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AIADA's Lusk on major happenings in retail auto, what's in store for '19

January 25, 2019
On the eve of the American International Automobile Dealers Association’s 49th annual meeting and luncheon, Jan. 27 in San Francisco, AIADA President Cody Lusk recounted automobile industry highlights from 2018 and offered a forecast of what’s to come in 2019.
In an interview with CBT Automotive Network, a multimedia platform for retail automotive professionals, Lusk called present days "kind of an interesting time."
"You have a new Congress that’s in and they’re figuring out where the restrooms are and getting their committee assignments and all kinds of stuff," he said. "But then, you know, with the shutdown on the administration side it’s been … it’s kind of a strange dynamic. You know, we’re hoping that there’s a resolution to that and we can kind of get back to regular order from our perspective."
Lusk said passage of the Tax Cuts and Jobs Act of 2017 and, within it, the elimination of the border adjustment tax, both were winners for the industry last year. He also applauded the industry coming together to work to rescind the auto guidance which the Consumer Financial Protection Bureau had enacted several years ago.
"Then we encountered some headwinds on the trade agenda," he said. "And we were able to play some pretty solid defense for the time being. It did get steel and aluminum tariffs in, but we testified as part of this 232 investigation (to determine the effects of imports on America’s national security) as to autos and whether there should be tariffs on automobiles. And we’ve been able to hold that off for the time being."
A report on the 232 investigation is expected by mid-February. President Donald Trump has accepted the Commerce Department’s recent conclusion that imported steel and aluminum "threaten to impair the national security." 
"If the President puts in 25 percent tariffs on auto imports, that’s really going to send the industry reeling," Lusk said.
A trade agreement being negotiated among the U.S., Canada and Mexico also could impact vehicle sales, the AIADA president said.
"Then you’ve got negotiations kicking off with the U.S. and Japan, the U.S. and Europe, and again, all the 232 tariff implications are all on top of that. So it’s going to be a busy, busy trade year."
A challenge for all automakers and their franchised dealers in 2019 is vehicle affordability. "You look at what’s going on in the market right now. And the affordability … what the prices are for new cars and even used cars. But what any slight increase could do to upset this market, much less what a 25 percent tariff would do, would be devastating to our industry at this time," Lusk said.
Rising interest rates also could be impactful for a generation of younger consumers who really have never witnessed that.
"Lease a vehicle, go in and get another vehicle, higher vehicle or better vehicle at basically the same rate. And now, with the rates going up, they are not really understanding — ‘Hey, why can I not … why am I going to lease a vehicle that’s the same or a little bit better and I’ve got to pay much more higher prices?’ " Lusk asked.
"So I think you’re seeing the interest rates, even though they’re historically low, they’re still impacting buyers in a way that they haven’t for basically a decade."
Dealers will face challenges this year and in the years ahead, of course, but Lusk is confident that successful dealers will meet the challenges.
"You know, it was just over 10 years ago that we got the iPhone. And I don’t think any of us saw what that was going to become.  There’s always been evolution. And dealers have evolved for 100 years.
"The good dealers are already focusing on what they need to do to make their businesses better every single day."
Lusk pointed to marketplace uncertainty as the industry’s greatest challenge in 2019.
"I think there’s a lot of messaging incorrectly or, you know, that sort of implies, ‘Hey, if you’re a single point dealer or you have one franchise, you’re not going to make it.’ Or you’ve got to be a giant multi-faceted dealer.
"You know, this industry is made up of all shapes and sizes."