Industry News

Affordable Dealer-Assisted Financing Preserved in Bill

House and Senate conference committee negotiators recently voted to exclude Main Street auto dealers from sweeping legislation to overhaul the nation’s financial system. The long-fought victory for auto dealerships and consumers preserves dealer-assisted financing as an affordable option for car buyers.  The vote by the conference committee is considered a major win for consumers. “Dealer-assisted financing will continue to provide more convenience, more competition, and more choices for car buyers,” said Ed Tonkin, National Automobile Dealers Association (NADA) Chairman.

The bill’s history began in late 2009 when a House Financial Services Committee member generated strong bipartisan support for an amendment to exclude dealer-assisted financing from an unwieldy new agency with almost unlimited authority to fundamentally alter the vehicle financing process.  Grassroots efforts by dealers and dealership employees garnered a 60-30 vote urging Senate conferees to accept the House language to exclude dealerships from the proposed agency. As a concession to secure the dealer exclusion, the Federal Trade Commission, which already oversees dealer-assisted financing, was granted expedited rule-writing authority over unfair or deceptive practices.

The bill is expected to create a new regulator to monitor consumer lending rules, boost powers of agencies such as the Federal Reserve and Securities and Exchange Commission, give the government the power to break-up failing companies, and toughen scrutiny over exotic financial products like derivatives.   The math appears to have finally lined-up for the White House which has pushed to overhaul financial regulations for more than a year. Because the House of Representatives passed the bill by a 237-to-192 margin several weeks ago, Senate passage would send the bill to the White House where President Obama is expected to quickly sign it into law. Source: nada.org

Auto Sales in U.S. Down 10.8% in June from May

The recovery of the auto industry may be heading for a detour. The auto industry sold 983,738 vehicles last month, fewer than many were predicting but up 14.4% from June 2009.  Sales in the U.S. fell 10.8% in June from May falling below the expectations of several automakers and many industry analysts. Jeff Schuster, global forecaster at J.D. Power & Associates, said consumers appear beaten down by volatility in the stock market, downbeat economic reports, and the slow pace of job creation.  These factors are creating challenges for an auto industry trying to recover from one of its worst periods ever last year.

And there is still room for automakers to increase incentives, which remain relatively low. Easier credit and little risk of another large automaker bankruptcy also should make for a more positive selling environment in the second half of this year. But some analysts are saying that automakers have learned to operate profitably at historically low levels of sales.  Now there is a risk that they might resort to offering costly incentives to lure customers into showrooms reversing any financial gains they may have made coming out of the downturn. Source: Los Angeles Times

It’s Official: Buyers are Downsizing

As Americans emerge from recession, they are buying much different vehicles than they did before the crash; smaller, more fuel-efficient, less ostentatious. A major shift has taken place since 2007, the last of the boom years and the finale of the rosy period preceding two years of turmoil that began with a spike in fuel prices early in 2008.

Compared with consumers in the first half of 2007, Americans now are buying:

  • More cars, fewer trucks, and smaller vehicles in general.
  • Smaller and less expensive cars within segments.
  • Ordinary rides that replace bigger or more luxurious vehicles.

Still, as they go down in size, buyers aren't necessarily sacrificing equipment. Cars are outselling light trucks again, taking 53.4 percent of the market in the first half of this year. That compares with 49.2 percent in the first half of 2007. But a close look at the numbers reveals an even more dramatic shift.

When car-based crossovers and minivans are lumped in with cars rather than with trucks, the swing away from body-on-frame pickups, SUVs and full-sized vans is striking. The big trucks plunged from 31.1 percent of the U.S. market in the first half of 2007 to 22.8 percent in this year's first half. Car-based vehicles grew to 77.2 percent, from 68.9 percent.  But consumers are not necessarily choosing cheaper vehicles. Transaction prices are rising and equipment levels and technology content are higher in even the smallest models, manufacturers say.  Source: Automotive News

Dealer Wins Case Against IRS with Help of ATD, NADA

A favorable decision was issued recently by the U.S. Court of Appeals for the 6th Circuit in a case involving a Mack dealer who, for nearly a decade, has challenged the results of a federal excise tax (FET) audit by the Internal Revenue Service (IRS) which had concluded that a particular category of truck which many dealers had been selling as tax-exempt, was in fact, subject to the FET.  These types of trucks had been sold by dealers for many years and the IRS had never asserted during audits that FET was owed.  NADA supported the dealer by providing Legal Defense Fund assistance and filing an amicus curiae brief supporting the dealer’s position in the case.

The 6th Circuit ruling reversed a 2008 Kentucky Federal District Court decision in favor of the IRS. Significantly, the Court of Appeals cited several arguments from the amicus brief filed by NADA/ATD in explaining the reason for its decision.  The case has been remanded to the District Court to consider whether the vehicles satisfy the “substantial impairment” prong of the test required for the exemption. There also remains a possibility that the IRS will ask the 6th Circuit to reconsider the decision en banc which, if granted, would involve a hearing before the entire 6th Circuit. If the decision by the 6th Circuit stands, it will be a significant victory for ATD members as it can be cited as precedent that the IRS’ narrow interpretation of this provision of the Internal Revenue Code was wrong. Source: NADA/ATD

Rolls-Royce Reports Record Production

Happy days are here again…at least for those with deep pockets and the desire for the most expensive cars on the planet. The wealthiest auto buyers are apparently loosening their purse strings again.  "The company is currently building 15 cars a day, including Phantom and Ghost models, with more than 300 cars built in June.  Both reflect record numbers since the company launched in January 2003," said Rolls-Royce in a statement. All models are sold out until at least September, with Phantom saloons sold out until October.

The Ghost is the so-called "entry level" Rolls-Royce with a $245,000 sticker price and the up-level Phantom starts at $380,000.  Sales in the first half of the year were up by almost 200 percent versus 2009. Substantial growth was seen in all regions, especially China. The report on the robust performance at Rolls-Royce mirrors a report by the International Monetary Fund that the global economy is unlikely to slip back into recession over the next few years. Source: Edmonds Inside Line

June Sales Summary

The auto industry sold 981,258 units in the month of June. This represents a decline of 10.9% from May (sales of 1.1 million). The SAAR* for the month was 11.1 million, down from 11.8 million in May.

Key Highlights:

  • Sales for the first six months of 2010 were 5.6 million, up 16.8% from a year ago.
  • Truck/SUV/CUV sales have increased 18.5% this year, while cars are up 15.2%. 
  • Japanese automakers lost 1.1 points of market share versus their May sales performance (36.5% of industry in June vs. 37.6% in May).
  • Chrysler LLC sales were up 33% for the month (sales of 92,234) the largest increase of any manufacturer.
  • Chevrolet recorded share of 14.4% for the month, up from 12.8% in May (its sales were up 33% for the month). 
  • Hyundai and Kia recorded share of 8.5% in June, up from 7.6% in May (their sales were up 28% for the month).
  • Toyota and Nissan struggled in June, losing 2.6 points and 1.2 points of market share, respectively, from their May performance. 
  • Through six months, the CUV segment has recorded the highest year-over-year gain in sales performance of any segment — up 28.9%.

*SAAR (Seasonally Adjusted Annual Rate) is a term used in the auto industry to depict the selling rate of vehicles for a particular month. In the case of June, the 11.1 million rate indicates that the industry was on pace to sell 11.1 million vehicles on an annual basis.