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Friday, Mar 29, 2024

Car Dealers Warn Tariffs Could Stifle Demand

Valley auto dealers and government officials are concerned that new auto tariffs proposed by the Trump administration could hurt sales by driving up prices. The tariffs would arrive at a time when the California auto market is already in decline, with a 5.6 percent drop during the first half of the year, according to the California New Car Dealers Association. Last month Don and Cheri Fleming, owners of Valencia Acura, invited Congresswoman Katie Hill to hear from members of the Greater Los Angeles New Car Dealers Association, based in Glendale, concerning the issue. Executives from Keyes Automotive Group, whose dealerships rank 3, 4, 6, 9, 10, and 12 on the Business Journal’s list of Auto Dealerships, and representatives from Galpin Motors, with dealerships ranking 1, 2, 8, 11, 17 and 20 on the list, sit on the association’s board. The Flemings, as well as Bob Smith with the GLANCDA and Peter Hoffman, president of Sierra Autocars in Monrovia, expressed their concern regarding new auto tariffs proposed by the Trump administration. Smith has a long vestment in the local car industry, with family ties to Bob Smith BMW, No. 18 on the list. “In spite of the intent to balance inequities, the near term damage to the industry, the ability to keep employment levels where they are and the cost of new vehicles affordable, are top-of-mind reasons new car dealers are pushing back,” Smith said in an email to the Business Journal. “The unified voice of the auto industry is for Congress to ensure that any new trade initiatives do not unduly increase vehicle prices, stifle demand for new vehicles or jeopardize American jobs,” said Cheri Fleming. The federal government initiated an investigation in May 2018 on the cost of imported automobiles and auto parts, concluding that the administration wants to negotiate better trade deals for consumers, and that as much as a 25 percent hike on these imports could be the result. No vehicle is 100 percent domestic, according to the Center for Automotive Research. Forty-eight percent of U.S. sales are of imported vehicles, mostly from Mexico, Canada and Japan. Auto dealers expect a 25 percent tariff to increase the average monthly car payment by $78. Jobs at new-car dealerships are also projected to drop by 10 percent. That’s a loss of 117,500 out of 1.1 million jobs on a national level. Sales would decrease by 2 million units, leading to slow fleet turnover as well. “It will be harder to get safer, cleaner and more efficient vehicles onto the road. Manufacturers will send products to other markets, which will reduce competition and customer choice in the U.S.,” the National Automobile Dealers Association said in a statement. “The projected decrease in sales would also lead to a loss of state and local taxes. Franchised dealerships in the U.S. provide 18 percent of total retail sales,” added Cheri Fleming. Valencia Auto Center makes up 21.7 percent of sales tax revenue for the City of Santa Clarita. More than $7 million in sales tax for 2018 was from auto sales and leases; roughly $69 million in local sales tax revenue has been generated during the last 12 years. Not all mandates are a complete negative for industry leaders, however, with green initiatives coming from the state and federal level. California has continued to set goals and mandates requiring a shift to zero emission vehicles, or ZEVs, bent on supporting the state’s effort to reduce greenhouse gas emissions. In 2018, California car dealerships managed to sell more than 240,000 ZEVs, plug-ins and hybrids – 12 percent of the new vehicle market share nationwide, according to the California New Car Dealers Association. Although this accounts for nearly 50 percent of ZEV sales nationwide, 2018 vehicles sales still have gasoline car sales coming in at 81.8 percent. Dealers face a challenge as the federal government has mandated lower emissions, while car buyers like high-consumption SUVs and pickups. But dealers have found that incentive programs at the state and federal level help, in particular the Clean Vehicle Rebate Project, Clean Cars 4 All, the Clean Vehicle Assistance Program, and the upcoming Clean Fuel Reward Program. “CNCDA encourages our dealers to designate at least one vehicle salesperson to be the ZEV and PHEV on-lot expert, and we have partnered with Plug In America on their PlugStar dealer training program,” the association said in a statement. The Business Journal restructured its Auto Dealership list this year. Dealerships are ranked according to number of new vehicles sold, rather than the previous methodology of ranking by sales revenue.

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