36 AUGUST 20, 2018 STATES posed in California earlier this year. But the subscription provision was stripped out of the bill after the Alli- ance of Automobile Manufacturers and the California dealer association agreed to discuss the issue further, Maas said. A new bill addressing vehi- cle subscriptions could be introduced as early as 2019, he said. policies that offer the most afford- able options to consumers,” Bryan Goodman, a spokesman for the alli- ance, said in a statement. Subscriptions face growing scrutiny Where the action is At least 3 states are looking at legislating how vehicle subscriptions are handled. California:
Language requiring automaker subscriptions to go through dealers was stripped from a bill this year in a compromise between dealers and manufacturers who will further discuss the issue. Indiana: A ban on vehicle subscriptions runs through May 1, 2019, while legislators study how the programs should be regulated. New Jersey: Dealers are lobbying for subscription program vehicles to be classified differently for registration purposes, though no bill has been introduced. GM deferred comment to the alli- ance. It offers Book by Cadillac, an $1,800-a-month vehicle subscrip- tion service operating in New York City, Los Angeles and Dallas that al- lows 18 vehicle flips within a year of signing up.
continued from Page 1 differences in opinion could lead many states in the next few years to review how subscription programs are handled. Lawmakers in Indiana are studying automaker subscription programs this summer after Gov. Eric Hol- comb, a Republican, earlier this year signed a moratorium on any vehicle subscription program — by auto- makers or dealers — that is effective through May 1, 2019. A hearing on vehicle subscriptions is scheduled for Sept. 27, and a bill could be filed by the end of December, said Rep.
Ed Soliday, a Republican who is chair- “Te sense that I’m getting from the legal team is we can expect to see more legislative action on this over the next year or two” in even more states, said Larry Dominique, CEO of PSA North America. French auto- maker PSA is considering vehicle subscriptions as part of its entry back into the U.S. market. Global Automakers, a trade associ- ation representing international nameplate carmakers, did not re- spond to requests for comment. Some California dealers, however, have concerns about Care by Volvo, including whether Volvo is compet- ing with dealers because sign-up happens on Volvo’s website or through Volvo’s app, Maas said.
In many cases, the delivery process is actually longer with a subscription plan, he noted. In New Jersey, dealers also have been lobbying the past few months about creating a different classifica- tion for subscription vehicles, said Jim Appleton, president of the New Jersey Coalition of Automotive Re- tailers. A bill could be introduced in the fall, he said. Haiken wants dealers involved with helping customers choose a ve- hicle for subscription at the dealer- In California, dealers don’t want to compete with automakers that aren’t including them in their programs, said Bri- an Maas, president of the California New Car Dealers Association, which rep- resents 1,300 franchised new-car dealers.
ing the committee with oversight of the matter. Dealers receive a pay- ment for each Volvo sub- scription they handle, Maas said. But some deal- ers are worried Volvo could cut that amount at any time and “there’s nothing the dealers can do about it.” ship. Volvo also should end its call center service in fa- vor of consumers working directly with dealerships, he said. Soliday described the moratorium as a compro- mise to provide more time to review facts from dealers and automakers. Jeremy Paolone, who runs Flex- drive subscription operations for Holman Automotive Group in New Jersey, said he would like to see a dif- ferent license plate for subscription vehicles.
Appleton said the unique plate could help law enforcement track the vehicle. In late April, a group of dealers met with Anders Gustafsson, senior vice pres- ident of the Americas for Vol- vo, Maas said, and the com- pany has been exchanging letters with the dealer associ- ation, which is analyzing whether Care by Volvo complies with California law. Indiana dealers are con- cerned about being com- pensated for the vehicle flips and warranty work, Soliday said. Tey also want to ensure healthy inventory numbers for dealerships if manufac- turers want to shift more vehicle al- locations to subscriptions.
“We want to make sure that any subscription pro- gram done by a franchisor is done with its franchi- sees,” Maas said. Dealer pushback Hult: Concerns understandable Matthew Haiken, chair- man of the Volvo Retail Ad- visory Board and dealer principal of two Volvo dealerships in New Jersey, said he met with Volvo executive management this month and dis- cussed dealers’ prime concern. Haiken: Dealers need protection Paolone said he’s not “scared of competing” with automaker sub- scription plans but is more con- cerned about trying to simplify the regulatory processes around the ve- hicles so he can grow the Flexdrive model for Holman, which ranks No.
18 on Automotive News ’ list of the top 150 dealership groups based in the U.S. He now is following rental car rules and has to pay taxes associ- ated with that. Many dealership groups — small and large — are keeping an eye on the potential legislation. “Te success of Care by Volvo in the United States is firmly rooted in the partnership between Volvo Cars and its retail partners,” Volvo spokes- man Jim Nichols told Automotive News. “We continue to collaborate and innovate together.” “We’re familiar with what’s going on,” David Hult, CEO of Asbury Automotive Group Inc., the nation’s No. 7 retailer based on new-vehicle sales, told Automotive News .
“It’s so much in its infancy going on, it’s so easy to fear the dealer supply chain is going to be left out.” More concerns exist regarding the automakers’ varying approaches to subscriptions, plus how sales tax, registration, title and toll collection will be handled for vehicles in the programs, he said. Soliday said deal- ers’ representatives have told him that they “might be able to live with the Volvo model.” “What happens down the road if this takes off and you try to cut our margin, or you try to cut us out com- pletely?” he said.
“We need to be able to protect our margins based on the expense structure that we have in the dealership.” Automakers fight ban “We want to cut out the extra cost, cut out these extra taxes and costs and fees and work flows that are slowing us down and costing us more money,” he said. “We want to have a competitive product for the custom- er. We want to make it as advanta- geous as possible to have a nice, flexi- ble experience. Frictionless mobility is what we’re striving for.” a Tat already has been a point of contention in some automaker sub- scription plans where dealers have had a limited to nonexistent role.
Dealers also are anxious about oth- er automakers offering subscription models and paying dealers only $250 to $500 to deliver vehicles, he said. Te Alliance of Automobile Manu- facturers, which represents 12 auto- makers including Volvo and General Motors, wants to ensure its members can offer varying business models including subscriptions. Automak- ers are seeking to end the subscrip- tion ban in Indiana. Care by Volvo is a two-year pro- gram Volvo has said will be available nationally. Vehicle use, insurance and maintenance are rolled into one payment. Customers can elect to ex- change their vehicle after a year if they renew for another 24 months.
When signing up, a Volvo concierge coordinates with a local dealer for vehicle delivery. Haiken described the current pay- ment from Volvo to dealers as less than the typical margin on a new ve- hicle but better than some automak- er payments to dealers on competing subscription programs. Haiken de- clined to provide specific amounts.
California, Indiana Language that would have prohibit- ed automakers from offering sub- scription programs outside of their dealer network was part of wide-rang- ing dealer franchise legislation pro- “Te alliance supports the ability of consumers to access as many transportation mobility options as possible and encourages innovative Jackie Charniga contributed to this report. COX USED After rapid acquisitions, company cut work force Prices low partly due to limited supplies “We sold so few cars in 2008, 2009, 2010, 2011 that now there’s not a lot of inventory for the used market for these 7-, 8-, 9- and 10-year-old vehicles.” aligned, Schwartz said.
But the company cultures have varied, so Schwartz and his team have been tasked with building a culture that’s consistent un- der the Cox name but also true to the original brand. continued from Page 8 Cox Automotive senior economist Charlie Chesbrough said. continued from Page 4 Limited supplies are another factor. Re- possessions are down, Chesbrough said. Dealers are keeping more of the off-lease vehicles turned in at their stores rather than send them to auction. “It’s really important to respect culture and to re- spect what’s important to [employees]. We’ve tried to bring these companies together the right way and still respect and honor the past and the cul- ture,” he said.
Charlie Chesbrough, Cox Automotive senior economis t GREG HORVATH And the Great Recession, which drastical- ly cut the numbers of vehicles that went to market 10 years ago, is also rearing its head. Last year, Cox laid off 950 employees — about 3 percent of its full-time staff — and 225 associates accepted early-retirement packages. After a rapid stream of acquisitions, the company had taken in- ventory of its assets and determined how they best connected. Because of that, Cox needed to ratio- nalize its work force, Schwartz said last week.
“We sold so few cars in 2008, 2009, 2010, 2011 that now there’s not a lot of inventory for the used market for these 7-, 8-, 9- and 10-year-old vehicles,” Chesbrough said. Tat’s forcing a lot of dealers, particularly the independents, to buy newer vehicles. “Otherwise, they’ll have no inventory.” sales and marketing. With three of the group’s five stores selling domestic-brand vehicles, the tariffs aren’t much of a concern at Moreland. Te main motivation? More money can be made on the used side, he said. probably 25 percent.” But he’s not too concerned about used-car prices increasing, he said.
If auction prices seem high on a certain type of vehicle, his buyers will purchase an- other type that day. Jay Feldman, CEO of Feldman Automotive Inc. with nine dealerships in Michigan and Ohio, also is growing his used business. He operates one standalone store and has branded that, plus the used-vehicle busi- nesses at his Chevrolet, Kia and Hyundai stores in Michigan, under one name. He plans to open another standalone store in about a year. Jason Tamaroff, vice president of Jeffrey Automotive Group and Tamaroff Motors Inc. with six stores in Michigan, is working to boost used-vehicle sales, but he’s also wary about stocking extra inventory given rising floorplanning costs.
Tat expense has doubled this year so far for his groups, he said. A single vehicle costs the dealership about $40 a day in personnel, preparation and depreciation expenses. Schwartz expects Cox to be in a constant state of change, with goals to streamline the business and bring products and services to the market faster. He envisions the work force evolving but said he can’t predict how employee head count will fluctuate. Another key explanation: Franchised dealers are concentrating more on their used-vehicle businesses as new-vehicle sales flatten and squeeze new-car profits. As for when Cox will boost its integration grade, Schwartz said:
“I’m hoping a year from now, we’re going to be much, much better. I don’t know if it’s going to be an A or if it’s going to be a B-plus, but we’re going to keep working at it.” a Moreland Auto Group in Colorado is a good example. “Our stores that are firing on all cylinders have doubled their used-car inventory in the past 12 months,” said Bennett Boothe, Moreland’s director of Internet “We’ve really focused on pre-owned,” Feldman said. “It’s about 40 percent of our business now, where two years ago, it was “We’re not buying cars to sit and hold,” Ta- maroff told Automotive News . a