules.
2024 Dues Invoices In December your Association sent out 2024 dues invoices to all our dealership and associate members. Our members’ dues help fund the Association’s activities on their behalf, including our lobbying on Beacon Hill and in Washington, our member counsel services, and our education and training activities. With your continued support and membership renewal, we can build on our current foundation and begin to enhance your Association’s core purposes of communication, advocacy, and education.
Complete the 2023 Economic Impact Survey Please assist us again in creating our annual Economic Impact Report, which we use with legislators and opinion makers to demonstrate the real dollar and cents economic impact that dealers have on our Commonwealth and in their cities and towns. Please take a few minutes to complete the survey today for each of your dealerships. The survey is available on page 11 of this issue. Your submitted survey is strictly confidential. We will be collecting the surveys until the end of April. Thank you for your assistance in this project. t
MSADA MASSACHUSETTS STATE AUTOMOBILE DEALERS ASSOCIATION
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ECONOMIC IMPACT STUDY SURVEY
This study is a critical legislative and public relations tool for Massachusetts franchised new car dealers. Please take the time to fill out this survey. You may fax it to Auto Outlook (610-640-2907), mail to Auto Outlook (PO Box 390, Exton, PA, 19341), or email to (autooutlook@icloud.com). If you operate more than one dealership, please complete one form for each location.
1. Personnel - 2023
4. Vehicle Sales - 2023
Number of full time employees
New
Number of part time employees
Total number of new and used vehicles sold
Change in number of full time employees from 2022 (+ or -) Total payroll
$
Total employee benefits (excluding payroll taxes and social security)
$
Do all of your employees and their dependents have access to health insurance through your dealership?
5. Taxes and Fees - 2023 Yes
Unemployment insurance premiums paid
$
Workers’ compensation premiums paid
$
No
2. Financial - 2023 FINANCIAL RESULTS - 2023 New vehicle sales
$
Used vehicle sales
$
Service Department
$
Parts and accessories
$
F and I Department
$
Other revenue
$
TOTAL SALES
$
Federal employee taxes (include employer and employee Social Security and Medicare, and employee taxes withheld)
$
State/local employee taxes (include state disability and income taxes withheld)
$
Real estate taxes
$
State sales and use taxes collected
$
Other state/local business taxes or fees
$
Question #1 In what county is the dealership located? Question #2 How many franchises are housed at the dealership?
Estimated annual battery electric vehicle sales as a percent of overall new vehicle sales: %
TAXES COLLECTED AND REMITTED - 2023
6. Miscellaneous Questions
3. Electric Vehicles
2023:
Used
2024:
%
Estimated number EV chargers that will be installed at the dealership by the end of 2024:
EXPENSES RELATED TO SALE OF EVs - 2024 Projected
Question #3 What were your total personal and dealership contributions to charitable and civic organizations in 2023? $ Question #4 How much was spent on advertising during 2023? $ What percentage of your 2023 advertising dollars went to: Newspaper
%
Direct mail
%
Radio
%
Internet
%
Television
%
Other
%
TOTAL EV-RELATED EXPENSES
$
Building modifications or acquisitions
$
Charging infrastructure
$
Chargers
$
Special equipment
$
Sales training
$
Question #5 Estimate the total amount spent in 2023 for products and services from other Massachusetts businesses (e.g., utilities, professional fees, office equipment, supplies, etc.)
Service training
$
$
ALL SURVEYS ARE STRICTLY CONFIDENTIAL www.msada.org
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L EGISLATIVE S CORECARD MARCH 2024
BILL#
SPONSOR
SUBJECT
S151 H331
Sen Crighton Rep Hunt
Amendments to Ch. 93B, the auto dealer franchise law.
SUPPORT
Joint Committee on Consumer Protection held public hearing on July 17, 2023; placed into study.
H290 H329
Rep Finn Rep Howitt
RTR law amendments to fix Model Year start date and consumer notice.
SUPPORT
Joint Committee on Consumer Protection held public hearing on July 17, 2023; placed into extension order.
S204 H270 H289
Sen O’Connor Rep Chan Rep Finn
Creates process to appeal improperly issued Class 1 license.
SUPPORT
Joint Committee on Consumer Protection held public hearing on July 17, 2023. H270 reported favorably on Jan. 25, 2024; sent to House Ways and Means.
S150 H351
Sen Crighton Rep Lewis
Modernize on-line vehicle purchase process.
SUPPORT
Joint Committee on Consumer Protection held public hearing on July 17, 2023. H351 reported favorably on Jan. 25, 2024; sent to House Steering & Policy Committee; House ordered to third reading on 2/12/24.
S199
Sen Moore
Amends definition of heavy-duty trucks in RTR law.
SUPPORT
Joint Committee on Consumer Protection held public hearing on July 17, 2023; placed into extension order.
S220 H400
Sen Velis Rep Walsh
Open safety recalls notifications.
SUPPORT
Joint Committee on Consumer Protection held public hearing on July 17, 2023. Redraft H4277 reported favorably on January 25, 2024; sent to House Ways and Means.
H354
Rep Linsky
Allows an OEM to open a factoryowned store, without a dealer, if there is no same line-make dealer in the state. (The so-called “Tesla Exemption.”)
OPPOSE
Joint Committee on Consumer Protection held public hearing on July 17, 2023; placed into study.
S688 H1095 H1118
Sen Moore Rep McMurtry Rep Philips
Creates process to increase the insurance reimbursed labor rate paid to auto body repairers.
SUPPORT
Joint Committee on Financial Services held public hearing on October 3, 2023; reported redraft H4412 favorably and sent to House Ways and Means.
S639 H1121 H995
Sen Feeney Rep Puppolo Rep Donahue
Protects consumer choice in vehicle service contracts.
SUPPORT
Joint Committee on Financial Services held public hearing on October 3, 2023; H995 reported favorably and sent to House Steering & Policy Committee.
S2219 H3255
Sen Cronin Rep Arciero
Eliminates initial state inspection for new vehicle.
SUPPORT
Joint Committee on Transportation held public hearing on Jan. 24, 2024; placed into study.
H3348
Rep Howitt
Limit doc prep fee amounts.
OPPOSE
S2210
Sen Crighton
Safety shutoff for keyless ignition technology.
OPPOSE
Joint Committee on Transportation held public hearing on October 17, 2023; reported favorably.
S25 H60
Sen Creem Rep Carey
Personal data privacy and security.
OPPOSE
Joint Committee on Advanced Information Technology, the Internet and Cybersecurity held public hearing on October 19, 2023.
S227
Sen Finegold
Mass. Info Privacy & Security Act.
OPPOSE
Joint Committee on Economic Development and Emerging Technologies held public hearing on October 19, 2023. Bill sent to AITIC Committee on November 2, 2023.
MARCH 2024
STATUS
Massachusetts Auto Dealer www.msada.org
Joint Committee on Transportation held public hearing on Jan. 24, 2024; reported favorably and sent to House Ways and Means Committee.
www.msada.org
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AUTO OUTLOOK
MARCH 20242022 Massachusetts AutoAuto Dealer www.msada.org FEBRUARY Massachusetts Dealer www.msada.org
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www.msada.orgMassachusetts Massachusetts Auto DealerFEBRUARY MARCH 2022 2024 www.msada.org Auto Dealer
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AUTO OUTLOOK
MARCH 2024
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COVER STORY
EVs Reset Is the Euphoria Over for Good or Are We in a Time-Out? By Boris Hansen It is difficult to pinpoint just when the PR around electric vehicles started to go south last year and why, thereby threatening widespread consumer acceptance of EVs in the short- and longterm. Was it because of price? Where the average price of a gasoline-powered, internal combustion engine vehicle exceeds $47,000, an EV can have a premium on top of that of at least $5,000, or more, depending on the vehicle model. Is it consumer range anxiety on mileage capabilities and a lack of available public charging stations and home charging capabilities? Although state and federal policy makers will admit to a dearth of existing charging sites, they will also tell you that there are hundreds of millions of dollars available through the Inflation Reduction Act, the American Rescue Plan Act, and other initiatives working with private investors and public utilities to help states build out a charging network. And the manufacturers will tell you that vehicle mileage range is improving. Was it over-exuberance by the MARCH 2024
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vehicle manufacturers, who committed all-in on EV sales well ahead of any true market development with any real demand and buy-in from a broad base of consumers? Surely, those who want an EV have been the first acolytes to commit. What about the next 90%? Is it a sentiment from a large segment of the population that the government is force-feeding an unwanted product on them at a time when the vehicles’ practicality in certain geographic areas is highly questionable? Tooling around in the latest ZEV in metro-Boston is one thing. Navigating the Dakotas while towing farm or other work equipment in extreme cold weather all while worrying about when the next charge is available is a completely different matter. Or is it really something much simpler – human nature’s reluctance to change when what one has now works just fine, especially with the unlimited presence of gas stations in our communities. Most likely, a combination of “all of the above.” “Listening to our customers, there are concerns on range and battery life, especially in cold weather, as well as price,” said
MSADA Robert Boch of Expressway Toyota in Dorchester. “Toyota has been very conservative on the EV push, focusing quite a bit on selling hybrids as a way for our customers to transition to the future. It’s not as if EVs are bad; it’s just that they are not right now getting good press.” Mike Marcotte of Marcotte Ford in Holyoke agreed with Boch: “Our customers love the hybrids, knowing they have the engine backup should battery charge run out.” “An underdeveloped charging infrastructure is hindering the development of a solid EV market,” Gary Rome of Gary Rome Hyundai in Holyoke offered. “EV quality and reliability is much improved, and factory incentives, especially on leases, are driving increased transactions. But we need many tools to help spark sales with an oversupply of product due to the cooling demand.”
Massachusetts Full Speed Ahead Regardless of the reasons, the future will be non-ICE zero-emission vehicles, and the government’s commitment in Massachusetts and Washington, D.C., is here to stay – for now. For better or worse, Massachusetts, in 1991, was one of the first state’s to fully commit itself to all things CARB – namely, the vehicle emissions policies and regulations promulgated by a group of unelected bureaucrats known as the California Air Resources Board. Under the Massachusetts Clean Air Act (MGL Chapter 111, Section 142K), the Commonwealth must adopt CARB’s motor vehicle emissions standards unless the state determines the
zero-emission vehicles by 2035. Beginning with a minimum requirement of 35% ZEVs and plug-in hybrid vehicles by 2026, the goal-line is increasingly adjusted each year (e.g., 51% by 2028; 68% by 2030; 82% by 2032, etc.) until a touchdown is scored of 100% in slightly over a decade from now. In December 2022, Massachusetts regulators adopted the CARB ZEV rules, after the Legislature re-affirmed the state’s commitment to them in the 2022 Clean Energy Act that Gov. Charlie Baker signed into law in August that year. That law also had a substantial carrot - Massachusetts also altered the vehicle and consumer eligibility standards for the state’s EV rebate program – MOR-EV (Massachusetts Offers Rebates for Electric Vehicles), finally enshrined in law and administered by the Massachusetts Department of Energy Resources, with a minimum rebate of $3,500.
Consumer Subsidies to Buy EVs For better or worse, Massachusetts, in 1991, was one of the first state’s to fully commit itself to all things CARB California standards do not provide better pollution reductions than that imposed by federal laws and rules. Thus far, 17 states have adopted all or part of CARB’s low-emission and zero-emission vehicle regulations, as allowed under Section 177 of the U.S. Clean Air Act, meaning over one-third of national new light-duty vehicle sales presently meet CARB’s auto emissions standards. In November 2022, CARB approved its Advanced Clean Cars II rules that committed to California’s meeting 100% sales of new
One way to support the transition to total ZEV sales is to provide consumers with subsidies to purchase or lease them. At least 15 states offer some form of rebate or tax credit on eligible EVs and PHEVs. Massachusetts has had its program in place since June 2014, although its financial backing had been inconsistent until 2020. Since its inception, MOR-EV has issued almost 42,000 rebates to consumers totaling approximately $106 million. Keep in mind, franchised dealers annually sell and lease on average 300,000 new vehicles of all kinds, with EVs and PHEVs making up a fraction of that total. Massachusetts has just over 105,000 registered EVs on the books as of the end of 2023, almost 2% of the state’s total registrations. During the program’s existence, MOR-EV administrators have altered drivetrain and vehicle pricing requirements in an effort to stress vehicle affordability and prevent higher-priced vehicles www.msada.org
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EVs RESET
from eating up all the rebate monies. Moreover, in the 2022 clean energy law, PHEVs were removed from the eligibility list, and DOER was authorized to create a point-of-sale program to supplement the consumer’s access to the post-sale rebate process on the MOR-EV web portal. “It is clear for decades Massachusetts remains committed to addressing climate and emissions issues from all sources by setting the most stringent standards it deems to be achievable,” said Robert O’Koniewski, executive vice president for the Massachusetts State Automobile Dealers Association. “Thus, it is important for our dealers to have the necessary tools to help their customers in the sales process. We advocated with legislators for a cashOne way to support the on-the-hood process transition to total that our members felt would make it easier ZEV sales is to provide for a buyer to access consumers with the rebate monies subsidies to purchase more quickly at the or lease them. At least dealership rather than 15 states offer some applying on-line postform of rebate or tax sale and waiting for the check to arrive in the credit on eligible EVs mail. Dealers – and, and PHEVs. more importantly, their customers – found this to be an improvement for a better sales experience.” The state’s point-of-sale process kicked in last year, requiring a dealer to register with the state in order to utilize the rebate in the sales process as an immediate reduction of vehicle price. At the same time, the IRS also implemented the federal tax credit program created under the Inflation Reduction Act. It, too, evenMARCH 2024
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tually included a point-of-sale process for consumers to convert the tax credits – up to $7,500 – on the sale or lease of an eligible vehicle under somewhat convoluted battery mineral sourcing and production rules. Beginning this year on January 1, this piece also required dealership registration with the IRS in order to process EV sales. Dealers, as well as buyers, have embraced the point-of-sale process. “The IRS site is easy to use, our customers are happy to get the cash to use toward a purchase, and we have been paid fairly quickly by the IRS,” stated Marcotte. “Also, the consumer is getting a fairly good price cut when one combines the state and federal rebates with the Ford discount. Unfortunately, right now, the eligible vehicle list is not that long. But that will change.” According to the state’s Department of Energy Resources, since point of sale was launched in August 2023, 253 dealers are enrolled in the program. There have been 8,519 rebates issued for new EVs – 6,688 (79%) were through the POS process and 1,831 (21%) were through the post-purchase application process. While the Massachusetts requirements are fairly straightforward based on vehicle propulsion type, cost, and customer-income level, the federal rules lead to a situation of constantly moving pieces that can impact vehicle eligibility status continually and guarantee consumer – and dealership – confusion.
MSADA “If you look at the numbers and where buyers reside, mostly in the higher-income zip codes in metro Boston, we are most likely paying people to buy certain cars they would have probably purchased any way,” O’Koniewski said. “Now that the ardent EV supporters have made purchases, the factories – and state and federal policymakers – are trying to crack the shell of EV skeptics. Thus, these subsidies will remain in place for a while to help develop the market, assist dealers in moving EV metal, and ease the sticker shock buyers presently face.”
State Versus Federal Subsidy Rules The rules for qualifying vehicles, subsidy amounts, and income eligibility vary greatly between the Massachusetts and federal programs, which has caused some consumer confusion when trying to figure out how much they can take off the vehicle price. Federal Tax Credit: All-electric, plug-in hybrid, and fuel cell electric vehicles purchased new in 2023 or after may be eligible for a federal income tax credit of up to $7,500. The availability of the credit will depend on several factors, including the vehicle’s MSRP, its final assembly location, battery component and/or critical minerals sourcing, and a consumer’s modified adjusted gross income. • The vehicle must undergo final assembly in North America. • The credit is based on critical minerals sourcing and/or battery components sourcing requirements. If the vehicle battery complies with both, the tax credit will total $7,500. If it meets one of the two, the credit will total $3,750. A vehicle meeting neither requirement will not be eligible for a credit. • The vehicle manufacturer’s MSRP cannot exceed $80,000 for vans, SUVs, and pickup trucks, nor exceed $55,000 for other vehicles. • A buyer’s modified AGI may not exceed $300,000 for married couples filing jointly, $225,000 for heads of households, or $150,000 for all other filers. • Presently on the IRS website, 36 vehicles qualify for the full $7,500 (23) or partial $3,750 (13) credit. State MOR-EV Rebate: The state program has its own vehicle type and income eligibility standards. • MOR-EV Standard: Rebates of $3,500 are available for new battery electric vehicles and fuel-cell electric vehicles with a Total MSRP of $55,000 or less. Plug-In Hybrid Vehicles purchased after June 30, 2023, are no longer eligible to receive a rebate under the MOR-EV program. • MOR-EV Used: A rebate of $3,500 for the purchase of eligible used light-duty EVs and fuel-cell electric vehicles is available for Massachusetts residents that participate in one of the approved income-qualifying programs OR have a maximum modified AGI of $150,000 for married filing jointly or a surviving spouse, $112,500 for heads of households, or $75,000 for all other filers. Eligible used EVs must have a final purchase price of $40,000 or less. • MOR-EV +: An additional rebate of $1,500 is available to income-qualifying Massachusetts residents participating in one of the approved income-qualifying programs.
Charging Infrastructure Commitments A vital component for a successful transition to ZEVs sales for all economic strata in every region of the state is a reliable and affordable charging infrastructure. Consumers simply will not confidently purchase vehicles they have no idea where and how those vehicles can be charged. The fuel for this piece of the transition is, of course, money. None of this charging infrastructure will be available overnight. But, at a minimum, the politicians have begun to put money where their mouths are with the realization of the ultimate task at hand. As a start, the Healey-Driscoll administration announced in February a $50 million package of initiatives to build out EV charging infrastructure across Massachusetts. The administration will use funds from the American Rescue Plan Act to increase access to charging infrastructure for more residents, electrify the state fleet, improve operation of public charging stations, manage the impact of charging infrastructure on the electric grid, and provide charging solutions for difficult to electrify vehicle types. “State and rideshare vehicles contribute a disproportionate amount of transportation emissions, so by investing in the elec-
Many Massachusetts drivers want to make the switch to electric vehicles, but worry about access to charging. trification of these vehicles, we can have a much more cost-effective impact on emissions,” said Governor Maura Healey. “Our administration is committed to leading by example in addressing climate change, and we are pleased that these funds will also allow Massachusetts to more quickly electrify its fleet.” “Many Massachusetts drivers want to make the switch to electric vehicles, but worry about access to charging,” said Lieutenant Governor Kim Driscoll. “This investment will break down barriers to widespread electric vehicle adoption and help Massachusetts meet its ambitious greenhouse gas emissions targets.” www.msada.org
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EVs RESET According to the administration’s press release, the $50 million in ARPA funds will support innovative EV technology programs at the Massachusetts Clean Energy Center (MassCEC), charging infrastructure investments for the state fleet through Division of Capital Asset Management and Maintenance (DCAMM) and the Department of Energy Resources (DOER), testing equipment and staff at the Division of Standards (DOS) to conduct inspections of public charging stations, and future analysis of EV charging needs by the Electric Vehicle Infrastructure Coordinating Council (EVICC). “This significant investment from the Healey-Driscoll Administration will help make the transition to electric vehicles a more
accessible and affordable opportunity for the Commonwealth’s residents and business owners,” said MassCEC CEO Dr. Emily Reichert. “These ARPA funds will directly impact our work to increase curbside charging stations, expand mobile charging for medium- and heavy-duty vehicles, speed up the electrification of taxi and rideshare fleets, and advance emerging technology that allows EV owners to use their car to power other sources.” Massachusetts and the federal government also have committed funds to address the needs of the heavy-duty trucking community. Dealers cannot wait for the government to build out a charging network, however. As a Ford Certified Elite dealer under the Model e program, Marcotte has installed two level 3 chargers and has six available ports on two level 2 chargers, all available to the public, 24 hours each day. “We are seeing great activity at our charging stations, not only from our own customers but also people coming off the nearby highway,” Marcotte Ford general manager Mike Filomeno said. “The chargers are definitely increasing our presence in the area and getting fresh faces into our dealership. And I think we are quite competitive on our charging price, at least based on what our customers have told us.”
Latest EPA Curveball – New Vehicle GHG Emissions Rule Throwing its own two cents into the mix, the Biden administration felt the need to ramp up emissions restrictions on the manufacturers in what some critics labelled a back-door EV mandate. Regardless of the motivation, it will pose challenges for manufacturers, their dealers, and consumers who may not find the vehicles they want and need.
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Massachusetts Auto Dealer www.msada.org
MSADA 2026 and Beyond – What’s Next? On March 20, the EPA issued its final rule related to greenhouse gas emissions requirements for new vehicles during model Over the next decade, it all will come down to a numbers game, years 2027-2032. These standards will effectively require OEMs as the manufacturers strive to hit the CARB goals and avoid subto substantially increase their production of electric vehicles as a stantial financial penalties. The first hurdle California, and by expercentage of total vehicles sold. tension Massachusetts through CARB, will need to hit is 35% The EPA issued a rule that is not as severe as its initial filing EVs and PHEVs by 2026 – not a considerable period of time off almost a year ago. One may recall that the initial rule received on the horizon. considerable opposition According to a refrom franchised auto cent report from the dealers as well as the Alliance, total EV sales motor vehicle manufacnationally in 2023 repturers individually and resented 9.5% of the collectively through the national market. EV Alliance of Automotive sales in California hit Innovation. 26% of the market – NADA’s president tops in the U.S. – while and CEO Mike Stanton Massachusetts came stated, “The EPA’s final in at eighth place at rule remains too aggres12%. EV registrations sive and far ahead of as a share of all regisconsumer demand. Our tered light-duty vehiexperience working with cles are 1.5%, out of consumers every day 286 million registered makes us highly skeptilight-duty vehicles in cal that consumers will the U.S. At the end of adopt EVs anywhere 2023, California acnear the levels required. counted for 35% of all The charging infrastrucregistered light-duty The EPA’s final rule remains too ture is not ready, the curEVs in the U.S. Caliaggressive and far ahead of rent incentives are not fornia, as a result, had sufficient, and high EV consumer demand. the highest portion of prices will price out miltotal state registered lions of consumers, parEVs of 4.85% (1.5 milticularly low-income Americans, from the new-car market. lion vehicles), while Massachusetts hit the tenth spot with 1.91% “While near-term improvements were made to the proposed (105,169 registrations). greenhouse gas rule due to the efforts of NADA and thousands of “Goals and aspirations are nice, but realism has to come into its dealer members, NADA urges the Administration to track acplay at some point, too,” O’Koniewski said. “At this point, most tual EV sales versus projections and make necessary adjustments of the jigsaw pieces are spread out on the table, but it will take to its requirements to reflect actual consumer demand. time to flip them over, “America’s franchised new car and truck dealers have promotmatch them up, and ed, and will continue to promote, electrification with billions of hope the picture matches dollars in investments in facilities, training and inventory already what’s on the box. Money committed. NADA remains committed to advocating for sound from public and private policy that aligns with consumer demand and the current realities sources can help. Howevof the country’s electric charging infrastructure.” er, money in combination John Bozzella, CEO of the Alliance of Automotive Innovation, with government fiat canreleased a statement stating, “Moderating the pace of EV adoption not force feed a false marin 2027, 2028, 2029, and 2030 was the right call because it priorket onto the buying public. For over one hundred years, dealers itizes more reasonable electrification targets in the next few (very have rather efficiently helped their customers buy vehicles they critical) years of the EV transition. These adjusted EV targets — need and want, regardless of propulsion source. Consumers are still a stretch goal — should give the market and supply chains a smart. A market will mature once the best option before them is a chance to catch up. It buys some time for more public charging ZEV. It will take time, of course. This is one watched pot of water to come online, and the industrial incentives and policies of the that will not boil with a snap of the fingers.” t Inflation Reduction Act to do their thing.” www.msada.org
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NEWS
from Around the Horn
NEW YORK CITY
NY Automotive Forum 2024 Highlights On March 26, automotive industry leaders and representatives from around the country gathered at the 2024 NY Automotive Forum, which is the prelude to the New York International Auto Show each year. Here are several stories (courtesy of NADA) to emerge from the Forum:
Ford Engages Dealers for Front Line Feedback During EV Transition
Ford Motor Company executive Elena Ford has been on the road talking to dealers, and they have been sharing feedback about the brand, including concerns about quality and affordability. “Dealers are the backbone of helping us with quality,” Ford says. “If there’s an issue, they are there for customers. It’s really important that they give us insight.” Ford, the chief dealer engagement officer at Ford Motor Company, came to the 2024 Automotive Forum New York fresh off her first stop on the Ford “engagement tour,” in Dearborn, Michigan. Ford and other executives will make stops also in Atlanta, Dallas, and Los Angeles through May. “We want to hear from dealers about things that they have on their mind,” Ford says. “This is a way to listen to, and engage with, dealers in different markets.” The tour was born from the Ford dealer council, who have been clear with Ford executives about dealers’ pain points, including floorplans and electrification. The manufacturer has made a goal of improving dealer sentiment, in part incentivized by the feedback they receive from the NADA Dealer Attitude Survey. “We can’t move forward without dealers. We need them,” she says. “They are part of the fabric of their community. And we really need to make life more simple for them, which is part of our goal.” Ford is the only full-line automotive manufacturer that offers complimentary pickup and delivery mobile service. This is offered by 65 to 70% of Ford and Lincoln dealers through a fleet of 3,300 mobile service units. And, according to the Net Promoter Score, customers love it. Through the digital revolution of the economy, customers’ needs are changing, and their expectations are higher, Ford says. She works with dealers to ensure that customers are met where they want to be. “If they want to come into the dealership – awesome. If they want the dealer to come to their house – no problem,” Ford says. “It’s really giving them back time.” Ford Motor Company also relies on their dealer network to see how customers are responding to EVs. “We love our EVs. We’re excited about the EV business. We’ll be ready,” Ford says. “We really are in a transition. The most important thing is to offer people choices of what they want to drive.” MARCH 2024
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She says one of the manufacturer’s goals is to make EVs more affordable to help expand the reach of electrification. Simultaneously, infrastructure investment is critical not only to the EV transition but the modernization of the brand. Ford says dealer input on both is invaluable.
GM North America President: “Dealers Are a Competitive Advantage”
General Motors Executive Marissa West values the unique approach that each franchise dealer brings to their business, market, and customers. “I became a hard fast believer that dealers are a competitive advantage,” said West, the newly appointed president of General Motors North America at the 2024 Automotive Forum New York. “I think everything starts with the product, but this is a people business. Customers are coming from all walks of life from all different levels of awareness.” West spent the first 18 years of her GM career in engineering roles but has quickly learned the importance of the retail network in her position as president of GM Canada and now 3 months into her new role leading North America. The dealers are the ones who develop the relationships with customers and take care of them throughout their ownership experience. The development of digital retailing aids dealers in giving the customer the experience that they want, whether that is online, in-person or – more likely – a combination of the two. “I believe that there’s a whole spectrum of customers,” West said. “I believe that there are customers that have the level of comfort to do everything online. And then there’s customers who recognize this is a very significant purchase, and there’s a lot of variables that go into the purchase.” Similarly, customers’ interest for electric vehicles is wide-ranging, and West said that GM is committed to allowing customer demand to dictate inventory volumes. “Our dealers are our partners in that, so we’re listening to their feedback,” she said. “Dealers will routinely tell us that they want what the customers want.” West acknowledged the concern of many in the automotive industry: lacking charging infrastructure. Until consumers don’t have to think about where and how they will charge, infrastructure will affect their purchasing decisions.
Jack Hollis Listens to Toyota Dealers to Understand Customer Needs
Toyota executive Jack Hollis didn’t say I told you so when consumer demand for electric vehicles shifted. However, he did note the changing tunes from other manufacturers on electrification in the last 12 months. “A year ago, all the OEMs were all in on EVs, and it’s interesting to see, a year later, how everyone is talking about bringing back hybrids,” the Executive Vice President of Sales at Toyota Motor North America said.
NEWS from Around the Horn What’s the secret strategy? It is no secret. “It’s not that we are smarter,” Hollis said. “We always use the same strategy. Ask the dealer what the customer wants and give it to them. And the dealers had the same answer last year that they had this year: we want a mixture of options for the customer.” Even though the EPA’s recently announced emissions regulations are more inclusive of hybrids, Hollis said the rule is still moving too quickly and does not take into consideration the evidence in the marketplace. The regulations are not changing Toyota’s long-term plans though. Hollis said that changes in political priorities in Washington, including changes in presidential administrations, do not affect the Toyota and Lexus product lines, which are based on their longterm investment strategy. This strategy comes back to the Toyota and Lexus dealers, which provide Toyota leadership with a wide view of the market. Hollis provided a few examples of the significance the brand places on dealer sentiment and feedback. When asked if Toyota would ever consider an online sales partnership like the one Hyundai has announced with Amazon, Hollis gave a resounding no. He said, “It’s dangerous to get outside the network of the dealers.” With rising concerns around affordability, Toyota has increased its focus around their entry level products, including the Corolla which has seen rising demand. Similarly, they are expanding their certified pre-owned vehicle programs to extend access down market. Hollis provided a counterexample in the startups that have entered the EV market. “Every one of these startups that doesn’t go with a dealer model is putting itself on an even shorter leash that will lead to most of them not surviving.” Long-term success comes from committing to the success of dealers. When they succeed, the brand succeeds. “It feels really good to know that the communication we have with our dealers is accurate,” Hollis said. “If we will continue to listen to our dealers, we’ll have the right answer.”
Road to Electrification Has Potholes
The transition to vehicle electrification and the governing emissions regulations are having a defining impact on the automotive industry, but just as significantly is their impact on consumers. John Bozzella, president and CEO of the Alliance for Automotive Innovation, and Mike Stanton, president and CEO of NADA, spoke on the EPA’s recent emissions rule and consumer demand for EVs at the 2024 Automotive Forum New York. Both associations have been vocal in the administration’s development of the rule and agreed that the initial proposal was “completely unworkable.” Stanton said that the final rule remains unworkable for dealers. “We’re concerned about this. It does not match what we’re seeing in showrooms,” he says. According to J.D. Power’s data, not only is consumer demand in EVs slowing, but consumer interest is also softening. New vehicle shoppers “very likely” to consider an EV has declined in the past five months, while those “very unlikely” to consider an EV has
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increased. “The EV market is growing, but it’s spiky,” Bozzella says, and he expects it to remain thorny as the market transitions from the first adopters (consumers who wanted to be at the cutting edge) to easy adopters (those who already have access to the necessary infrastructure) and finally to the mass market. Stanton referred to this transition from the early adopters to the mass market as a chasm and offered hybrid and plug-in hybrids as an aid to cross it, advocating for more models to enter the market. Stanton and Bozzella agree that the biggest challenge to the industry is charging infrastructure. While the private sector and government are both involved in expanding access, Stanton argued there is a long way to go. “We need to see these charging stations pop up like mushrooms,” he says.
Hyundai’s Muñoz: Auto Shows Are Good for Business
José Muñoz, the president of Hyundai Motor Company, cleared the air at the Automotive Forum New York: he stands by the Hyundai dealer network. After Hyundai announced a partnership last November to sell vehicles through Amazon’s online platform, franchise system advocates have been concerned about the retail strategy of the brand. But Muñoz said that the dealers remain the ones selling the vehicles. The Amazon platform is opt-in. The pilot program is currently active with 20 dealers and Muñoz expects it to expand in the second half of the year. Though this is a cautious expectation. He noted that vehicles are more complex than any existing products sold on the Amazon platform and present unique challenges to the transition. Muñoz still recognizes the significance of consumers interacting with the vehicles in person, evidenced by Hyundai’s strong presence in auto shows across markets. “We like people who like cars,” he said. “People like coming to the shows – seeing the cars, experiencing cars.” Active participation in auto shows is better for the company, Muñoz said. It provides opportunities for consumers to experience and test drive vehicles they may not have previously considered – like electric vehicles. While the Hyundai Motor Company has “double downed” on EVs, Muñoz recognized the need for consumer choice. He said, “We need to be flexible and understand the interest of the public.” Hyundai will continue to offer ICE, hybrid and EV options.
Mercedes-Benz USA CEO: Electrification Is a Marathon, Not a Sprint
Dimitris Psillakis says that the U.S. is the luxury market in the world – “the biggest, the most demanding and still growing.” And he would know; Psillakis worked in Greece, South America, South Korea and Canada before taking over as CEO of Mercedes-Benz USA. Psillakis spoke at the 2024 Automotive Forum New York about how Mercedes-Benz is striving to maximize the business of desire. Last year, one third of their volume sold were top-end vewww.msada.org
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NEWS from Around the Horn hicles. The luxury aspect is part of the DNA of the brand, Psillakis says. And the customers are loyal to it. But Mercedes-Benz strategy extends beyond keeping their existing customers happy. There are 618,000 millennial millionaires, 44% of which live in California, which offers a new generation of potential customers. “We need to bring products which are younger, appealing, fun and exciting to them,” he says. Moving across generations is not the only shift Mercedes-Benz is focused on. The brand has pledged commitment to electrification, but Psillakis says the transition will be slow. “The future is electric, but the course to that is long. It’s a marathon, not a sprint,” he says. “Reaching the flip point between ICE and electric depends on infrastructure, ensuring the vehicle can charge in a short period of time and have longer range. And this will take some time.” Next year’s electric CLA derivatives are projected to be able to fully charge in 15 minutes and achieve a range of 400 miles. By the end of this summer, Mercedes-Benz expects its vehicles to be able to charge in every public charging station in the country. Like all brands, Mercedes-Benz sees regional differences for electric adoption, and they rely on their dealer network to ensure customers can purchase and service the vehicle they desire. “The country is diverse,” he says. “Slowly, slowly we see a certain portion of electric vehicles entering the market. Plus, there’s always the plug-in hybrid, which is the best of both worlds.” The retail network is also an integral part of Mercedes-Benz’ strategy to educate consumers about electric vehicles. For example, dealerships offer EVs as courtesy vehicles, providing an opportunity for customers to “experiment” with the technology. EVs will play a significant role in Mercedes-Benz’s year ahead, which will see over 20 new model rollouts, including an electric version of the iconic G-Class. HAVERHILL & ANDOVER
Billy DeLuca IV Featured in Alum Magazine As Vice President of the DeLuca Family of Dealerships, Billy DeLuca IV leads an organization that sells hundreds of vehicles a year. By any measure he is a master salesman – but don’t ask him about the art of persuasion. In an interview with Austin Prep’s alumni publication, Journey, DeLuca, Class of 2000, shared many of the principles he learned at the college preparatory high school that he translated to success later in life. Asked for a selling secret only an insider would know, DeLuca says, “Be honest. Be helpful. Never boast and never pretend you know something you don’t really know.” It is a concept that can be traced back to Billy’s time as an Austin Prep student and the importance that Augustinians placed on humility, viewed as a central piece of Christian life. “If you want to succeed at sales consistently, you’ve got to MARCH 2024
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change your point of view,” Billy says. “I’m there to solve problems for customers, and there are lots of ways I can do that, lots of ways I can get a win for that person….What’s important is that they feel they were treated right when they leave. Treat clients like family and you will succeed in the long run. It’s as simple as that.” Billy has equally specific advice for students going into their first jobs. “Never take the easy way out. Not many people are willing to work for things anymore and management knows that. Surprise them. And be willing to fail.” He points out that the lessons he learned as a student create a foundation for success. “The same principles apply at school and on the job. Show up on time. Demonstrate your dedication. Do what it takes to get the job done. Focus. If you have any kind of management role, help others; train them; support them; give them a chance to succeed.” According to Billy, passion is vital to success, and he urges students to use their time to explore possibilities and don’t stop until you find something you are passionate about. Finally, if he could tell the leaders at his old school one thing it would be to “keep developing entrepreneurs, creators, and leaders. That’s what the world needs right now.” BOSTON
Annual OEM Awards The recognition continues for annual OEM awards for dealership performance. Congratulations to our award winners. Mercedes-Benz “Best of the Best” Dealer Recognition Award recipient: • Flagship Motorcars, Herb Chambers, Lynnfield BMW’s 2024 Center of Excellence Award for overall customer satisfaction and operational superiority: • BMW of Peabody Honda’s President’s Award for dedication to excellence: • Honda North, Danvers • Nucar Honda of Westford • Parkway Honda, Boston • Rt. 128 Honda, Reading • Silko Honda, Raynham • Tufankjian Honda of Plymouth MCLEAN, VIRGINIA
NADA Academy Graduates in March 2024
The following Massachusetts dealership employees graduated NADA Academy in March this year: • Rodney Dukes, Toyota of Watertown; and • Casey Wagner, Mercedes-Benz of Shrewsbury Congratulations and good luck with your endeavors in our industry t
MSADA 27 A smart alternative to traditional utility programs
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ACCOUNTING Maximizing Profitability: A CPA’s Perspective for Auto Dealerships By Barton Haag CPA, Albin Randall & Bennett
bhaag@arbcpa.com In the dynamic landscape of the auto dealership industry, staying ahead financially requires a keen understanding of emerging opportunities and potential pitfalls. As Certified Public Accountants (CPA) specializing in the automotive industry, we are here to provide invaluable insights and strategies to help your dealership thrive. In this article, I will delve into essential financial considerations for auto dealerships, including sales and gross profit margin, expense management, tax planning, renewable energy initiatives, and regulatory updates.
Regulatory Updates Stay informed about changes to tax laws and regulations that may affect your dealership’s operations. For example, be aware of the Massachusetts millionaires’ tax, which may impact high-income earners in the state. Understand the implications of filing statuses for both federal and state tax returns, as changes in filing requirements can affect your tax liability. For example, those with a status of married filing separately in 2023 can have a big impact on the millionaire’s tax. This is a one-year deal, however, since the loophole is closed for 2024.
Sales and Gross Profit Margins are Declining Maintaining healthy sales and gross profit per retail unit figures is crucial for sustaining profitability. Continuously analyze your sales data to identify trends MARCH 2024
and areas for improvement. Most of our clients are experiencing a decline in sales and gross profit per retail unit sold. Implementing effective sales strategies, such as targeted marketing campaigns and personalized customer experiences, can help drive sales while ensuring healthy gross margins. If you believe your processes are already spot-on for front-end sales, focus on other areas of the dealership that can have a more immediate impact on your bottom-line. How are your backend sales? Are your F&I sales per retail unit sufficient? Is your team effectively managing your days’ supply of inventory? Compare your business today to pre-pandemic levels. Are there deficiencies?
Expense Management As expenses start to climb, it is essential to proactively manage costs to maintain profitability. If you have not already, conduct a thorough review of your dealership’s expenses and identify opportunities for savings. Implement cost-cutting measures where appropriate, such as renegotiating vendor contracts or investing in energy-efficient technologies to reduce utility expenses. The big three expenses – personnel, interest, and advertising – are often where there is “low hanging fruit.” Analyze those carefully looking for opportunities to improve inventory mix and levels, advertising spend per retail unit sold and personnel costs that have potentially ballooned over the past couple of years.
Tax Planning Strategic tax planning can significantly impact your dealership’s bottom line. If you are not already, engage with your CPA. Consider your long-term plans and organizational structure. Take advantage of tax-saving opportunities, such as the Section 179D deduction for energy-efficient improvements to commercial buildings, cost segregation studies, or other tax saving opportunities.
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Renewable Energy Initiatives Investing in renewable energy initiatives, such as solar installations and electric vehicle charging stations, can offer long-term financial benefits while reducing your dealership’s environmental impact. In addition to potential tax incentives, buying renewable energy credits to offset your dealership’s carbon footprint can further demonstrate your commitment to sustainability and attract environmentally conscious customers. Remember though, if you invest $80,000 in energy credits and you get a $100,000 benefit, you will have a capital gain of $20,000.
Increase in IRS Audits With the IRS increasing scrutiny on tax compliance, it is more important than ever for auto dealerships to maintain accurate and thorough financial records. Be proactive in addressing any potential audit risks by implementing robust internal controls and conducting regular self-audits of your financial processes. Work closely with your CPA to ensure compliance with tax laws and regulations and minimize the risk of audit exposure. The good news is that the IRS is way behind in their goal to hire more auditors. The bad news is that despite that, many dealers are large taxpayers in their markets and are getting selected for audit. Navigating the financial landscape of the auto dealership industry requires a strategic approach and a thorough understanding of key financial considerations. By focusing on sales and gross profit margins, managing expenses, optimizing tax planning strategies, embracing renewable energy initiatives, and staying abreast of regulatory updates, you can position your dealership for sustained success and profitability. Consult with your CPA regularly to develop a comprehensive financial plan that aligns with your dealership’s goals and priorities. t
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A Closer Look at Your 401k Plan By Kimberly Reed CPA, Partner at Withum
Now that the ink has dried on your corporate tax return, it is time to consider your next important tax filing. If you sponsor a 401(k) plan with a December year-end, it is important to remember that your Form 5500 and audited financial statements, if required, are due July 31 with the option to file an extension, allowing an additional 2 ½ months to file. Recently, the requirement that determines when audited financial statements are required changed. The Department of Labor made changes in the method of counting participants to determine the 100-participant audit requirement threshold. Plans with less than 100 participants do not have to be audited by an independent qualified public accountant. Prior to the change, all eligible employees, even those who chose not to participate in the plan, were included in the count, while now only participants and beneficiaries who had account balances at the beginning of the year were included. The DOL expects this change to reduce the number of audits by 20,000 annually. Maybe you recently learned that you no longer need an audit, have never needed an audit, or are counting on others in your dealership to “handle” the audit and the plan. No matter what category you fall into, it is important to remember that, if you are a fiduciary of the plan, it is still your responsibility to ensure that the plan is operating in compliance with all rules and regulations. Fiduciaries are acting on behalf of participants and beneficiaries and according to
the DOL, their responsibilities include: • Acting solely in the interest of plan participants and their beneficiaries and with the exclusive purpose of providing benefits to them; • Carrying out their duties prudently; • Following the plan documents; • Diversifying plan investments; and • Paying only reasonable plan expenses. Further, here are several items to stay on top of to ensure that you are keeping up with your responsibilities: • Does your plan have adequate fidelity bond coverage? Each plan official must be bonded in an amount equal to at least 10% of the amount of funds handled in the preceding year. The bond amount cannot, however, be less than $1,000, and the DOL cannot require a plan official to be bonded for more than $500,000 ($1,000,000 for plans that hold employer securities).
Your 401K plan involves constant monitoring, reviewing, and updating. • Are you remitting employee contributions timely? It is required that participant contributions be deposited in the plan as soon as it is reasonably possible to segregate them from the company’s assets, but no later than the 15th business day of the month following the payday. If employers can reasonably make the deposits sooner, they need to do so. For plans with fewer than 100 participants, contributions deposited with the plan no later than the 7th business day following withholding by the employer will be considered contributed in compliance with the law. • Are you protecting your employees’ assets and data? Your retirement plan includes a massive amount of data about your participants. Are you protecting this data and ensuring information is bewww.msada.org
ing safeguarded? In April 2021, the DOL released guidance on cybersecurity best practices, including maintaining security frameworks, reducing cyber risks, and protecting retirement benefits. Are you following these best practices? • Have you hired qualified service providers? Many plan sponsors think that since they have hired a well-known service provider, they have no additional responsibilities to the plan. However, that is not the case. Documenting your due diligence when selecting or changing service providers is essential. It is also important to monitor the service provider regularly. Are you aware of their cybersecurity policy? Are you reading their reports and reviewing their SOC 1? What is their fee structure, and who is paying the fees? How often do you meet with advisors to review the plan and its investments? • Is your plan following the terms of the plan document? First, have you adopted amendments for all recent tax law changes? Have you restated your plan documents in accordance with the restatement cycle? It is imperative to have current signed documents for your plan. Next, are you following all provisions of the plan? A common area where errors occur is in the definition of plan compensation. It is not uncommon to assume compensation used to base contributions on is correct only to dig into the documents and find that group term life insurance or demos are not being treated correctly. Also, new pay codes can get added and incorrectly set up in payroll. Are you sure bonuses and overtime are included in compensation? Who is monitoring this? Errors in compensation can be a costly fix for the plan sponsor. Your 401(k) plan should not be a “set it and forget it” thing that you cross off your one-time “to-do” list. These plans involve constant monitoring, reviewing, and updating. Your employees are counting on you to protect their valuable assets! t Massachusetts Auto Dealer
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DEALER OPS What’s Hiding in Your Merchant Statements? By Don Giordano Business Development, Merchant Advocate
If you have that sinking feeling that you are paying more for merchant services than you should be, you are not alone. More than 72% of businesses are being overcharged. And if you are familiar with the statements provided by processors, you might have a guess as to how they are getting away with this unfair practice. Hundreds of different card types, mysterious coding, inconsistent fees – statements are intentionally written in a language that only an expert can understand. And while this makes them nearly impossible to decipher on your own (let alone find the fees hiding within their pages), we will discuss some key terms and information to look for. Let’s dive in!
Navigating Your Statements
Every processor configures statements differently (further adding to confusion), but your business name and merchant ID number(s)—also known as MIDs—should be at the top. (See Fugure 1.) Also front and center is the summa-
ry, which provides a quick overview of the past 30 days’ activity and can include chargebacks (when a customer requests a refund directly from the credit card company) and reversals (the amount that was initially resolved against the merchant but was ultimately found in favor), adjustments, and fees charged. (See Figure 2.) The next section you will likely encounter is the pages-long “Deposit Details,” which breaks down each batch transaction, line-by-line for the previous 30 days. (See Figure 3.) But as seen in this example, multiple batches were created each day, which as noted here, can number in the hundreds and can take up huge swaths of paper. After that, we come to the “Processing Detail Qualified” section, sometimes referred to as “Fees.” (See Figure 4.) This section contains the most confusing jargon as it unfurls, denoting interchange fees (these go to card-issuing banks), assessments, the merchant’s pricing model, and all other various fees, each broken down by card type, ending with the fees’ grand total. Below is an example of what this looks like; this section takes up almost four pages alone on this resort’s statement and contains multitudes of confusing codes. Finally, there is typically a section called something like “Important Information About Your Account.” As implied, this section is essential and should not be overlooked since it contains news regarding
What Happens Next?
But what do you do if you see an increase? Or if you, understandably, do not have the time to pour over pages of statements monthly, let alone keep up with the multitude of changes and new fees assessed by processors looking to drive up their profits? That is where the auditing experts at Merchant Advocate come in. Not only do our trained analysts make an initial meticulous review of your statements to identify overcharges, inflated rates, and hidden fees, they keep checking your statements month after month to ensure there are no surprises. By not reviewing your statements each month, and not challenging your merchant services providers when fees and charges seem exorbitant and unnecessary, your dealership could be ceding money unnecessarily to your providers. t Merchant Advocate, an MSADA-endorsed vendor, has saved clients more than $300 million in excess fees, without switching processors. Contact Don Giordano at dgiordano@merchantadvocate.com to receive a free analysis of your merchant account with just one, no-commitment phone call.
FIGURE 1
FIGURE 2
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rate fluctuations and new policies that your processing company may be implementing – aka new ways to charge you more money. Appallingly, your original processing agreement included language allowing processors to raise rates and add new fees for any reason, at any time. The only way to combat these increased costs is to go head-to-head with your processor, which can take significant time, resources, and an understanding of merchant statements that most businesses do not possess.
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FIGURE 4
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The Five Cs of Attractive Leadership By Tim Marbut Ethos Group
Of all the leaders you have encountered, who has been the best? Now, who was the worst? Which one was easier to remember? There are a plethora of bad managers and leaders, but very few great ones. Often when the topic of Leadership arises, we discuss aspects like vision, mission, values, and accountability. All these topics are important and essential to the discussion, as they form the backbone of effective leadership. However, the more important topic of discussion might be: Why do people follow someone’s ideas on vision,
Charisma Charisma is the first and glaring component to attractive leadership. Great leaders have that certain awe, presence, or confidence that stands out. They do not have to announce their entrance or position. People are drawn to them and feel confident in their ability to do what they say they can do. They are exciting, confident, enthusiastic, focused, and motivated to succeed. Their ability to connect everyone around them to a greater purpose beyond individual interests is one of their most significant attributes.
Competence Being competent within your field of endeavor is a major point of separation in a great leader. J.C. Penny once said, “A man should know their business better than anyone else.” A competent leader knows how to ask and answer the right questions. They can anticipate challenges
Great leaders have that certain awe, presence, or confidence that stands out. mission, values, and accountability? What qualities make a person worth following? Over the past thirty plus years, I have been a student of human behavior. I am intrigued with things like why certain people excel and why others do not; why certain people lead and why certain people always follow; why we follow certain leaders and not others; and why some leaders have good intentions but fail. There must be some answers to these questions. So, what is it that makes a leader followable or attractive? Five essential components define attractive leaders - those exceptional individuals whom people are naturally inclined to believe in or follow, particularly concerning vision, mission, values, and accountability. I call these The Five Cs of Attractive Leadership: Charisma, Competence, Character, Communication, and Compassion. MARCH 2024
in their business and take preemptive measures to prevent them. Competent leaders understand their team members and know how to bring the best out of them.
Character A person’s character is easily demonstrated by how they treat people they do not necessarily rely on or need. Character is one’s core belief system revealed. An attractive leader is one you want to follow because of their influence and moral compass. Character alone can either solidify attractiveness or ruin attractiveness. In an attractive leader, there exists a seamless alignment between their words and actions.
Communicator
One of the most compelling traits of great communicators is their incredible ability to listen first. An attractive leader
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who is also a great communicator listens for more than just a message, problem, or communication point. They listen to messages that are not spoken. They recognize, understand, and communicate to one’s unique personality trait. They easily explain expectations and desired behaviors in a way that is understood and respected.
Compassion Great leaders care. The question arises: Why would individuals choose to follow someone who lacks genuine care for their well-being and their success? The answer might be found in the concept of fear. There are three primary ways to motivate: fear, incentive, and purpose. However, great leaders motivate through purpose, recognizing its enduring impact. Purpose-driven motivation is the most long-lasting motivator because it focuses on the individual, their ideas, desires, and contributions to the company or cause.
Are you a leader worth following? Great leadership is rare because it revolves around prioritizing the needs, development, and success of others over personal gain or recognition. It requires a clear vision, a compelling mission, unwavering adherence to values, and a steadfast commitment to accountability. It is important to consider how we lead and how it affects others. Do we inspire trust and help others grow, or do we struggle to give direction and support? Do we exhibit the Five Cs of Attractive Leadership? We all have a list of the best and worst leaders we have encountered. To what list do you belong? t For more information on how Ethos Group can help your dealership develop more leaders in your F&I office, sales management tower, and your sale’s floor in 2024, please contact Drew Spring at dspring@ethosgroup.com or (617) 6949761.
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LEGAL
Recent EPA, DOE Rules May Have Positive Impact on Auto Dealers By Tom Vangel, Esq. & James Radke, Esq. Partners at Murtha Cullina LLP, (617) 457-4072
In a recent win for U.S. automakers, the Department of Energy announced, on March 19, its final rule concerning the Petroleum Equivalent Fuel Calculation. This final rule relaxes the DOE’s initial 2023 proposal, which required automakers to reduce electric vehicles’ mileage ratings by 72% in 2027. Instead of the strict timeline under the original proposal, the revised rule allows automakers to meet overall Corporate Average Fuel Economy (CAFE) requirements while still building more gas-powered vehicles through 2030. Under its initial 2023 proposal, automakers were expected to have EVs constitute 60% of their new vehicle production by 2030 and 67% by 2032. The DOE solicited comments on the proposed rule, and OEMs responded that, given the time constraints, they would be forced to pay billions of dollars in fines for failing to meet this standard, while actively incurring increased costs to build new EVs to become compliant. Auto dealers were also some of the more vocal opponents of the proposed rule. They argued that more time is needed to meet these standards because many consumers find that EV technology is still too costly. The DOE took these comments into account. Under the newly released final rule, automakers will get more fuel-economy credit for the EVs they currently sell than initially proposed. In addition, this rule will allow manufacturers to avoid substantial fines and gradually reduce their petroleum-equivalent fuel economy by slowly MARCH 2024
phasing these requirements in through 2030 rather than being forced to comply by 2027. Also, under the final rule, the petroleum equivalent EV fuel economy rating will be reduced by a total of 65% rather than the initially proposed 72%. In a similar move, the Environmental Protection Agency issued a rule on tailpipe-emissions standards on March 20. The finalized rule eases auto emissions standards and allows a slower transition than originally proposed. The original proposed rule, announced by the EPA in the Spring of 2023, established new, more stringent vehicle emissions standards for motor vehicles for model years 2027 through 2032. Under the original proposed rule, manufacturers were required to steadily cut emissions each year and aim for EVs to constitute 60% of their new vehicle production by 2030 and 67% by 2032. Members of the auto industry provided feedback to the EPA regarding this proposed rule and requested more time to meet these stringent standards. In taking these concerns into account, the amended final EPA rule also applies to model years 2027 through 2032 and caps tailpipe emissions of carbon dioxide at 85 grams per mile in 2032. The biggest changes from the proposed rule to the finalized rule come within the first three years. Unlike the proposed rule, the EPA’s new standard is set to slow implementation initially from 2027 through 2029 and then ramp up in later years to require manufacturers to reach the prior EPA recommended level from 2030 to 2032. The EPA has stated that the auto industry could meet the required limits under this rule if 56% of new vehicles are electric by 2032, while allowing at least 13% other partially electric cars or plug-in hybrids in addition to more efficient gasoline-powered cars. Like the changes to the DOE’s rule regarding the Petroleum Equivalent Fuel Calculation, the EPA changes are in direct response to strong industry opposition to the
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accelerated timeline and the public’s reluctance to embrace EVs. Further, the EPA recognizes that sales of zero-tailpipe emissions electric vehicles have begun to slow, and, given that increased sales of these vehicles are needed to meet the EPA standards, compliance with the proposed rule would prove nearly impossible. Both of these finalized rules reflect the Biden administration’s recognition that consumers are not transitioning as quickly to EVs as they may have hoped. This is likely due to quality issues that have been associated with EVs, high prices, limited charging infrastructure, and concerns about grid reliability. In its amended rule, the DOE noted that compliance with the initial proposed rule may have been difficult because the necessary support required for EVs and the required charging infrastructure are still in the early stages of being developed. The DOE also recognized that, although EV market penetration has dramatically increased, EVs still only make up approximately ten percent of new passenger car and light truck sales. Due to this, the DOE acknowledged that even though incentives are currently already driving massive investments into EVs, it will take years for these investments to fully translate into production and sales. Of course, we have yet to see the full impact that these final rules will have on Massachusetts dealers, as the rules were just finalized and released. It is likely that they could benefit dealers as a whole across the country, as manufacturers have finally obtained some much-needed breathing room, which hopefully should result in less pressure on dealers to order and sell EVs. t Tom Vangel and Jamie Radke are partners with the law firm of Murtha Cullina LLP in Boston who specialize in automotive law. They can be reached at (617) 4574072.
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MSADA
Dept. of Labor Poised to Make More Dealership Employees Eligible for OT By Jeff Fritz, Esq., and Joshua Nadreau, Esq., Fisher Phillips LLP
More of your employees may be eligible for overtime pay under a new rule likely to be finalized in April. As proposed in August 2023, the federal Department of Labor intends to significantly raise the exempt salary threshold for the so-called “white-collar” exemptions from about $35K to about $55K – meaning your workers will need to earn at least the new threshold to even be considered exempt from OT pay. The White House budget office recently announced that it is reviewing the rule, which is the final step before it is shared with the public. Although the final rule will likely face legal challenges, you cannot bank on a court halting its implementation. Moreover, the higher exempt salary threshold is expected to impact 3.6 million workers, which means you should start planning now. Here is an eight-step action plan to help your dealership prepare as the rule is finalized. 1. Review Pay Practices and Prepare for Compliance Under the federal Fair Labor Standards Act, employees, unless they fall under an exemption, generally must be paid an overtime premium of 1.5 times their regular rate of pay for all hours worked beyond 40 in a workweek. One requirement to qualify for the most common exemptions is earning a weekly salary above a certain level. Currently, the salary threshold for exempt employees is $684 a week ($35,568 annualized) for the administrative, executive, and professional exemptions, collectively known as the “white-collar” exemptions. The DOL’s proposal, if finalized in its current form, would raise the rate to $1,059 a week ($55,068 annualized) or higher depending on cost-of-living adjustments. The proposed rule also would automatically update the salary threshold every three years, which means you would have to adjust your budget accordingly. These
are big changes that will require some planning if you have exempt employees under the white-collar exemptions who earn less than the proposed amount. 2. Work Through Your Decision Tree Start by creating a list of your exempt employees who currently earn between $35,568 and $55,068 a year. You will have to decide whether to raise their salary to meet the new threshold or convert them to non-exempt status. If you decide to convert them, there are many considerations to take into account: • how much you will increase pay for affected employees; • how you will calculate the “regular rate”; • how you will handle incentives and bonuses; • how you will track working hours; and • how benefits will be affected. Additionally, you may want to start tracking their actual hours worked now to help you understand the potential impact of converting to non-exempt status as those individuals will need to be paid overtime. 3. Consider the Impact on Employee Morale Reclassifying employees to non-exempt could have a negative impact on morale. Many employees associate prestige with being classified as an exempt-salaried employee, they like the flexibility that comes with being salaried, and they do not want to track and record their hours worked. Therefore, employees may view a switch to non-exempt status as a demotion. 4. Plan to Provide Advance Notice of Changes In addition to developing communications focused on employee relations and morale, you will want to provide a written communication to each employee about the specific changes to their compensation and what new responsibilities come with the changes, such as timekeeping and record keeping. www.msada.org
5. Review Your Policies on Company Equipment and Personal Devices Do you have different policies for exempt and non-exempt employees when it comes to issuing company equipment and using personal devices? Exempt employees may have more leeway to use company laptops or their own personal devices, such as smartphones, to conduct business while traveling or outside of their regular office hours. You will have to determine how to address these policies moving forward. 6. Develop a Training Plan for Managers and Newly Non-Exempt Employees We highly recommend that you provide detailed training to newly reclassified employees and their managers prior to the changes taking effect. There is much to learn. The specifics may vary from business to business, but you will want to cover scheduled hours, OT approval policies, timekeeping procedures, rules about meal and rest breaks, and more. 7. Ensure Exempt Employees Meet the Duties Test Besides the salary test, exempt employees also need to satisfy certain duties requirements. Neither their job title nor job description alone determines whether an employee qualifies for a white-collar (or any other) exemption. This is a good opportunity to ensure they meet these standards as well. 8. Review Applicable State Laws Overtime compliance continues to be a highly litigated issue for Massachusetts dealerships. As a reminder, dealerships must comply with both state and federal law. Fortunately, with respect to the “white collar” exemptions, Massachusetts law and federal law are substantially similar. However, the Massachusetts legislature continues to propose legislation that could increase the salary threshold levels even higher than federal law. t Massachusetts Auto Dealer
MARCH 2024
FEBRUARY 2024
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Patrick Manzi
NADA Senior Economist
New light-vehicle sales for February 2024 exceeded expectations. February 2024’s SAAR totaled 15.8 million units, up 6.3% from February 2023 and up 6% from January 2024, which had seen a 10-month low. More vehicles on dealer lots coupled with higher OEM incentives helped drive the sales increase. According to J.D. Power, average incentive spending per unit is expected to total $2,565 in February, an increase of 75.3% year over year and the highest level since May 2021. One of the drivers of increased incentive spending, says J.D. Power, is more OEM incentives for leasing. In February 2024, leasing will likely account for 23.2% of retail sales. Despite higher incentives and a lower average transaction price of $44,045 in February, which was down $1,919 year over year, the average monthly payment on a new-vehicle finance contract should remain flat year over year at $722, says J.D. Power.
MARCH 2024
Massachusetts Auto Dealer www.msada.org
The crossover segment continues to grow and remains the largest new-vehicle segment in the industry. Through February 2024, crossovers made up 49.9% of all new vehicles sold, up 3.2 percentage points in market share from the same period last year. Alternative-fuel vehicles represented 18% of all new vehicles sold through February 2024, an increase of 3.6 percentage points in market share compared with the same period in 2023. Hybrids have seen the largest market share jump so far this year, rising 2.7 percentage points year over year to 8.5%. For the rest of the year, we expect to see inventory continue to increase gradually and OEM incentive spending to follow suit. The industry will continue to stabilize throughout 2024. Our annual forecast for new light-vehicle sales is 15.9 million units. t
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AIADA Brief
MSADA MSADA
A Presidential Rematch Looms By Cody Lusk President & CEO, American International Auto Dealers Association
With a presidential election just months away and campaigns ramping up both their fundraising and outreach efforts, dealers of all brands and in all regions of the country are wise to keep a close eye on the political winds of change. On March 12, former President Donald Trump clinched the Republican party’s nomination after winning the Washington State primary by a comfortable margin. President Joe Biden secured the Democrat party’s nomination on the same day with a victory in Georgia’s primary. Now that a 2020 rematch is all but assured, dealers must weigh how their businesses will be impacted by election results and how they can work to impact policy at both the local and national level. One of the most straightforward opportunities for exerting influence, outside of voting and donating to candidates you support, is participating in AIADA’s Dealer Visit program. Once you reach out to us, AIADA’s experienced staff will take the reins, coordinating all communication with your lawmaker’s office while ensuring that the visit runs smoothly. Go to www.AIADA.org/visit and learn more about our program that brings legislators to dealerships so they can see your facilities firsthand, connect with your employees, and develop a better understanding of the enormous investment international name brand dealers, like you, are making in their districts. Now is the perfect time to engage with your elected officials at home, as election coverage is sucking the oxygen out of Washington, D.C. In the coming months, we can expect any legislative action on MARCH 2024
Capitol Hill to slow considerably, which is pretty remarkable, considering that the House of Representatives passed just 27 pieces of legislation into law in 2023, the lowest number in nearly 100 years. In contrast, and to get a better sense of the unprecedented partisan gridlock we currently face, consider that during President Obama’s second term the 113th and 114th Congresses passed 196 and 329 bills, respectively. The 115th and 116th Congresses, which took place during President Trump’s administration, passed 442 and 344 bills. Most recently, the 117th Congress, passed 362 bills during the first two years of President Biden’s term. Democrats and Republicans clearly do not agree on much in D.C. (apart from a shared disdain for TikTok), but AIADA’s members now see clearly that both parties do align in their opposition to international trade. In an effort to appeal to the frustrated anti-trade, populist voter, both parties are in a race to secure the MOST protectionist agenda. Over the coming months, we can expect that, instead of seeing a reasoned debate over the pros and cons of global trade, we will instead be subjected to an all-out race to see which candidate can recklessly commit to the most outlandish and economically damaging tariffs. There will, of course, be no discussion of what those tariffs might cost the American public.
Massachusetts Auto Dealer www.msada.org
Whatever 2024 holds for the auto industry, we at AIADA fully expect to hear plenty of speeches disparaging the international nameplate brands and stores we represent. What won’t you hear? You likely will not hear about the 549,000 Americans who go to work each day at international nameplate auto dealerships, or the 580,000 jobs they indirectly support. You will not hear about the 9,416 international dealership franchises that have a $50 billion national payroll and are responsible for a 56 percent share of the U.S. retail vehicle market. You absolutely will not hear any presidential candidate acknowledge the $107 billion international brand auto manufacturers have invested in the United States, the $34.8 billion that’ve paid in federal taxes, or the 695,000 U.S.built vehicles they exported worldwide in 2022. Our candidates might not like to acknowledge these facts, but they sure will hear about them from us. Dealers cannot afford to stay quiet this election year. Your voice is needed more than ever to support and preserve the industry you love. As we move forward together on this mission, I encourage you to use AIADA’s resources and experience to augment your own efforts. Together, we can ensure that our corner of the industry gets a fair shake on election day and beyond. t
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SIGN UP TODAY www.msada.org
Massachusetts Auto Dealer
DECEMBER 2023
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TRUCK CORNER
Tackling 2024 Priorities By Scott Pearson Chairman, American Truck Dealers ATD Chairman S cott Pearson is owner and president of P eterbilt of A tlanta .
At the ATD Show in Las Vegas, I promised you my enthusiasm and dedication as your 2024 ATD Chairman. Our industry is facing historical challenges and threats, but the energy I witnessed in Las Vegas proved to me that we are ready to take them on. I have identified the key priorities for the year: • Push back on federal electric truck mandates and educate key decision-makers at the EPA and on Capitol Hill. • Educate truck dealers on how the CARB mandates are unfolding and their impact on the truck market and their customers. • Increase truck dealer outreach to build relationships and solidify member value. • Continue to grow membership and promote the ATD NextGen program. EV Mandates. The announcement of the Phase 3 GHG Rule will have a historic impact on truck dealerships nationwide. Unfortunately, California dealers are already experiencing unprecedented barriers to their business. These regulations are here, and we must address them head-on. Truck dealers are making a sig-
ATD is ensuring that truck dealer concerns are heard on this front. It is imperative for dealers to stay educated and engaged on this critical issue. Dig deeper by checking out our available resources at www.nada.org/ atd/ including a summary of ATD activity of the EPA mandates, a summary of the CARB rules, and a summary of the EPA’s greenhouse gas (GHG) rule and the hurdles to EV adoption. Membership and ATD NextGen. Growing our membership is important to maintaining a healthy and active organization. That means focusing outreach on both big and small dealer groups. We cannot avoid the reality of consolidation, and we need to adapt by getting each rooftop and general manager involved. The value of ATD membership requires input from both sides. The ATD board and leadership have committed to consistent contact and communication through dealership visits and calls, educational opportunities and events. To advance these relationships, members should remain engaged in the asso-
Dealers, however, cannot force their customers to buy trucks that do not meet their needs, and ZEVs are not there yet for most commercial applications. nificant investment to sell and service EVs to the tune of nearly $1 billion. Selling and servicing commercial vehicles is our job, and we will continue to do it. Dealers, however, cannot force their customers to buy trucks that do not meet their needs, and ZEVs are not there yet for most commercial applications. Commercial buyers have shown us that they are not ready to purchase ZEVs for a multitude of reasons, including insufficient charging infrastructure, inefficiency of the vehicles caused by immense weight, prolonged time required to charge, lack of sufficient range, and affordability. ATD is constantly working to share this perspective with the EPA in an effort to impact the rule. We have filed official comments, testified before the EPA in person, taken EPA decision-makers on in-depth dealership tours, and continue to meet with both the EPA and White House regularly to convey the voice of commercial truck dealers and their customers. MARCH 2024
Massachusetts Auto Dealer www.msada.org
ciation. Don’t know where to get started? Consider these two significant opportunities: • 2024 ATD Legislative Fly-In (June 25-26 in Washington, D.C.): Come and visit your elected representatives and share the message of your dealership, employees and customers. It is a critical time to talk to your decision-makers about the environmental regulations facing our industry and the impact. • ATD NextGen Program: Enroll your dealership leaders into the NextGen program to start engaging with industry peers and national issues. This includes anyone in the dealership on the leadership track, not just successors. ATD NextGen offers networking, webinars, and educational opportunities. Please try to find at least three people at each of your locations to enroll in NextGen (it is free). To sign up, go to www.nada.org/atd/legislative-affairs/ grassroots-advocacy/atd-nextgen.
MSADA 43 I have my work cut out for me as your Chairman. I look forward to your voices, passions, and input as we advocate for the nation’s commercial truck dealers.
CFC Releases Study on Cost to Electrify Commercial Fleet This month the Clean Freight Coalition (CFC), which includes ATD as a founding member, released a study from the global consulting firm Roland Berger finding that full electrification of the U.S. commercial truck fleet would require nearly $1 trillion in infrastructure investment. The study reveals a massive investment gap in commercial charging infrastructure as state and federal EV mandates continue to ramp up. The question of who will pay for this massive investment remains completely unanswered. More key findings include: • Preparing today’s commercial vehicle fleet for electrification would cost upwards of $620 billion in utility and infrastructure costs alone, including specialized chargers, electric service, and facility upgrades. • Utility companies and government will need to invest $370 billion to upgrade their networks and the power grid to meet the demands of just commercial vehicles. • This nearly $1 trillion expenditure does not account for the cost of new battery-electric trucks, which according to market research can be two to three times more expensive than their diesel-powered equivalents. • Policymakers will need to address these cost concerns and technological hurdles to make an electrified supply chain function smoothly for the American economy. • Current economic and operational constraints make electrification unrealistic for the heavy-duty segment. Improvements in battery range and charging infrastructure would forge a path for the electrification of medium-duty trucks. The report can be found at www.nada.org.
ATD Webinar: Overview of EPA and CARB Electric Vehicle Mandates On March 5, ATD conducted a webinar covering electric vehicle mandates imposed by the federal Environmental Protection Agency and the California Air Resources Board. Access to the webinar recording and slide deck, entitled Overview of EPA and CARB Electric Vehicle Mandates, is available to ATD Members at www.nada.org. If you need assistance accessing your member content, contact ATD customer service (Monday-Friday: 8:30am4:45pm) at (800) 557-623.
2024 ATD Legislative Fly-In, June 25-26 The 2024 ATD Fly-In is an invitation-only event that provides truck dealers and Automotive Trade Association Executives (ATAEs) an opportunity to lobby Congress on issues of importance to medium- and heavy-duty truck dealers. Registration is now open at https://www.nada.org/atd-fly-in. The registration
deadline is May 29. This year’s event will be held at The St. Regis Hotel, one block from the White House. ATD will make hotel reservations for each guest. Upon check-in, guests will be required to provide credit card information for room charges and any incidentals. Dealer visits with legislators on Capitol Hill are the key component of the Fly-In. ATD Legislative Affairs will set up your legislative meetings unless you prefer to schedule your own. This year’s legislative priorities include: • The EPA’s aggressive “Phase 3” greenhouse gas rule for heavy-duty vehicles; • Repeal the federal excise tax on heavy-duty trucks (H.R. 1440/S.694); • Opposition to the vehicle “right to repair” legislation (H.R.906); • Support for catalytic converter anti-theft legislation (H.R. 621/S.154).
Upcoming ATD Webinars Thursday, April 11, 1-2pm ET: The Cost of Electrifying the Supply Chain: Roland Berger Study Results. Join ATD and consulting firm Roland Berger as we share their findings pertaining to the Clean Freight Coalition’s new study on costs and challenges to the electrification of the commercial supply chain. We’ll focus on the country’s infrastructure costs and grid challenges as it advances commercial fleet electrification stemming from new federal and state EV mandates. We will delve into the challenges with range and charging for specific duty cycles. Thursday, April 25, 1-2pm ET: ATD NextGen: CARB Regulations Too Far Too Fast. Join Laura Perrotta, President of ATD, and Kim Mesfin, President of Affinity Truck Center and ATD’s Volvo Line Representative, for the next ATD NextGen webinar series as they provide an overview of the California Air Resource Board’s (CARB’s) three new truck rules that went into effect on January 1, 2024. These new rules create mandates that will significantly impact truck dealerships and fleets in California and the national truck market. Members can register at www.nada.org/atd.
ATD Releases Performance Measurement 2024 ATD Performance Measurement 2024 provides medium- and heavy-duty truck dealers with relative comparative performance guides, including overall dealership performance and departmental information for sales, service, parts, and body shop. The report, based on 2023 data, covers a variety of challenges faced by commercial truck dealers in the economic, social, and political environments, including sixty Critical Operating Variables (COVs), based on data from ATD 20 Group members and Academy students, for calendar years 2021 through 2023. The COVs are proven financial result measures of economic performance for a medium- or heavy-duty commercial truck dealership. The report is available at www.nada.org/atd. www.msada.org
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MARCH 2024
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FEBRUARY 2024
Massachusetts Auto Dealer www.msada.org
NADA Update
MSADA
Regulatory Fights Continue Scott Dube, Partner at McGovern Hyundai Rt. 93, represents NADA’s Massachusetts members on the NADA Board of Directors. He can be reached at sdube@ mcgovernauto.com. After a successful NADA Show in Las Vegas last month, it is now back to the regulatory grind for Team NADA. Litigation initiated by NADA and the Texas Auto Dealers Association earlier this year to challenge the FTC’ s Vehicle Shopping Rule continues along in the United States Court of Appeals for the Fifth Circuit. The Petition for Review challenges the rule on the basis that it is “arbitrary, capricious, and abuse of discretion, without observance of procedure required by law, or otherwise not in accordance with law.” NADA and TADA have filed a motion with the court seeking a stay of the rule and expedited consideration of the Petition for Review. On March 15, NADA and TADA filed their opening brief in support of the Petition for Review. The FTC’s opposition brief is due May 14. Then, on March 20, the Environmental Protection Agency issued its final rule related to greenhouse gas (GHG) emissions requirements for new vehicles during model years 2027-2032. These standards will effectively require OEMs to substantially increase their production of electric vehicles as a percentage of total vehicles sold. The EPA issued a rule that is not as severe as its initial filing almost a year ago. One may recall that the initial rule received considerable opposition from franchised auto dealers as well as the motor vehicle manufacturers individually and through the Alliance of Automotive Innovation. NADA expressed its position on the finalized rule thusly: “The EPA’s final rule remains too aggressive and far ahead of consumer demand. Our experience working with consumers every day makes us highly skeptical that consumers will adopt EVs anywhere near the levels required. The charging infrastructure is not ready, the current incentives are not sufficient, and high EV prices will price out millions of consumers, particularly low-income Americans, from the new-car market. “While near-term improvements were made to the proposed greenhouse gas rule due to the efforts of NADA and thousands of its dealer members, NADA urges the Administration to track actual EV sales versus projections and make necessary adjustments to its requirements to reflect actual consumer demand. “America’s franchised new car and truck dealers have promoted, and will continue to promote, electrification with bil-
lions of dollars in investments in facilities, training and inventory already committed. “NADA remains committed to advocating for sound policy that aligns with consumer demand and the current realities of the country’s electric charging infrastructure.” It is expected that a number of industry groups will challenge the EPA’s rule in court, so this may not be the end of the story. Your NADA is committed to battling government overreach into our industry on a number of fronts. Unfortunately, these fights require not only time and money but also a dogged commitment to prevent harm to our franchised dealers. The fights continue, and your NADA is up for those challenges.
EPA Eases Ramp-Up for Vehicle Emissions Rule to Address Industry Concerns By Audrey LaForest, Automotive News
The EPA on Wednesday (March 20) finalized a rule that sets tougher limits on vehicle tailpipe pollution through 2032 but eases requirements in the early model years to appease auto industry concerns of a too-fast transition to electric vehicles. Compared with the EPA’s proposal in April, the final rule on light-duty vehicle emissions standards for the 2027-32 model years adopts a less aggressive pace of greenhouse gas emissions reductions in the first few model years followed by more stringent reductions after 2030. The agency now projects battery-electric vehicles will account for 30 to 56 percent of new light-duty vehicle sales in the 2030 to 2032 model years, down from the controversial 67 percent in 2032 that the EPA projected in its original proposal. The toughening standards come amid broader concerns of a warming planet, with the Biden administration clamping down on harmful pollutants in the U.S. transportation sector and striving to reach net-zero emissions economywide by 2050. “With transportation as the largest source of U.S. climate emissions, these strongest-ever pollution standards for cars solidify America’s leadership in building a clean transportation future and creating good-paying American jobs, all while advancing President Biden’s historic climate agenda,” EPA Administrator Michael Regan said in a statement. “The standards will slash over 7 billion tons of climate pollution, improve air quality in overburdened communities, and give drivers more clean vehicle choices while saving them money.” The final rule, which covers carbon dioxide and other pollutants such as nitrogen oxides and particulate matter, also set standards for medium-duty vehicles. For the light-duty fleet, the standards mandate an industrywide average target of 85 grams of carbon dioxide per mile by the 2032 model year, representing a nearly 50 percent reduction in average emission target levels from the 2026 model year, the EPA said. For medium-duty vehicles, it mandates a target of www.msada.org
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MARCH 2024
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NADA Update 274 grams of carbon dioxide per mile, marking a 44 percent reduction from 2026 levels. The EPA said the final standards for both light-duty and medium-duty vehicles would provide $99 billion in annualized net benefits, including $46 billion in reduced annual fuel costs and nearly $16 billion in reduced annual maintenance and repair costs for drivers. The EPA estimates it would add about $1,200 per vehicle in technology costs to automakers from the 2027-32 model years. However, consumers would save an average of $6,000 over the lifetime of a 2032 model-year vehicle compared with one meeting the 2026 standards, the agency said. EPA’s Michael Regan said, “The standards will slash over 7 billion tons of climate pollution, improve air quality in overburdened communities, and give drivers more clean vehicle choices while saving them money.” In comparison, the EPA’s April proposal for light-duty vehicles would have required automakers to achieve 13 percent fleetwide average annual emissions reductions in the 2027-32 model years, representing a 56 percent reduction in average emission target levels from the 2026 model year. EVs also were expected to make up 60 percent of new-vehicle sales by the 2030 model year and 67 percent by 2032, according to the agency’s projections, which excluded plugin hybrids from its analysis in the draft rule. Automakers, dealers and the UAW had pleaded with the EPA to relax those requirements, arguing it would effectively mandate an aggressive increase in EV sales before the supply chains, infrastructure and market are ready. In a press briefing Tuesday, a senior administration official said the EPA considered those concerns when finalizing the rule. “We received what we thought was persuasive information both from the OEMs, from the dealers, from labor, suggesting that the rule would be more durable if we provided the OEMs and the market a little bit more lead time,” the official said. To be sure, the regulation does not mandate a specific technology such as EVs. Instead, it is designed to allow automakers to meet the performance-based requirements through multiple pathways, including efficiency improvements in internal combustion engine vehicles. Critics have called the auto industry’s description of the proposal as an “EV mandate” inaccurate and part of a lobbying strategy to soften the rule. “Anyone talking about mandating EVs, that’s not how these rules are designed,” Dave Cooke, senior vehicles analyst at the Union of Concerned Scientists, told Automotive News last month. Under the rule finalized Wednesday, the EPA adjusted its EV market penetration rates, now projecting that battery-electric vehicles could make up about 30 to 56 percent of new light-duty vehicle sales from the 2030-32 model years, according to an EPA fact sheet. MARCH 2024
MSADA The UAW, in a statement released Wednesday afternoon, praised the decision while remaining generally supportive of the administration’s priority of “tackling the climate crisis.” The UAW recently endorsed President Biden’s re-election. “By taking seriously the concerns of workers and communities, the EPA has created a more feasible emissions rule that protects workers building ICE vehicles, while providing a path forward for automakers to implement the full range of automotive technologies to reduce emissions,” the UAW said in a statement. “This rule does not require Ford, General Motors, Stellantis or any other domestic automaker to do anything beyond the commitments they’ve made to shareholders to capitalize on the growing EV market. We reject the fearmongering that says tackling the climate crisis must come at the cost of union jobs.” The Alliance for Automotive Innovation, which represents most U.S. automakers, reiterated the industry’s commitment to EVs, citing massive investments in the technology but stressing that “pace matters.” “Moderating the pace of EV adoption in 2027, 2028, 2029 and 2030 was the right call because it prioritizes more reasonable electrification targets in the next few (very critical) years of the EV transition,” John Bozzella, CEO of the alliance, said in a statement Wednesday. “These adjusted EV targets — still a stretch goal — should give the market and supply chains a chance to catch up. It buys some time for more public charging to come online, and the industrial incentives and policies of the Inflation Reduction Act to do their thing.” Toyota Motor Corp., which has faced criticism for its strategy of taking a multipronged approach that leans on plug-in, battery-electric, hydrogen fuel cell and fuel-efficient gasoline vehicles, said the EPA’s rule requires “a precipitous shift from around 8 percent market share of battery-electric vehicles today to more than half by 2032 — an aggressive, sixfold increase over just eight years.” “Toyota will continue to lead the industry and comply with regulations, but serious challenges around affordability, charging infrastructure and supply chain will need to be addressed before this mandate is realized,” the automaker said in a statement Wednesday. “Ultimately, the American consumer drives the auto business.” The National Automobile Dealers Association said the EPA’s final rule “remains too aggressive and far ahead of consumer demand.” “Our experience working with consumers every day makes us highly skeptical that consumers will adopt EVs anywhere near the levels required. The charging infrastructure is not ready, the current incentives are not sufficient, and high EV prices will price out millions of consumers, particularly low-income Americans, from the new-car market,” NADA said in a statement Wednesday.
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MSADA “While near-term improvements were made to the proposed greenhouse gas rule due to the efforts of NADA and thousands of its dealer members, NADA urges the administration to track actual EV sales versus projections and make necessary adjustments to its requirements to reflect actual consumer demand.” NADA said franchised car and truck dealers will continue to promote EVs, citing billions of dollars in investments committed for buildings, training and inventory. In a Republican response to the EPA’s decision, U.S. Sen. Deb Fischer, R-Nebraska, said the administration’s revised standard “responds to a slowdown in sales as Americans realize not just the cost and unreliability of electric vehicles, but also the dirty truth behind this supposedly ‘clean’ technology.’” “Continuing to force EVs on automakers and the public will only exacerbate their serious environmental, safety, and human rights concerns. Instead of delaying these standards, President Biden should abandon this attempt to appease climate activists and allow the market to take its course. More practical, market-driven changes — like allowing the yearround sale of E15 ethanol — would help achieve environmental goals for America’s vehicle fleet,” Fischer said in a statement. In a press call Tuesday ahead of the rule’s release, Chris Harto, senior policy analyst at Consumer Reports, said he expects most automakers will choose a “balanced compliance pathway” that relies on a mix of internal combustion engine, hybrid and battery-electric models. “We’re planning to dig into the details as soon as we get them, run our modeling and really keep our eyes out for various credits and loopholes that may have been given away to automakers,” Harto said. The EPA rule and other EV policies are likely to be scrutinized in the November election, where Biden will face off against former President Donald Trump, who loosened standards put in place under predecessor Barack Obama. “These rules have been challenged previously in courts, and … we have no expectation that these will somehow skate by without legal challenge,” said Matthew Davis, vice president of federal policy at the League of Conservation Voters, an environmental advocacy group. “But we believe that the EPA is on solid ground setting emission standards like these.”
The Secret Sauce to Work-Life Balance in the Dealership
identified as a significant barrier in recruiting more women. Hours that extend beyond the traditional workday are not just a concern for women; younger generations are increasingly prioritizing work-life balance. The hard facts are that the most popular times for vehicle sales and service are outside the standard 9 to 5 weekday hours, so employers have to think outside the box to develop schedules employees are happy with while providing the customer service their businesses require. Dealers, managers, and industry leaders at the 2024 Women Driving Auto Retail event hosted in conjunction with the NADA Show discussed potential solutions to this concern and their top takeaways during a session sponsored by Solera. Check out what they said below: Schedule creatively. Some dealerships are seeing success in offering atypical schedules for employees, such as four-day work weeks with 10-hour days or allowing some positions to work by appointment to accommodate caregiver responsibilities. Other positions are being adapted for job sharing or hybrid roles, allowing employees more time away from the store. Consider what work can effectively be done at home. Innovative employers are using technology not just to increase efficiencies in sales and service processes but also to offer digital and remote services, allowing both the customer and employee a more flexible experience. There are also some positions that do not require face-to-face customer interaction, like the business development center and finance, and therefore translate better to remote work flexibility. Re-evaluate performance incentives. Taking a new perspective on incentives based on performance (instead of presence) can reinvigorate the workforce. For example, the salespeople at one dealership can go home on Saturdays after completing two sales. Incentives like this prioritize the customer experience over clocking in and patrolling the lot. Offer benefits that outweigh long hours. There are some dealership positions that require being at the store early, late or on the weekend. The people in those positions are more likely to perform well and stay at the dealership longer if their efforts are rewarded through compensation and benefits. If employees are expected to be at the dealership for long days, ensure the facilities meet their needs, including a space for lactation and clean and pleasant spaces for breaks.
US Automakers Race to Build More Hybrids as EV Sales Slow (Reuters Wire Service)
Lessons Presented from Women Driving Auto Retail What’s the secret sauce to creating a healthy work-life balance at the dealership while satisfying customers? Unfortunately, there is not one. But dealerships are getting creative in addressing the concern. And it is a concern. The long hours associated with dealership careers are often
As U.S. sales of gas-electric hybrid vehicles surge and electric-vehicle sales cool, automakers and suppliers are betting consumer demand for a compromise between all-combustion and all-electric is a durable trend. Automakers and suppliers are adding capacity to build
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NADA Update gasoline-electric hybrid and plug-in hybrid vehicles for the U.S. market, responding to increased consumer demand for technology that General Motors and other automakers once planned to phase out in favor of all-electric fleets, industry executives and analysts said. U.S. sales of hybrids grew five times faster than EV sales in February, Morgan Stanley said. A plug-in hybrid version of the Jeep Wrangler SUV accounted for half of total U.S. Wrangler sales in the second half of 2023, up from 37% in the first half of the year, Stellantis said. Sales of Ford Motor hybrids rose nearly 37% during the first two months of the year, driven by demand for the hybrid Maverick compact truck that starts at $25,315. “The hottest car on our lot right now is the Maverick hybrid,” said Scott Simmers, general manager at Palm Springs Motors in Cathedral City, California. The hybrid Maverick now accounts for about half the model’s sales and dealers said they could sell more if Ford could build them. “We had to rush to add capacity for Maverick,” Jim Baumbick, Ford vice president for product development, told Reuters. “We added a whole third shift to respond to demand.” The industry shift toward hybrids challenges the Biden administration’s pro-EV climate policies, and environmental groups that want automakers to phase out CO2-emitting internal combustion engines as quickly as possible. The White House is expected this month to issue vehicle CO2 emissions standards designed to force automakers to increase the share of fully electric vehicles they sell to as much as 60% by 2030. The November U.S. presidential election puts the White House’s EV subsidies and emissions rules at risk, however. Most legacy automakers lose money on EVs and hybrids are a more profitable path to reducing CO2 emissions if a future administration changes course, analysts said. “Hybrids are a big hedge against an administrative change that cools down the push from a regulatory standpoint,” said Mark Wakefield, head of AlixPartners’ global automotive practice. Supporters of strong limits on combustion-engine emissions are concerned the Biden administration could offer incentives for automakers to sell more plug-in hybrids with combustion motors. “If the hybrids are flying off the lot, there is no need for EPA (the Environmental Protection Agency) to further encourage their sale with loopholes that allow more pollution,” said Dan Becker of the Center for Biological Diversity in Washington. Led by Toyota, Ford, and Honda, North American production of hybrids could rise to as much as 20% of total light-vehicle production by 2025, compared with 14% for EVs, according to data provided to Reuters by AutoForecast Solutions. “While the EV outlook has been depressed by about a MARCH 2024
MSADA million units in the last year, hybrid models have surged by roughly the same volume,” AFS Vice President Sam Fiorani told Reuters. Suppliers such as Schaeffler are making long-term investments to expand capacity for hybrid production. The German company plans to invest $230 million in a new factory in Dover, Ohio, to increase production of electric axles used in hybrid drive systems. Schaeffler currently supplies key components for the hybrid systems offered in Ford F-150 pickup trucks. Ford has said it plans to double the share of hybrid F-150s to 20% of sales. Marc McGrath, chief of Schaeffler’s U.S. operations, told Reuters he expects even wider adoption of hybrid powertrains for heavy-duty pickups and large sport utility vehicles. “We see discussions with all the major (automakers) in that segment,” McGrath said. Hybrid demand is fueled by consumers like Jeremy Ashton of East New Market, Maryland. Frustrated by the poor fuel economy of his V-8 powered Ford F-150 truck, Ashton shopped for a replacement and bought an F-150 hybrid for about $61,000. Comparable gasoline-only trucks “were priced the same. Some of the gas ones are more expensive,” Ashton said in an interview. Ashton said he did not like the looks of Ford’s all-electric Lightning pickup or the challenge of charging. So far, Ashton said his white hybrid F-150 is delivering 22 to 24 miles per gallon. “It is much better on gas.” Dave Wilson, head of the Preston dealership group in Maryland, said he began ordering more hybrid models last August and September. “We were bullish on them,” he said. In December, hybrids accounted for about 35% of total F-150 sales at the dealership. For the 2024 model year, Ford F-150 hybrids will start at the same price as F-150s with 3.5 liter turbo-charged EcoBoost engines. Toyota, long the leader in the U.S. hybrid market, plans significant increases in the number of hybrid models and overall sales of hybrids, Toyota brand chief David Christ told Reuters. “Last year, 29% of sales were hybrid. Year-to-date it is 37%. We expect this year to be closer to 45% of our total volume,” Christ said. Toyota’s next-generation Camry sedan launching this year will be offered only with hybrid powertrains. Toyota has narrowed the price premium it charges for hybrids over comparable combustion-engine vehicles as it has scaled up production. The price gap used to be as much as $6,000 to $7,000, Christ said. Now, it is $1,500 and $2,000. “That’s more attainable and the consumer sees more value in the car,” he said. t
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