HawaiiDealer

The Official Publication of the Hawaii Automobile Dealers Association

2018 Convention Edition

Looking back….at the 2018 First Hawaiian International Auto Show.

See auto show pages 10-18

Also in this Edition...

FACT OR FICTION?

Looking back at this past year’s auto show…

The HADA board of directors reviews big plans for next year’s HADA convention on Maui.

First Hawaiian Bank CEO Robert Harrison (left) and his wife Lori enjoy a moment at the show’s VIP Preview Night with Joe Nicolai, who, in 2000 as president of HADA, helped move the show to the See president’s remarks on page 4 Hawaii Convention Center. See the auto show pages 10-18

The legislature intends to only tax $1 million second homes with the proposed property tax on the ballot? (well….not necessarily) See the facts about the Nov. 6 ballot issue.

See page 22

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Hawaii Automobile Dealers Association 1100 Alakea Street, Suite 2601 Honolulu, HI 96813 (808)593-0031 • Fax (808)593-0569

2017-2018 HADA Officers & DirectOrs President Brian Kitagawa President-elect John Uekawa Vice President Eric Fukunaga secretary Wayne De Luz treasurer Kenny Ching nada director Stan Masamitsu Hawaii director Jackie De Luz Watanabe Maui director Jim Falk Kauai director Mike Niethammer

This year’s convention serves as a springboard With HADA and the UH Engineering Department, being two of the three founding organizations in the Hawaii Autonomous Vehicle Institute (HAVI), and joining in the request for $10 million in federal funds in a proposal submitted to USDOT Fed Highway Admin (FHWA) – Advanced Transportation & Congestion Management Technologies Deployment program, the association and its members are leading in the efforts to build the Future of Transportation in Hawaii.

As a fourth generation dealer it’s a joy to see so many NextGen dealers on the HADA board who are joining with our seasoned veteran dealers in tackling this tall task that was given to us by Governor David Ige, who issued executive order 17-07 which tasked HADA dealers and the UH College of Engineering with helping to bring connected autonomous vehicle technology to the islands.

The HADA board has voted to hold next year’s convention at the Fairmont Kea Lani and is asking all HADA dealers to invite high level officials from their respective auto manufacturers to join us in reviewing the progress Hawaii has made in developing increased vehicle customers’ embrace of the new automotive technology.

oaHu director Stan Masamitsu oaHu director

The big HADA convention we are holding this year, in effect, is serving as the springboard for this effort to bring the automotive world to Hawaii. Next year’s First Hawaiian International Auto Show also will play a role.

Michael Stoebner oaHu director Heather Cutter oaHu director

Much thanks to all, and especially our sponsors for making this all possible.

Brian Kitagawa HADA President 2017–2018

Brad Nicolai at-large director Marc Cutter at-large director Keoni Hansen iMMediate Past President Bill van den Hurk

HADA STAFF executiVe director Dave Rolf

HawaiiDealer is designed & published by Custom Publishing Design Group, Inc.¨ 800.246.1637 • www.MyCompanyMagazine.com. To advertise in an upcoming issue contact Sara Russell, 800.246.1637 ext. 315 or e-mail sara@mycompanymagazine.com.

HawaiiDealer is published quarterly by the Hawaii Automobile Dealers Association, 1100 Alakea Street, Suite 2601, Honolulu, HI 96813 Phone: 808 593-0031 Fax: 808 593-0569 Email: drolf@hawaiidealer.com

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Study shows auto show influ that of global markets like NY

Hawaii’s auto show has the highest crowd density of all the MotorTrend- produced shows in the U.S. — (MTAS benchmark report 2018)

} Hawaii State Representative Gene Ward and his wife Faradah inspect the KIA concept car.

10

uence in Hawaii is high, like Y, LA, Chicago and Detroit The Old…

Paul Olivas, “Mr. Mustang,” is a regular attendee at the First Hawaiian International Auto Show “Mr. Mustang” Paul Olivas, co-founder of the Aloha Mustang and Shelby Club, which exhibits each year at the show since it has moved to the Hawaii Convention Center in 2000, owns, drives, and works on his 1964 (and a half) red Mustang.

} “Dad, when did cars have fins like this?”

“That’s a ’59 Pink Cadillac..a classic.”

and the New…

} The “i” cars in the front window were a crowd pleaser.

JN’s Velocity display included Lamborghini, Ferrari, Maserati, and more high end exotics.

} Paul Olivas, Mr. Mustang, (shown 2nd from left) enjoys a moment at the show with show attendees Dave Watts, left, and Roy Ogasawara, 3rd from left, and Rick Hamada, KHVH radio host of the Rick Hamada Show.

} Paul is shown here posing with Toyota product specialists.

11

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2018 First Hawaiian International Auto Show

} The show sparkled‌ anytime, day or night, thanks to the beauty of the Hawaii Convention Center, considered by many to be America’s most beautiful convention center.

} One of the 70 press interviews and stories run on the show; total run times for all the TV and radio news stories was 3 hours and 21 minutes.

} Hawaiian Electric displayed a Nissan LEAF with plug-in information about electric rates.

14

} Hawaiian Electric Company provided information on the electric car ownership experience.

} The Texaco exhibit was at the front of the show and drew delighted show attendees for pictures.

} A new feature, the Texaco-sponsored KIDS TEST DRIVE was a hit with parents and kids.

} MotorTrend’s copywrited themed carpet helped show-goers travel between exhibits.

} A virtual experience allowed show attendees to test their skills under extreme driving conditions.

} A popular video driving experience was one of the highlights of the Ford exhibit.

} A Chinese car by BYD was featured in Hawaii. No other Motor Trendproduced show has had this vehicle on display yet.

15

16

} The show also featured 2019 pre-production models like this 2019 Ford Ranger model.

} The Aloha Shelby and Mustang Club has exhibited at the show for years and always draws an interested crowd.

} A First Hawaiian Bank promotion helped create a large opening day crowd on Friday.

} Classic cars look like the day they came from the factory and gleamed under the convention center lights.

} Moms and kids both enjoyed the First Hawaiian Bank exhibit. The kids are spelling “YES.�

} Students from the University of Hawaii proudly displayed the vehicle they created for a project.

VIP Preview Night

} Nine HADA “legacy” dealers were honored with inscribed koa paddles for their involvement with the First Hawaiian International Auto Show over the last 40 years.

} Miss Hawaii 2018 Julianne Chu helped host the VIP Preview Night ceremonies.

} Miss Hawaii 2018, Julianne Chu presents a koa paddle to Joe Nicolai as Nick Cutter looks on. Joe, as HADA president, helped move the auto show to the convention center in the year 2000.

18

} First Hawaiian Bank’s Chris Dods, on behalf of his father, Walter Dods, Jr. accepts a Hawaiian voyaging canoe model from HADA president Brian Kitagawa.

Walter Dods founded the show in 1977. The show was not held one year when show dates moved forward from the Fall to Spring dates. This year’s show marked its 40th year.

} The HADA board of directors, representatives of honorees, and VIP Night sponsors gathered for the official seat belt opening and received instructions from Kahu Kordel Kekoa at the completion of the show’s Hawaiian blessing.

As JM&A Group celebrate its 40th Anniversary, we realize that you’re our greatest gift. You’ve made us part of the Hawaiian community and trusted us to provide the highest quality of service to those that matter the most to you, your customers. Looking back, we’re proud to be one of the nations leading independent F&I providers, but we’re truly grateful for the wonderful relationships and professional friendships we’ve forged among Hawaii’s auto dealers.

As we mark this milestone and look toward tomorrow, here’s to your success and another 40 years of exceptional performance and profitability.

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FACT OR FICTION? The legislature’s intent is to only tax homes worth $1 million or more.

No one wants to tax “mom and pop” establishments under this new tax.

FICTION. The Facts: The proposed amendment would allow the legislature to establish a new tax on all “investment real property” – residential, commercial and agricultural – regardless of their value. There is NOTHING that indicates the legislature’s intent is to only tax homes worth $1 million or more. In fact, the legislature removed specific language from the ballot question that would have limited the tax to “residential investment property valued at one million dollars or greater, excluding a homeowner’s primary residence.”

FICTION. The Facts: Because there is no clear definition of “investment real property,” small businesses that rent also could be affected by this new tax.

This new tax only affects rich, out-of-state investors.

FICTION. The Facts: As it stands, this new tax would affect all property owners regardless of where they live and what their property is worth.

This new tax will help our keiki and public school classrooms.

FICTION. The Facts: There is no guarantee of additional money for public education or that the money raised from this new tax will go to K-12 public school classrooms. The legislature could use the new funds to replace a portion of the nearly $2 billion in General Funds that currently goes to education and divert it to other priorities. In addition, the language of the bill indicates the money could go toward “public schools free from sectarian control, a state university, public libraries and such other educational institutions as may be deemed desirable, including physical facilities therefor.”

22

Hawai‘i is the only state in the country that does not use property taxes to fund schools.

FACT. The Facts: Hawai‘i is the only state in the country that has a single, statewide education system which is funded at the state level and not by local counties.

Elsewhere in the country, local school jurisdictions are supported by local property taxes.

All of the counties are against the ballot measure.

FACT. The Facts: It’s true. The Hawai’i state constitution gives the counties exclusive authority to tax real property. It is a critical source of revenue to pay for core services like police, fire, street repairs, garbage pickup and park maintenance. Giving the state authority to tax real property would undermine and interfere with this authority and will make it even more difficult for county officials to balance their budgets and will hurt the counties’ bond ratings, which means borrowing costs will go up.

Hawai‘i public schools are chronically underfunded.

FICTION. The Facts: According to the Education Week Research Center’s 2018 Quality Counts survey, Hawai’i spends $13,436 per pupil, which is higher than the national average of $12,526 per pupil.

Money raised from this new tax will go toward raises for Hawai‘i’s teachers.

This new tax is about making the 1% pay their share to help our keiki.

FICTION. The Facts: The bill does not guarantee money from this tax will go toward raises for teachers. As it stands, this new tax could actually hurt teachers who live in rented homes and make it even more difficult to afford to live in Hawai‘i.

It is critical to remember, when taxes go up, so does rent.

FICTION. The Facts: This new tax will raise the cost of living for 100% of Hawai’i residents by increasing the cost of residential rents and increasing the cost of goods and services.

All of the language that guaranteed the money would help our keiki was taken out of the bill before it passed.

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Self-Driving Vehicle Legislation Must Preserve a State’s Right to License and Regulate Vehicle Commerce (H.R. 3388/S. 1885)

Issue Congress aims to finalize legislation to advance self-driving vehicles (H.R. 3388/S. 1885) by preempting certain state laws to avoid automakers having to build different self-driving vehicles for different states. Historically, the federal government has preempted only state laws that impact vehicle design, construction and safety. Congress must ensure self-driving vehicle legislation retains a state’s traditional role to provide consumer protections, and license and regulate vehicle commerce within its borders.

Background The Senate Commerce, Science, and Transportation Committee approved S. 1885 last year. While the bill clarifies that state laws regarding the sale, distribution, repair or service of self-driving vehicles are not preempted, the bill lacks a technical amendment to ensure that state vehicle licensing/franchise laws protecting the rights of dealers and consumers are not nullified. NADA expects this technical issue will be corrected before full Senate consideration to ensure these state vehicle laws are fully protected. The House-passed bill, H.R. 3388, includes bipartisan language to clarify that state vehicle licensing/franchise laws as applied to self-driving vehicles are not preempted.

Ensuring the correct federal/state relationship is critical, as states have traditionally had the right to license and regulate the distribution, sale and service of vehicles in their state, based on the states’ desire to protect consumers and businesses that provide price competition, local jobs, and significant local and state tax revenue. These rights are reserved to states under the 10th Amendment to the Constitution.

For decades, state vehicle franchise laws have included important consumer protections and regulated the disparity in size and power between local dealers and multinational automakers to help level the economic playing field. Such protections for state residents are especially important, as there are new risks, as well as opportunities, associated with self-driving technologies, and new entrants rapidly entering the auto market.

Traditionally, the federal government has preempted only state laws that impact vehicle design, construction and safety to ensure uniform rules across all 50 states. Auto dealers support this defined and well-established federal role regarding self-driving vehicles.

Key Points • • •

Congress should enact a balanced federal preemption (as in H.R. 3388/S. 1885) that enables states to continue to exercise their right to license and regulate the distribution of vehicles.

H.R. 3388/S. 1885 properly clarify that state laws regarding the sale, distribution, repair or service of AVs are not preempted to preserve state vehicle franchise laws protecting the rights of dealers and consumers.

S. 1885 should include a technical “conforming” amendment before Senate consideration to fully ensure that state vehicle licensing and franchise laws are not preempted.

Status The House passed H.R. 3388 in September 2017. Senate sponsors of S. 1885 are seeking agreement to attach the committee-passed bill to a must-pass measure on the Senate floor. Congress must ensure that final self-driving vehicle legislation fully and explicitly preserves state vehicle licensing/franchise laws.

September 6, 2018

25

New Auto Tariffs Will Threaten U.S. Jobs and Hurt Consumers In May 2018 the Trump Administration initiated an investigation that could result in tariffs of up to 25% on imported automobiles and auto parts.

The President has been crystal clear: He wants to negotiate better trade deals for America, and he’s right to want that.

But steep, new tariffs on autos and auto parts, if implemented broadly, would hurt the auto industry and our customers.

New tariffs would increase prices, stifle demand for new cars, and cost dealership jobs. And new tariffs would impact both domestic and international brands.

Most new vehicles sold in the U.S. are made in the U.S. by both international and domestic brands.

No vehicle is 100% domestic.

On average, vehicles assembled in the U.S. have an international parts content of 40%.

24% of new vehicles sold in the U.S. are made in either Canada or Mexico, mostly by domestic brands.

40

%

Sourcing of U.S. Light Vehicle Sales, 2017 OTHER GERMANY SOUTH KOREA JAPAN

CANADA

10%

11%

% 3% 5

5%

U.S. FIRMS

29%

48%

U.S. Sales of Imported Vehicles

14% MEXICO

INTERNATIONAL PARTS

52%

U.S. Sales of U.S. Produced Vehicles

23% INTERNATIONAL FIRMS Source: The Center for Automotive Research

Source: The Center for Automotive Research

New tariffs would hit both U.S.-built and imported vehicles.

A 25% tariff applied to all imported autos and auto parts would lead to an increase in the price for all vehicles sold in the U.S.

Average Increase

$4,400

$2,270

$6,875

ALL VEHICLES

U.S.-BUILT

IMPORTED

$78 INCREASE IN AVERAGE MONTHLY CAR PAYMENT Sources: The Center for Automotive Research; NADA

N A T I O N A L

26

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This year’s HADA-initiated bill updating Hawaii’s Motor Vehicle Franchise Act with 6 new provisions became law July 10, 2018 This legislative session more than 2,000 bills were submitted by Hawaii’s 76 legislators adding to the many bills carried over from last session. Some 200 bills or so, have become law, as of July 10, 2018—including our HADA-initiated bill, SB2490.

Now, 6 new provisions have been added to Hawaii’s motor vehicle industry franchise law.

Seamless transfer of sales staff Under the new law, dealerships with common ownership can transfer sales staff seamlessly between dealerships without the need to apply and pay for a sales license transfer.

An MVILB form must be approved.

During this past legislative session the HADA board met with Gary Slovin, the local representative for the Alliance of Automobile Manufactures and the Alliance’s Curt Augustine, who is based out of California. They are shown at the end of the table.

Brad Nicolai, far right, and Wayne De Luz, far left co-chaired the legislative committee’s franchise law subcommittee.

1% Payment/Month for used vehicles on stop-sell When a replacement part for a used vehicle on stop-sell is not made available, a payment of 1% of the value of the use vehicle per month will be paid by the manufacturer to the dealer, if requested by the dealer.

Facility upgrade applicable for 10 years A manufacturer or distributor may not require a dealer to construct, renovate, or make substantial alterations to the dealer’s facility if the dealer has completed a construction, renovation, or substantial alteration to the same component of the facility that was required and approved by the manufacturer or distributor within the previous ten years.

“Substantially similar” goods or services may be used If goods, building materials, or services of a substantially similar appearance, function, design, and quality are available from other sources; and the franchised motor vehicle dealer has received the

manufacturer’s or distributor’s approval then such may be used in renovations or construction.

Fairness in sales and service performance requirements If the sales or service performance standard is to be used as the basis for a termination of a dealer, then the performance standard shall be deemed unreasonable, arbitrary, or unfair if the standard does not include material and relevant local market factors.

Data access by manufacturer Under the new law, a manufacturer or distributor may not require a dealer to grant the manufacturer or distributor access to the dealer’s data management system to obtain consumer and proprietary data.

The data access provision is relatively new law in this relatively new area. Hawaii is one of the first states with such a provision. See SB2490 for all the details at www. capitol.hawaii.gov 29

Advertise In The

HawaiiDealer Established under HADA president Charlie King in 2002, the HawaiiDealer is a quarterly magazine that provides information on the activities of HADA members to a wide audience, including the membership of the Association, key employees at the dealerships, legislators, city council members, Hawaii media, the Congressional Delegation, and many Hawaii sister organizations.

HADA appreciates the “sponsorship” of the official publication through the provision of sixth, third, half, and full-page color messages.

The Official Pub lication of the H awaii Automobi le Dealers Assoc iation

2018 1st Quarter Edition

The Official Pub lication of the H awaii Automobi le Dealers Assoc iation

... soon, to everything.

Mahalo!

See story pages 8, 9, and 10

5G LTE

For more information, contact Custom Publishing Design Group, Inc. Tel 860-513-1213  Fax 860-513-1216 MyCompanyMagazine.com



2018 Summer Edition

The big “if” in tariff…

See story pages 8-10

(small wave) broadband

Covering Data thru June

2018

Hawaii Auto Outlook

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Sponsored by: Hawaii FORECAST

Automobile Dealers

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State New Vehicle Market

Remains Strong in First

Below is a list of 10 key trends and developments in the Hawaii vehicle market: new

Also in this Edition...

1. State new retail registrations declined a slim 1.6% in the first half of this year versus a year earlier. The U.S. market fell by less than 1%.

2. As shown on the graph below, the market has plateaued during the past several years, with sales remaining at elevated levels.

3. Auto Outlook’s annual forecast for 2018 new retail light vehicle registrations: 58,750 units, down slightly from 2017.

4. Light truck market share increased from 63.4% during the first six months of 2017 to 67.2% this year.

5. Registrations for European brands were up 4% so far this year, while the overall market declined.

sara@ HADA recognizes Walter Dods, First Hawaiian International Jr.—founder of the Auto Show. This year marks the show’s 40th year.

See auto show story pages 8–10

The First Hawaiian International Auto Show annually keeps Hawaii “connected” with new automotive styles and new technology.

See story on pages 8–10

Volume 17, Number TM

Association

Market Outlook for next two years: New vehicle sales should remain above average; uncertainties increasing

Dealer Day at the Capitol was held February 15, 2018.

Please see the multi-page pictorial on pages 13–18

or

NO

Also in this Edition...

Annual Trend in State

Market

Market Summary

Also see the HADA website at www.hawaiiautodealer.com

The Big Bang for EV Uptake or Epic Pile-up?

Global consulting firm AlixPartners predicts “a pile-up of epic proportions” but HADA proposes a solution.

New light vehicle registrations

70,000 60,000 50,000 40,000 30,000 20,000

48705

54039

57094 58485 59137 58750

10,000 0

2010 2011 2012 2013 2014 2015 2016 2017 2018 Historical Data Source: IHS Forecast Markit.

The graph above shows annual See the Hawaii new retail light vehicle registrations in Auto thru 2017 and Auto the state from 2010 Outlook’s projection for allOutlook. of 2018.

See pages 12, 13, and 14

Cavanah Associates, Inc. Cavanah Associates, Inc. An Independent Insurance Agency Specializing in: An Independent Insurance Agency Specializing in:

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Domestic European Japanese Korean

YTD '17 thru June 29,740

YTD '18 % Chg. thru June '17 to '18 29,258 -1.6%

Mkt. Share YTD '18

10,893 18,847

9,603 19,655

-11.8% 4.3%

32.8% 67.2%

6,340 2,782 18,683 1,935

6,283 2,892 18,219 1,864

-0.9% 4.0% -2.5% -3.7%

21.5% 9.9% 62.3% 6.4%

Source: IHS Markit.

Domestics consist of vehicles sold by GM, Ford, FCA (excluding Tesla. Historical FIAT and Alfa), and See the figuresinformation were revised by IHS on Markitthe and will differ slightly from shown in previous releases. those

Nov. 6th ballot issue.

See pages 22, 25, 26, and

D

Phone: (808)537-1970 Phone: (808)537-1970

Vehicle Service Contracts Vehicle Service Contracts GAP Protection Programs GAP Protection Programs Homeowners Insurance Homeowners Personal AutoInsurance Insurance Personal Auto Insurance Dealer Enhancements Dealer Enhancements Group Life and More!

Group Life and More!

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TOTAL Car Light Truck

42463 32649 35576

Protecting Our Customers' Assets Commercial & Personal Insurance Protecting Our Customers' Assets Serving & Supporting HawaiiÕ s Auto Dealers Since 1976 Serving & Supporting HawaiiÕ s Auto Dealers Since 1976

Full Dealer Package Full Dealer Package Garage Liability Garage Liability Property Insurance Property Damage Insurance Physical Physical Damage Workers Compensation Workers Compensation Employment Practices Liability Employment Practices Liability

Strong economic growth, rising employment, and increasing incomes have helped keep new vehicle sales at elevated levels. Some potential storm clouds are on the horizon, however.

Negative fallout from tariffs, rising interest rates, and inflationary pressures are concerns for the market.

6. Alternative powertrain (hybrid and electric vehicle) market share was 6.1% thru June of this year, up slightly from last year.

7. Three biggest segments in the state are Compact SUV, Compact/ Mid Size Pickup, and Compact Car.

YES

Half of 2018

8. Brands with the largest percentage increases in registrations during the first six months of this year (among top 30 brands): Tesla, Land Rover, Volkswagen, Volvo, and Subaru 9. State market share leaders in the first Honda, Nissan, Ford and Chevrolet. half of 2018 were Toyota, 10. Top ten selling vehicles in state market: Toyota Tacoma, Toyota 4Runner, Honda CR-V, Honda Civic, Toyota RAV4, Nissan Rogue, Toyota Camry, Ford F-Series, Toyota Corolla, and Honda HR-V.

I A A S S O C

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Please see page 18

3

From Ship to Showroom Pasha Hawaii offers Hawaii auto dealers and rental car companies versatile ocean transportation services between Hawaii and the Mainland, with fully enclosed decks on our roll-on/roll-off vessels for maximum protection of all vehicles.

Direct Ro/Ro service available from Los Angeles and San Diego, CA to Hilo, Kahului, and Honolulu, HI.

YOU’RE GOING TO LOVE OUR 2019 MODEL.

On the roadways or the sea lanes, there’s no denying the importance of a top-of-the-line fleet.

The first of our two new Kanaloa Class con-ro vessels is coming in late 2019, as we begin to roll out a $500 million investment to better serve you, our friends and partners in Hawaii’s auto dealerships. We’ve been shipping automobiles to Hawaii for almost as long as there have been cars, and HADA members can continue to count on Matson to deliver. Visit Matson.com.