Auto Sector Escapes Big Hits in Senate Tax Bill

First Up 12/05/17

Dec. 5, 2017

VW Preps Dealers for Tough EV Economics

Volkswagen is in global discussions with its worldwide dealer networks to figure out some way to keep dealers profitable as the automaker shifts hard toward lower-maintenance electric vehicles. Automotive News reports that Volkswagen plans to bring at least four plug-in electric vehicles to the U.S., beginning in 2020 with the I.D. Crozz all-wheel-drive crossover followed in 2022 by the I.D. Buzz microbus. Click here to see it. But there's an exposed wire in the brand's electrification strategy: Electrically powered vehicles generally need less maintenance than those powered by internal combustion engines. VW customers with EVs are likely to have fewer reasons to return to dealerships for service, harming dealership profitability. The answer: Change the business model among the factory, dealerships and consumers, said Jurgen Stackmann, global head of sales and marketing for the Volkswagen brand. "The only way to offset the fewer parts, the fewer service [visits] per car in the time period is to extend the time period and keep cars and customers longer" into the vehicle life cycle, Stackmann said. For more on ways VW believes dealers will maintain profitability, click here.

Fueled By Demand for SUVs, Average New Vehicle Prices Hit a High in November

Demand for sport utility vehicles drove new vehicle prices to a record high in November, potentially propelling annual sales to top 17 million again as the industry heads into its most important retail month. The average transaction price for a new vehicle hit a record of $35,852 in November, according to data from Edmunds. That’s up 2.3 percent from November 2016. Forbes reports that customers are also putting more money down – $3,906 in November, compared with $3,616 the same month last year. Meanwhile, incentives fell slightly – to an average of $3,371 in November – suggesting that buyers are willing to pay more for larger vehicles. Automakers reported a steady appetite for crossovers, SUVs, and pickup trucks.  BMW said demand for its X5 mid-size SUV and new X3 compact crossover helped sales rise 7.1 percent for November. The Toyota RAV4 and all-new Mazda CX-5 also posted their best-ever November sales performances, while Honda Trucks reported a 15.8 percent gain – the division’s best-ever November sales. For the full story, click here.

2017 Los Angeles Auto Show: Winners and Losers

The 2017 edition of the Los Angeles Auto Show was a busy one. Reporters covered two dozen new or updated vehicles over the past few days, ranging from the affordable 2018 Nissan Kicks to the opulent 2019 Mercedes-Benz CLS. This year's show was SUV-heavy: Ten out of the 12 vehicles covered in Cars.com’s Winners and Losers wrap-up are utes, as Americans increasingly flock to them for their added utility, passenger space, and ride height. The 2018 Hyundai Kona was selected by three of four Cars.com contributing editors as a “winner” thanks to a hot turbocharged engine, a sporty suspension, all-wheel drive, and a spacious interior mean this thing will sell like crazy. Click here to see it. The Toyota FT-AC concept did even better, getting four thumbs up for its promise of a rugged, interesting new Toyota with off-road credibility sized between the blander RAV4 and Highlander SUVs. Click here for a picture. To see which vehicles were similarly appreciated, and which one was the most disliked, click here.

Auto Sector Escapes Big Hits in Senate Tax Bill

The auto industry fared better, on balance, in the tax bill that narrowly passed the Senate on Saturday than in the House version. Now the industry will try to hold onto those gains, or improve on them, as both chambers convene to craft a unified bill. Automotive News reports that dealerships won a reprieve when last-minute language was inserted in the Senate legislation to preserve full deductibility of floorplan interest -- mirroring the House measure. The Senate is seeking to limit business interest deductibility to 30 percent of adjustable taxable income, and the original proposal would have included the traditional write-off of interest expense on vehicle inventories. Industry officials say retailers heavily rely on interest-only loans to buy products they can showcase to customers. Family-owned franchise dealerships also would benefit from how the House treats the estate tax, which is levied on property when it transfers to heirs after an owner's death. Both chambers would immediately double the current exclusion, but the House would repeal the estate tax after 2014. For more on how dealers might fare on the proposed new tax bill, click here.

Why the Market Isn't Sweating the Decline in U.S. Auto Sales

The U.S. auto industry may be closing out the first annual decline since the year GM and Chrysler went bankrupt, but it’s a long ways from carmageddon. Bloomberg reports that while sales have slipped in 2017, they’re down only about 1.5 percent through the first 11 months of the year. That’s a far cry from the plunge seen during the recession, when financing froze up and consumer confidence tanked. Industrywide, November sales ran at an annualized rate of more than 17.5 million units. The average estimate among 11 analysts and economists surveyed by Bloomberg News is that sales will slide to 16.7 million cars and light trucks in 2018. The decline in the U.S. auto market can be chalked up to passenger-car models falling out of favor. Instead of buying sedans, coupes and convertibles, consumers are switching to sport utility vehicles and trucks that are more lucrative for automakers. While manufacturers have been spending more on incentives to boost deliveries, the average selling price of their vehicles continues to rise. And while the SUV market is getting crowded, profits on many of these models remain strong. For more on why the industry remains positive, click here.

CNA National Gives Higher-Mileage Vehicle Buyers More for Less 

CNA National’s stated-component service contracts—Mechanical Advantage Care+Plus and Vehicle Value Care+Plus—offer favorable pricing for consumers purchasing higher-mileage vehicles, as well as flexible terms up to 10 years and 150,000 miles, all at very competitive rates. These features provide dealers the ability to better match products with the needs of their customers. Additional highlights include coverage for custom suspension, propulsion batteries and shocks; generous reimbursement amounts for towing, rental car, and travel and lodging; and multiple deductibles, including a “disappearing” option that encourages customers to return to the selling dealer for service. To learn more, call 800-345-0191 x 450 or connect with CNA National online.

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