Washington Conference on the Horizon

According to the National Insurance Crime Bureau, thefts increased by 1,215% between 2019 and 2022. Due to valuable precious metals used in the devices, stolen catalytic converters can garner anywhere from $20 to $350 on the black market; however, the replacement cost to vehicle owners can be as high as $2,500. At present, thefts are hard to combat as catalytic converters are not easily traceable and can be stolen from unattended vehicles in mass quantities, including at dealership lots.

We at NADA have a robust legislative and regulatory agenda before us. See this month’s cover story for more details. As the Biden administration pursues anti-business regulations that will substantially harm our franchised dealer members, please keep in mind that our legislators down in D.C. do not operate in a vacuum. You can always help in our advocacy efforts by hosting a Member of Congress at your dealership, or making a phone call to your congressman, or even flying to D.C. for two days in September for our Washington Conference. Every little bit can help. Please contact me if you want to get more involved.

NADA, Broad Coalition Push Congress to Act on Catalytic Converter Theft Bills

The National Automobile Dealers Association, joined by 20 industry partners, sent a letter last month to the leaders of the U.S. House and Senate Commerce Committees in support of H.R. 621/S. 154, a bipartisan bill to combat rising catalytic convertor theft. The “Preventing Auto Recycling Theft (PART) Act” addresses the growing national problem of catalytic converter thefts, which are costing businesses and vehicle owners millions of dollars annually.

America’s franchised car dealers commend Sens. Amy Klobuchar (D-Minnesota), Mike Braun (R-Indiana), Ron Wyden (D-Oregon), and JD Vance (R-Ohio) for introducing the Senate bill and Reps. Jim Baird (R-Indiana), Betty McCollum (D-Minnesota), Angie Craig (D-Minnesota), Randy Feenstra (R-Iowa), and Michael Guest (R-Mississippi) for reintroducing the House companion bill.

“Catalytic converter theft continues to rise across the country, with no clear end in sight,” said NADA President and CEO Mike Stanton. “Common sense legislation like the PART Act would help give law enforcement the tools they need to deter catalytic converter thefts.”

The PART Act would give local law enforcement additional resources to prosecute thieves by requiring new vehicles to have traceable numbers stamped on the catalytic converter during assembly. The bill also increases record keeping requirements for purchasers and establishes a federal criminal penalty for theft, sale, trafficking, or known purchase of stolen catalytic converters of up to five years in jail. The organizations who have signed the letter urge Congress to pass this legislation that provides a federal framework needed for local law enforcement to combat catalytic converter thefts.

Signers of the letter includes such groups as National Automobile Dealers Association; American Car Rental Association; American Property Casualty Insurance Association; American Rental Association; American Truck Dealers; American Trucking Associations; Automotive Recyclers Association; Elite Catering & Event Professionals; Major Cities Chiefs Association; NAFA Fleet Management Association; National Association of EMTs; National Auto Auction Association; National Automatic Merchandising Association; National Consumers League; National Insurance Crime Bureau; National Private Truck Council; National RV Dealers Association; National Salvage Vehicle Reporting Program; National Tank Truck Carriers; NTEA — The Association for the Work Truck Industry; Truck Renting and Leasing Association.

Electric Car Sales Growth Slows in U.S.

as Inventory Builds Up

(Source: Bloomberg News)

Electric vehicle sales growth, while still brisk, has begun to slow in the US as inventory of battery-powered models piles up on dealer lots.

Sales of plug-in models grew by nearly 50% in the first half of the year, according to data from researcher Motor Intelligence. That’s less than the 65% growth rate for all of 2022 and well off the 71% gain in the first half of last year over the same period in 2021.

The slower pace comes as the supply of EVs on dealer lots ballooned to 92 days in June, well above the 51 days of inventory for all models, according to researcher Cox Automotive. That may help explain why only 31% of dealers see EVs as the future, while 53% of car buyers do, according to a survey Cox conducted.

“Dealers, staring at almost 100 days’ supply, perhaps are a bit more realistic,” said Mark Schirmer, a Cox spokesman. “The extra inventory is making some dealers a bit concerned.”

Automakers are pouring $200 billion into constructing nearly 100 EV assembly and battery plants in the United States in the biggest build-up since the industry was founded more than a century ago, according to consultant KPMG.

Consumer acceptance in the US has been slower than in China and Europe, as American car buyers have balked at high prices and spotty charging infrastructure.

But legacy and startup automakers are betting their futures on catching up with Tesla Inc., which generates profit margins twice the going rate in the industry while controlling 60% of the US EV market. Wall Street is skeptical of EV growth ambitions such as Ford Motor Co.’s plan to boost output of battery powered models by more than 15-fold to 2 million vehicles a year by the end of 2026.

Car Prices Ease as Pandemic Supply-Chain Issues Fade

(Source: Bloomberg News)

The US new-car market is returning to pre-pandemic norms as supply-chain issues resolve, forcing carmakers to ramp up deals to sustain sales growth.

The annual pace of new-car sales likely rose to 15.6 million in June, from 13 million a year ago, according to the average forecast of seven market researchers. Cox Automotive raised its full-year forecast to 15 million, from 14.2 million in March, as deliveries to businesses and rental-car companies, which evaporated during pandemic scarcity, rebounded.

“Pent-up demand from individuals and businesses that couldn’t find product last year is now being unleashed,” Charlie Chesbrough, senior economist at Cox, said on a call with reporters. “Not only has supply returned to the market, but so has discounting.”

Car prices have skyrocketed in recent years from a confluence of factors. That fueled inflation and triggered interest rate hikes, which together bumped up the overall cost of owning a car.

Meanwhile, more mass-market models sell for premium prices as carmakers stuff vehicles with expensive tech features and luxurious interiors. For their part, electric ve- hicles, which are gaining in popularity, tend to cost more than combustion cars because of their expensive lithium-ion batteries.

Now that the semiconductor shortage is easing, manufacturer incentives are making a comeback and prices are starting to ebb, albeit slowly. Incentives made up 4.2% of the sticker price on a new car on average as of May, up from 2.4% last October, and are poised to keep climbing, according to consulting firm AlixPartners.

The average price of a new car was $47,892 in May, down 1.3% from its peak in December, according to Edmunds.

“We’re still in a pull market, but getting much more normalized over this period, which puts pressure on pricing, and of course pressure on manufacturer profits,” said Mark Wakefield, head of the automotive practice at AlixPartners’ office outside Detroit.

Costs continue to drive shoppers into the used market, said David Kelleher, owner of a Chrysler, Dodge, Jeep and Ram dealership in Philadelphia. “I’ll have a customer come back on a three-year lease on a Ram truck — he leased the truck for $394 a month three years ago. I say, ‘Well, great news, you’re going to be at $687.’ That’s very difficult to do,” Kelleher said. “It’s led to a choppy market.”

Jeep, Ram, and Nissan offered the highest incentives as a percentage of transaction price among a dozen brands in May, according to analysis by Cox Automotive.

General Motors Co. likely increased market share in the first half of the year by outselling all of its peers, while Honda Motor Co. and Tesla Inc. also gained share, according to Cox. Toyota Motor Corp and Stellantis NV lost market share, according to the forecast. Many of the largest car companies, including GM and Toyota, will report second-quarter US sales numbers on Monday.

The need to replenish dealer lots will continue to drive sales in the second half of the year, though analysts are doubtful the industry can maintain the same momentum. Automakers have also vowed to keep a tighter rein on inventory to preserve pricing power.

Prior to the pandemic, annual US auto sales topped 17 million for five consecutive years, well above the 15 million forecast for 2023.

Tesla, which slashed prices earlier this year to defend its position as the EV market leader, could also pressure automakers to swallow more of the cost of electric vehicles.

“There will be an easing of the current record levels of pricing and profitability as manufacturer incentives gradually increase,” said Thomas King, president of data and analytics at J.D. Power. “Nevertheless, this will be offset to some extent by an increase in overall sales volumes.”