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- Cox Automotive’s Forecast: 2024 – A Return to Normalcy in the U.S. Auto Market Cox Automotive
- Honda joins Ford, GM and others in adopting Tesla’s EV charging technology The Associated Press
- The great EV debate: Americans reveal what they REALLY think of their electric cars as more and more reject White House drive to go green… So, whose side are YOU on? Daily Mail
- Hybrid cars are popular among Democrats, Republicans, and Independents. But electric and gas-powered vehicles get mixed approval The Guam Daily Post
Tag Archives: dealers
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EV carmakers work to fit auto dealers into their future plans
Customers wearing protective masks looks at the interior of a vehicle for sale at a Ford Motor Co. dealership in Colma, California, Feb. 1, 2021.
David Paul Morris | Bloomberg | Getty Images
DETROIT — As automakers chase Tesla-like profits on new electric vehicles, they face an existential question: how best to bring franchised auto dealers along with them as they transition to EVs.
Some, such as General Motors, are asking luxury dealers to go all-in on EVs or get out of the business. Others like Ford Motor are offering dealers different “EV-certification” levels, while most other carmakers, or OEMs, know they need to change the sales process to fit the evolving industry, but are still try to figure out how to do it.
“I think we’re all building this airplane as we fly,” Michael Alford, president of the National Auto Dealers Association, a trade association that represents more than 16,000 U.S. new franchised dealers, told CNBC. “Depending on the OEM, the level of engagement or the intensity of the engagement varies.”
Automakers and franchised dealers have a complex relationship that is backed, in many states, by laws that make it difficult, if not illegal, to bypass franchised dealers and sell new vehicles directly to consumers. (Tesla and other newer EV startups have worked around such regulations to cut costs.)
Both automakers and franchised dealers want to maximize profits, but they’re separate businesses that heavily rely on one another to succeed. Dealers rely on automakers for product to fill and move off lots, and the carmakers in turn rely on dealers to sell and service vehicles as well as serve as concierges for customers.
How that historical relationship fits into an all-electric future is expected to be at the forefront of discussions between automakers and dealers at the National Auto Dealers Association Show occurring through Sunday in Dallas. The event attracts thousands of franchise dealers annually to hear from their respective automotive brands.
For dealers — from mom-and-pop shops to large publicly traded chains — EVs will mean new employee training, infrastructure and substantial investments in their stores to be able to service, sell and charge the vehicles. Depending on the size of the dealer, those upgrades could easily cost hundreds of thousands, or millions, of dollars. Of course, they want to make sure their investments will pay off.
“The tone and tenor of this subject matter has evolved, and I think it’s very, very clear this year that our legacy OEMs absolutely realize that we are essential going forward,” said Alford, who runs Chevrolet and Cadillac dealerships in North Carolina.
Competing with Tesla
As more automakers introduce EVs, they’re rethinking the sales process, including selling new vehicles largely, if not fully, online. Tesla was among the first automakers to embrace online sales for a large portion of its business, though it still has physical dealerships, information sites and service shops.
A greater shift online may limit the role of dealers to strictly processing, maintenance and as delivery centers going forward and eliminate the need for large lots of cars that they then sell to consumers.
“By and large, the franchise system remains in place even for EVs by traditional automakers, although they all seem to be looking at ways to tweak it to be more competitive, so they say, with the Teslas of the world,” said Michelle Krebs, Cox Automotive executive analyst.
Automakers believe doing so will provide consumers a more streamlined and cohesive sales process, but they also consider the dealers to be their partners and to offer “strategic advantages” when it comes to other sales and maintenance issues.
A Tesla dealership in Colma, California, on Wednesday, Jan. 26, 2022.
David Paul Morris | Bloomberg | Getty Images
Honda Motor has said it plans to move more sales online, including 100% online sales for its luxury Acura brand for EVs. Mamadou Diallo, American Honda vice president of sales, said the plan is to facilitate the ordering process online, but with the vehicle being picked up or delivered by dealers. Those procedures are still being worked out, though, he said.
“We want to proceed with ensuring that we provide convenience with what customers are looking for, with no intention of bypassing our dealer body,” Mamadou said Tuesday during a media call.
Jay Vijayan, who assisted in building out Tesla’s digital and IT systems, doesn’t believe selling EVs exclusively online will pan out. He said a mix of sales points is best, which is why Tesla and newer EV startups are selling online as well as opening new showrooms and service centers.
“Apple still opens new stores, right? And every company you think is going to go direct is also opening new stores in the automotive space,” said Vijayan, founder and CEO of Tekion, a cloud-based dealer service provider.
Wall Street analysts have largely viewed direct-to-consumer sales as a means to optimize profit. However, there have been growing pains for Tesla when it comes to servicing its vehicles.
Ford CEO Jim Farley has said he wants the automaker’s dealers to cut selling and distribution costs by $2,000 per vehicle to be competitive with Tesla’s direct-to-consumer model.
Automaker approaches
Ford is among the automakers receiving the most pushback from dealers for its EV push, which includes EV-certification tiers that could cost more than $1 million per store, depending on the size of the dealership.
The Detroit automaker is facing legal challenges to the certification program from dealers who argue that the plan violates franchise laws. A group of 27 dealerships in Illinois filed a protest with the state’s motor vehicle review board, and four dealers in New York filed suit against the automaker last month, according to Automotive News.
Ford dealer Marc McEver said he signed on for the highest EV-certification tier at his dealership near Kansas City, Kansas, but he worries about the cost and timing of the program.
“I think we’re all concerned that what they’re having us put in now, by the time we really get some vehicles, will be outdated and need to be upgraded or replaced,” McEver, who also owns a Lincoln dealership, said.
Aside from the investments, dealers who opt into selling Ford EVs will need to abide by five standards to stay within good standing: clear and nonnegotiable pricing; charging investment; employee training; and improved vehicle purchasing and ownership experience for customer, both digitally and in person.
Ford on Saturday plans to outline some changes to its EV-certification tiers, according to two people familiar with the plans. The changes, as first reported by Automotive News, would narrow the differences between the program’s two tiers. The bottom tier comes with lower capital investment but also a smaller allocation of EVs from Ford.
Ford, though, unlike archrival General Motors, is allowing dealers to opt out of selling EVs and continue to sell the company’s gas-powered cars.
GM has offered buyouts to its Buick and Cadillac dealers that don’t want to shell out to sell EVs. About 320 of Cadillac’s 880 retailers took buyouts. Buick’s buyouts are ongoing, according to a spokesman.
Toyota Motor, for its part, has no plans to overhaul its franchised dealership network as it invests in electrified vehicles, CEO Akio Toyoda told dealers to resounding applause in September.
“I know you are anxious about the future. I know you are worried about how this business will change. While I can’t predict the future, I can promise you this: You, me, us, this business, this franchised model is not going anywhere. It’s staying just as it is,” said Toyoda, who will step down as CEO to become chairman in April.
Nearly 2,000 Ford Dealers Buy Into EVs
Around two-thirds of Ford’s dealer network in the U.S. has signed up for the company’s electric-vehicle certification program, the price of batteries for electric cars is on the rise for the first time in over 10 years, and United Airlines is looking at Delta’s pilots’ contract as the template. These stories and more in The Morning Shift for Tuesday, December 6, 2022.
1st Gear: Most Ford Dealers are in on EV Certification
Ford says that nearly two-thirds of its U.S. dealer network are on board with the company’s pricy electric-vehicle certification program. The automaker’s CEO, Jim Farley, says 1,920 dealers have signed on.
He added that 1,659 went the “Certified Elite” route. That program requires investing as much as $1.2 million at the dealership. A further 261 dealers went with the cheaper “Certified” status. That program only requires dealers to spend up to $500,000 for EV enhancements. However, that level caps EV sales at 25 per year. From Automotive News:
Ford has about 3,000 dealerships in the U.S. The company said those that didn’t sign up by last week’s deadline will not be allowed to sell EVs beyond 2023 but will have another opportunity to do so in 2025.
Farley has said Ford’s retailer need to evolve to better compete with EV startups like Tesla and others that sell directly to customers.
“The future of the franchise system hangs in the balance here,” Farley said. “The No. 1 EV player in the U.S. bet against the dealers. We wanted to make the opposite choice.”
The announcement comes as opposition to the program grows. Last week, dealers in New York filed a lawsuit challenging the program as illegal, while a separate group of dealers in Illinois filed a protest with the state’s motor vehicle board. Also last week, U.S. Sen. Richard Blumenthal, D-Conn., and Connecticut state lawmakers voiced their displeasure over what they say are excessive costs that potentially violate state franchise laws.
Ford has consistently said it believes the program does not violate any state laws.
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“We want to work with our dealers, but there are certain things our customers want that are nonnegotiable,” Farley said to the crowd at the Automotive News Congress in Detroit.
He added that he does not regret rolling out the program.
“There’s always a better way,” Farley continued. “But I don’t think we made, really, any big mistakes.”
2nd Gear: EV Battery Prices on the Rise
The price of lithium-ion batteries is on the rise for the first time in over 10 years. The increase comes from surging prices raw material costs, and it will ultimately have a negative impact on the automotive industry’s push for EVs to get cheaper. From Financial Times:
Soaring prices of battery metals such as lithium, cobalt and nickel and higher component costs pushed battery pack prices up to $151 per kilowatt hour, a 7 per cent rise compared with a year ago and the first increase since BloombergNEF began its annual survey in 2010.
The company expects prices to rise further to $152 per kWh next year. In 2010, prices were $1,160 per kWh on average.
That’s bad news for the automotive industry. FT reports the industry has viewed $100 per kWH battery pack as the number where EVs become competitive with ICE vehicles from a price perspective.
However, lithium prices have increased 10-fold since the start of 2021 and nickel is up 75 per cent, while cobalt prices have been more than double their 2020 average this year.
As a result, BloombergNEF forecasts that the $100 per kWh level will be reached by 2026, two years later than previously expected. This will “negatively impact the ability for automakers to produce and sell mass-market EVs in areas without subsidies”, it said.
It added that the higher costs could also be problematic for the economics of battery energy storage projects that are vital to stabilising the grid as intermittent renewable power grows.
The rise in battery pack prices would have been even higher if car companies and cell manufacturers in the Chinese market had not switched to cheaper lithium iron phosphate (LFP) batteries, which do not use cobalt and nickel but have a shorter range.
Right now, there’s a lot of uncertainty about whether or not battery material prices will actually ease. Skyrocketing demand and manufacturing issues are only exacerbating the problem for battery makers and consumers.
3rd Gear: United Looking to Delta’s Contract as a Blueprint
United Airlines’ CEO Scott Kirby says a possible deal between Delta and its pilots union could be used as a template for similar agreements. From Reuters:
“It’s a rich contract but I think the really good news is it means we’ll all get deals done essentially on the same terms and can move forward,” Kirby told Reuters on the sidelines of an event in Washington late Monday. Delta struck a tentative deal Friday to give pilots a 34% cumulative pay increase in a new four-year contract.
Kirby says the Delta agreement will push pilot wages up across carriers and be passed onto consumers in the form of higher airplane ticket prices.
“The biggest news for an investor perspective is cost convergence in the industry means that what is different now is all the low cost carriers are going to have come up to these much higher pay rates,” Kirby said. “This is going to wind up like oil prices — it’s going to be a pass through.”
Delta’s contract reportedly also offers a lump-sum one-time payment, reduced healthcare insurance premiums, better 401(k) parameters as well as improved paid time off.
Kirby added that demand is still very strong for flight tickets, which he says are cheaper today than they have been over the past 15 years.
Its union estimates the proposed deal represents more than $7.2 billion of cumulative value increases over the next four years.
American Airlines and United have promised “industry-leading” contracts to their pilots.
Reuters reports that last month American Airlines pilots turned down a proposed 19 percent pay hike over the next two years that would cost the company about $2 billion. United pilots had previously turned down an offer that would give them about a 14.5 percent wage cumulative increase.
4th Gear: Works Strike at Pennsylvania Auto Parts Supplier
About 270 workers at an Autoneum AG plant in Bloomsburg, Pennsylvania have gone on strike at the global automotive insulation supplier, and soon ripples could be felt throughout the rest of the automotive industry.
Workers walked off the job last Thursday after negotiations between the company and the union stalled after the latest contract offer was rejected by the workers. From Automotive News:
Autoneum, based in Winterthur, Switzerland, focuses on internal and external sound and heat insulation systems. The supplier works with almost every major automaker, including General Motors, Ford Motor Co. and Stellantis, according to its website.
For the Bloomsburg plant, its exact list of customers is unclear. However, the plant received awards from Toyota in 2011, Ford in 2014 and GM in 2021. Autoneum did not respond to calls from Automotive News’ seeking comment on the strike.
Brian Heverly, president of Local 1700 Workers United, told FOX 56 that the rank-and-file turned down Autoneum’s third and final contract offer.
Among worker complaints is the supplier’s insistence that workers pay 5 percent more of their healthcare costs outside of usual yearly increases.
Local 1700 Vice President Dave Schaffer, an employee at the plant 44 years, told FOX 56 that the workers didn’t want to strike, but felt compelled to given the circumstances.
The last strike at this plant was reportedly back in 1968, a year known for nothing else but that strike.
A spokesperson for General Motors told the outlet that the automaker is aware of what’s going on, but they don’t see the strike having an immediate impact on GM operations.
5th Gear: GM’s BrightDrop Starts Production in Canada
General Motors has started production of its BrightDrop electric delivery vehicle at its CAMI Assembly plant in Ontario. That makes it the first EV factory in Canada as a whole.
Last month, GM said the startup will be worth about $1 billion in revenue in 2023. The company is expected to hit $5 billion in revenue by the middle of the 2020s, and it could be as high as $10 billion by 2030.
“Starting volume production is really important; this is a very important product for GM,” Sam Abuelsamid, principal research analyst leading Guidehouse Insights, told The Detroit News. “This finally starts to get them back into a more competitive offering in the van segment and with electrification, so … it has the potential to be a really strong business for GM.”
GM launched production this week of the larger Zevo 600 electric delivery vans at CAMI. The delivery vans were being manufactured at small scale at a Michigan supplier plant until the CAMI facility was ready for production. Production of the Zevo 400, a smaller model than the Zevo 600, will start in late 2023. BrightDrop expects to make 30,000 next year and scale to 50,000 by 2025.
[…]
GM formed BrightDrop in 2021. The business is focused on providing emissions-free products for delivery companies. Its products include the Zevo electric delivery vans, Trace eCarts for easier package delivery and the BrightDrop Core software platform.
The automaker invested more than $800 million to convert CAMI for high-volume EV production. The plant was revamped in just seven months — the quickest retooling of a GM plant ever.
[…]
BrightDrop also on Monday announced it’s entering the Canadian market with the addition of DHL Express Canada logistics company as a customer. DHL will add its first Zevo vans to its fleet early next year. The company is also piloting BrightDrop’s Trace eCarts and software platform in Toronto.
BrightDrop has also received requests for electric delivery vans from FedEx Corp., Walmart Inc., Hertz Global Holdings Inc. and Verizon Communications Inc.
All in all, BrightDrop has 25,000 production reservations and expressions of interest for its EV delivery vans. So far, the company has delivered 150 Zevo vans to FedEx out of the 2,500 the shipping company has ordered.
Reverse: Washington
Neutral: Boeing 747, Over and Out
On The Radio: Darlene Love – “Christmas (Baby Please Come Home)“
This is the best Christmas song, and I will not hear otherwise.
Pope Francis: ‘World War III’ gives arms dealers opportunity, Ukraine invasion ‘very complex’ situation
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Pope Francis urged more nuance in discussions about Russia’s invasion of Ukraine, insisting that people are too quick to create “good guy” and “bad guy” labels for a complex global situation that is tantamount to an ongoing “World War III.”
“A few years ago, it occurred to me to say that we are experiencing a third world war fought piecemeal,” the pope told editors of news outlet La Civilta Cattolica. “Today, for me, World War III has been declared.”
The pope’s wide-ranging conversation with the Cattolica editorial board, released Tuesday, acknowledged the atrocities in Ukraine, but the pope cautioned that many people “miss the whole drama … unfolding behind this war.”
“What we are seeing is the brutality and ferocity with which this war is being carried out by the troops, generally mercenaries, used by the Russians,” Pope Francis said. “In reality, the Russians prefer to send forward Chechens, Syrians, mercenaries.”
CHINA REITERATES SUPPORT FOR RUSSIA’S ‘SOVEREIGNTY AND SECURITY’ IN CALL BETWEEN XI JINPING AND PUTIN
The pope referred to the possibility that the war was “either provoked or not-prevented,” and that there was “interest in testing and selling weapons.”
“Someone may say to me at this point: But you are pro-Putin! No, I am not,” the pope insisted. “It would be simplistic and erroneous to say such a thing.”
“I am simply against turning a complex situation into a distinction between good guys and bad guys, without considering the roots and self-interests, which are very complex,” he argued.
SYRIA TO BECOME FIRST TO RECOGNIZE DONETSK, LUHANSK ‘REPUBLICS’ IN UKRAINE IN SUPPORT OF RUSSIA’S WAR
The pope also spent time praising the “brave” Ukrainian people who are “struggling to survive and have a history of conflict.”
But he related the Ukraine invasion to other conflicts around the world, such as in some parts of Africa “where war is ongoing and no one cares.”
“Think of Rwanda 25 years ago. Think of Myanmar and the Rohingya,” he said. “The world is at war.”
NATO LOOKS TO GERMANY FOR PLAN TO BEEF UP DEFENSES IN EUROPE’S EASTERN FLANK
“What is happening to humanity that has had three world wars in a century?” he added. “I experienced the first war through the memory of my grandfather on the Piave River, then the second and now the third, and this is bad for humanity, a calamity.”
The Pope laid the blame on weapons manufacturers and arms dealers, whom he claimed were happy to see their products tested in conflict.
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“What is before our eyes is a situation of world war, global interests, arms sales, and geopolitical appropriation, which is martyring a heroic people.”
Car dealers raising prices up to 82% above retail price, as Ford threatens to withhold new cars
Four fifths of Americans who bought a car from a dealership last year paid more than the sticker price – a 276-fold increase in just two years.
A new study from auto market research firm Edmunds showed that only 3 per cent of cars bought at American dealerships were sold over the manufacturers’ suggested retail price (MSRP) at the start of 2021.
The trend slowly rose by May before skyrocketing up to 82 per cent in January 2022, a 276-fold increase since the 0.3 percent in 2020.
Ford saw an average of $163 add-on to MSRP in 2021, although one Seattle woman told the Washington Post she’d been warned she’d have to pay $12,000 over the list price for one of the firm’s hybrid pick-up trucks, prompting her to abandon the purchase.
GM’s Chevrolet and GMC brands saw markups of $625 and $677, respectively.
GMC’s prestige Cadillac line saw an average of $4,048 last month. Kia, Hyundai’s popular bargain brand, saw an average mark up of $2,289.
On average, the new markup on cars have cost consumers an extra $728, with shoppers reporting that electric vehicles and hybrids are being sold at an additional $10,000 or more.
Only about 3 per cent of cars sold at dealerships were marked up at the start of 2021. By January 2022, 82 percent of cars sold were marked up
Ford saw an average of $163 add-on to MSRP in 2021, with some popular models, like the Maverick (above) getting marked up by as a high as $12,000
GM’s Chevrolet and GMC brands saw markups of $625 and $677, respectively. It’s Cadillac line saw an average of $4,048 last month
Ford said they would withhold deliveries of their most popular vehicles, including the new F-150 Lightning pickup and other electric vehicles, from dealerships that are overcharging the cars.
Ford spokesman Said Deep told the Washington Post that the company is worried about how the markups would effect their new electric cars and hybrids as they try to compete with Tesla, who leads the market in electric vehicles.
‘The Lightning is a big deal for us,’ Deep said. ‘It’s a leap ahead in innovation for any of our trucks. It plays such a critical role for our brand and all our dealerships.’
Ford CEO Jim Farley told investors at a January conference that about 10 per cent of the company’s nearly 3,000 dealerships in the US have been consistently pricing vehicles above MSRP in 2021.
GM did not immediately respond to DailyMail.com’s request for comment.
Hyundai said it ‘consistently reminds its dealers of the need for complete transparency’ on pricing and ‘strongly reinforce[s]’ that prices advertised online for vehicles should align with retail prices.
‘We strongly discourage our dealers from charging prices above MSRP,’ the company said in a statement.
Legacy car manufacturers in the US are bound by laws forcing them to sell the vehicles through dealerships, with those middle men and women adding on a mark-up to profit from the sale.
Newer firms including Tesla and Rivian sell direct to customers, cutting out that markup. Legacy brands are now keen to follow suit, although are said to be aware that they risk losing the knowledge and skill of dealers who close sales for them.
Hyundai saw its popular Kia bargain brand get marked up by $2,289 on average
Ford is worried that the surge in mark ups will hurt the company’s reputation and launch of its new line of electric cars to complete with Tesla’s models (pictured)
Ford estimated that about 10 per cent of the company’s nearly 3,000 dealerships in the US have been consistently pricing vehicles above MSRP in 2021.
David Eagle, a Los Angeles-based auto broker who helps shoppers negotiate the price on electric vehicles and hybrids, told the Post that he’s had trouble finding good prices for his customers in the past year.
He said that the market suffered greatly in the start of the pandemic in 2020 as dealers sat on cars for months on end before people began buying cars again in 2021, with 15 million vehicles sold last year, a slight increase from the 14.6 million sold in 2020.
Eagle added that dealers are also raising prices to cope with short supplies as microchip shortages have left car manufacturers hampered.
Jeff Aiosa, who owns a Mercedes-Benz dealership in New London, Connecticut, told the Post that dealers don’t have much of a choice but to mark up the cars amid fewer sales.
‘I think that a lot of the high line luxury buyers understand that, ‘Look, your volumes are down and you historically always discount,’ Aiosa said.
‘If we need now to pay a little bit of an upcharge for something that we want and need right now, we understand that that’s the environment that we’re in. And you have to stay in business, and we want you to stay in business because we don’t want to come back and see the lights off and not be able to service our car.’
Ford considering shipping incomplete F-150s to dealers
Pictures of thousands of brand new, unsellable Ford F-150s parked in lots in at least three states expressed the semiconductor shortage in real and financial terms. Ford’s pain has been especially dreadful; CEO Jim Farley said nine of Ford’s Tier 1 suppliers relied on chips from a single chip maker that experienced a fire in its clean room. This break in the supply chain is breaking the knees of Ford’s star player. Earlier this month, the Detroit Free Press reported the automaker had sourced a supply of chips that would allow it to ship thousands of trucks to dealers and keep production lines going. Now, Automotive News reports that Ford is discussing an idea with dealers to ship trucks before the chips are installed. Any dealers receiving such vehicles would get training for service staff on how to install the hardware, and repayment for nearly an hour’s worth of labor for each repair. This is only an idea for now, and if it became reality, only dealers agreeing to the plan would receive unfinished trucks.
A brace of important questions need satisfactory answers before this has a chance of leaving the whiteboard. Dealers won’t want the obligation of paying for and insuring trucks on their lots that they can’t sell, and more importantly, don’t know when they’ll be able to sell. The profit and loss people hate those kinds of scenarios. Some dealers are also wary of accepting responsibility for such repairs. Chips that are important enough to make a truck unsellable when those chips are missing will control important, and perhaps numerous, systems. Should anything go wrong down the road, customers and their lawyers will scrutinize all potential connection to dealer-installed chips.
Ford F-Series sales are only down 1.5% through the end of June compared to 2020. However, F-150 sales in June plummeted 26.9% compared to 2020, and these numbers are relative to the pandemic year. Considering the new car market’s current astronomical demand, Ford’s highly motivated to spitball with dealers until they come to some mutually profitable agreement on minimizing the delay between finishing trucks and selling them. And it’s certain Ford is tired of paying places like Kentucky Speedway to park gaggles of its golden geese. A Ford spokesperson would only tell Automotive News, “We are exploring a number of different options as we work to get our customers and dealers their new vehicles as quickly as possible.”
Dealers Sue Rivian, Lucid, And Illinois Over Direct Sales
Dealers still exist not because anyone is asking for them, really, but because of state franchise laws, which largely prevent automakers from selling directly to consumers. Which means that any threat to those laws gets dealers very, very hot under the collar. The latest evidence of that is a new lawsuit against Illinois, Rivian and Lucid.
The suit was filed Thursday on behalf of a dealer group, the Illinois Automobile Dealers Association, and scores of other plaintiffs, primarily individual dealerships located across the state.
The suit is seeking to stop Rivian and Lucid from selling directly to consumers in Illinois, as the dealers contend doing so is against the law. Tesla currently operates locations in Illinois under an agreement it made in 2019, which the dealers agreed to because they thought the Illinois franchise law would be applied more strictly going forward. Thursday’s suit is an attempt to stop any possibility of Lucid and Rivian, which is based in Normal, Illinois, from playing by Tesla rules.
“We welcome new manufacturers to Illinois, especially those who are building innovative vehicles,” said David Sloan, President of the Chicago Automobile Trade Association, another party in the suit. “Our franchised members already sell dozens of electric and hybrid vehicles. We ask that manufacturers sell them in Illinois according to state law. We’re not demanding they cease operations in the state, just that they franchise a dealer.”
And while the civil complaint the dealers filed offers plenty of legal reasons why they should win — Illinois’s agreement with Tesla does seem like a strange one — the dealers also claim that they are doing this on behalf of consumers, which is where they instantly lose me.
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Via their press release:
At issue are the benefits to consumers and the Illinois economy generated by more than 700 dealers operating 2,300 franchises across the state. Those benefits include:
- Consumer protection: Dealers maintain service centers with trained staff to perform all recall and warranty repairs, where the dealers act as advocates for the consumers with the manufacturers.
- Availability of parts and service: Dealers maintain an inventory of parts and provide timely service to consumers who depend on the daily use of their vehicles.
- Price competition: Consumers have many choices, with the competition among dealers saving buyers money. Direct sales from manufacturers result in a monopoly that offers no price benefit.
- Community benefits: The franchised dealers are long-established local businesses that generate millions of dollars of revenue and economic development, employ 42,000 people across the state and support many local causes and events.
All of these arguments are pretty silly, but my favorite is their claiming direct sales results in some kind of monopoly. No wonder Tesla is doing so well.
Anyway, for my money dealers would be better served admitting who they are: textbook middlemen. “We exist because for now we have the law on our side and we will fight to keep it that way,” they could say. It wouldn’t be the most attractive argument, but at least it would be honest.
You can read the full complaint below.
Electric Vehicles Are the U.S. Auto Industry’s Future—If Dealers Can Figure Out How to Sell Them
Car dealer Brad Sowers is spending money to prepare for the coming wave of new electric models from General Motors Co. He is installing charging stations, upgrading service bays and retraining staff at his St. Louis-area dealership to handle the technology-packed vehicles.
But when he considers how many plug-in Chevy Bolts he sold last year—nine, out of the nearly 4,000 Chevrolets sold at his Missouri dealerships—it gives him pause.
“The consumer in the middle of America just isn’t there yet,” when it comes to switching to electric vehicles, he said, citing the long distances many of his customers drive daily and a lack of charging infrastructure outside major cities.
As auto executives and investors buzz about the coming age of the electric car, many dealers say they are struggling to square that enthusiasm with the reality today on new-car sales lots, where last year battery-powered vehicles made up fewer than 2% of U.S. auto sales.
Most consumers who come to showrooms aren’t shopping for electric cars, and with gasoline prices relatively low, even hybrid models can be a tough sell, dealers and industry analysts say.
Auto makers are moving aggressively to expand their electric-vehicle offerings with dozens of new models set to arrive in coming years. Some like GM are setting firm targets for when they plan to phase out gas-powered cars entirely.
Sales consultant Robert Mason Jr., center, spoke with Paul Sweeney, left, and his son, Jeff, who were purchasing a Chevrolet Trail Boss at Jim Butler Chevrolet in Fenton, Mo., on Friday.
Many dealers say that puts them in a delicate spot: They are trying to adjust, but unsure whether and how fast customers will actually make the switch. About 180 GM dealers, or roughly 20%, have decided to give up their Cadillac franchises rather than invest in costly upgrades that GM has required to sell electric cars.
A GM spokesman said the company expected some Cadillac dealers to opt out and is pleased that the roughly 700 remaining share its all-electric goals.
Past attempts by car companies to expand electric-car sales have largely flopped, saddling retailers with unsold inventory. Even now, some dealers say they are reluctant to stock electric models en masse.
“The biggest challenge is that dealers have a bit of ‘boy who cried wolf’ syndrome,” said Massachusetts dealer Chris Lemley.
Car companies have promised for years to make electric cars mainstream, but produced only low-volume, niche models, he said. He recalls
Ford Motor Co.
rolling out an all-electric Focus that sold poorly and stacked up on his lot. It was discontinued in 2018.
“So when we are told, ‘This time, we really mean it,’ it’s easy to be skeptical,” Mr. Lemley added.
Some shoppers also are unsure. Joe Daniel, an energy analyst at the Union of Concerned Scientists, said he was determined to buy an electric car, but eventually abandoned his effort after realizing there weren’t enough public charging stations near his apartment in Washington, D.C. Without a place to plug in, the purchase made little sense, he added.
“For EVs to take off, they need to be as convenient as gas-powered cars—that’s the whole point of this big purchase,” Mr. Daniel said.
To solve problems like this, President Biden has said he wants to spend billions of dollars to upgrade the country’s charging infrastructure as part of a push to incentivize battery-powered cars.
Ford, GM and other major car companies say they are confident in their new electric-vehicle offerings and are training dealers to sell and service them.
Still, some auto retailers say they worry about the long-term implications for their business.
Tesla Inc.’s
influence on the electric-car market has created a new standard for car shoppers, offering an online transaction and a simplified lineup with no price negotiation. Other electric-vehicle startups, like Rivian Automotive and Lucid Motors, say they’ll likewise sell directly to consumers and bypass traditional dealerships.
Some car companies are now following their lead, initially stocking dealership lots with few if any electric models and allowing customers to order more directly from the manufacturer.
Volvo Cars CEO
Håkan Samuelsson
recently said that all future battery-electric vehicles would be sold exclusively online and the price would be set centrally, eliminating the ability to haggle. Dealerships will help deliver vehicles to customers and perform other services, like maintenance, he said.
“The marketplace is moving from the physical dealership to online. That’s what will happen in the next 10 years,” Mr. Samuelsson said.
Howard Drake,
a GM dealer in Los Angeles, said he is considering converting two of his showrooms. Rather than separate models by brand, he is considering two stores—one for electrics, the other for gas-powered vehicles.
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“These are really different customers,” Mr. Drake said. “A Hummer EV buyer probably doesn’t want to be sitting next to some guy buying a gas-guzzling pickup truck.”
Mr. Sowers said he sees encouraging signs. GM recently dropped the sticker price of the all-electric Bolt and helped boost sales for the model in February. But he said his electric-vehicle inventory will remain light because he is uncertain about longer-term demand.
“It’s still very early days,” Mr. Sowers said.
As soon as dealers figure out how to sell EVs, another business problem awaits in the service bay.
Troy Carrico worked on a Chevrolet Corvette.
Electric vehicles typically have fewer mechanical parts and don’t require the same type of service that gas engine cars need, such as oil changes. That work right now is a big profit center for dealerships.
“There’s going to be an impact, but it might take three or four years to see the full effect,” Mr. Lemley said. “That’s really my biggest question mark heading into all of this.”
—William Boston contributed to this article.
Write to Nora Naughton at Nora.Naughton@wsj.com
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Tse Chi Lop, one of the world’s biggest drug dealers, arrested in Amsterdam
Canadian national Tse Chi Lop was detained at Amsterdam’s Schipol International Airport on Friday, according to Australian Federal Police (AFP), which has taken the lead in a sprawling international investigation. Before his arrest, Tse was one of the world’s most-wanted fugitives.
Authorities allege that Tse, 57, is the leader of the Sam Gor Syndicate, arguably the biggest drug-trafficking operation in Asia’s history. Experts say he is in the same league as notorious drug lords El Chapo and Pablo Escobar.
“The importance of Tse’s arrest can not be underestimated. It’s big and (has) been a long time coming,” said Jeremy Douglas, the Regional Representative of the United Nations Office on Drugs and Crime (UNODC) in Southeast Asia and the Pacific.
The organization is accused of running a synthetic drug manufacturing empire in large swathes of the under-policed jungles of Myanmar, a region marred by civil war and still under the control of various competing warlords and militias — conditions that make it easy to hide industrial-scale drug manufacturing operations from law enforcement.
From there, Sam Gor has allegedly been able to procure large amounts of precursor chemicals, the ingredients to make synthetic drugs, and then move them across the region to nearby markets in Bangkok, but also to farther-flung ones in Australia and Japan, law enforcement said.
Sam Gor allegedly had operatives working throughout the globe, with players in South Korea, England, Canada and the United States, according to a briefing on the syndicate shared with CNN by an official with direct knowledge of the investigation.
The documents described Sam Gor as a “triad-like network” — a reference to ethnic Chinese gangs that operate in Asia and North America — but more mobile and dynamic. The group’s existence was revealed in 2016 after a Taiwanese drug trafficker was arrested in Yangon, Myanmar, the briefing showed.
Further police investigations revealed that the organization was, as of 2018, earning between $8 billion and $17.7 billion worth of illicit proceeds a year, according to the briefing. The organization uses poorly regulated casinos in Southeast Asia to launder a significant portion of those proceeds.
AFP said a warrant was issued for Tse’s arrest in 2019 in connection with an operation targeting Sam Gor.
“The syndicate targeted Australia over a number of years, importing and distributing large amounts of illicit narcotics, laundering the profits overseas and living off the wealth obtained from crime,” AFP said in a statement.
Tse allegedly ran his multibillion dollar operation from Hong Kong, Macao and southeast Asia. But his name — or existence — was not public knowledge until he was revealed by a Reuters investigation published in 2019.
Dutch police spokesman Thomas Aling said Tse is expected to be extradited after appearing before a judge. Authorities in the Netherlands were unable to provide details about the legal proceedings and it was not clear whether Tse had a lawyer.
This is not Tse’s first run-in with law enforcement. Tse pleaded guilty to felony narcotics charges in the United States in 2000 and was sentenced to nine years in prison. Details surrounding the case are limited because it is still sealed, but the source said he was released in 2006 and returned to Canada before moving to Hong Kong.
While Douglas of the UNODC praised Tse’s arrest, he said more needed to be done to ensure drug lords cannot take advantage of poor government oversight of the areas in Myanmar and Laos.
“While taking down syndicate leadership matters, the conditions they effectively used in the region to do business remain unaddressed, and the network remains in-place,” he said. “A lot of difficult information is about to come out.”