CATA News

With its Lucid Air set to go on sale in the coming model year, Lucid Motors, a California-based EV maker, plans to unveil its first production model during a web event in September.
 
The startup is just one of a long list of new brands hoping to crack the U.S. market during the next several years, a list that also includes the likes of Fisker, Lordstown Motors, Faraday Future, Bollinger, Vantas, BYD, Great Wall and others.
 
The U.S. automotive market has long been a relatively closed club. While a handful of new brands have pried open the door in the past half century, far more have either shut down or walked away. But if even a fraction of these new entrants actually makes it into showrooms, American buyers soon will have more brands to choose from than at any time since World War II.
  
Automakers "have always wanted to get into the U.S. It’s a coveted market," said Stephanie Brinley, principal automotive analyst with IHS Markit. "It’s a difficult market to get into, but not impossible (though) it takes a lot of volume to be profitable."
 
During the past 120 years, the U.S. has seen more than 800 brands come and — mostly — go, according to the archives of the Henry Ford museum in Dearborn, Michigan. The vast majority of them popped up during the industry’s pioneering days, with names such as Chalmers, Maxwell and Duesenberg. The Great Depression wiped out hundreds of them. Others, such as Studebaker and Packard, struggled on through World War II but couldn’t generate the economies of scale needed in an increasingly costly business and were gone by the 1960s.
 
The post-War period did see the arrival of a new wave of import brands, including European marques such as Renault, Volkswagen, BMW and Mercedes-Benz, as well as Japanese players such as Toyota, Honda and Nissan. Even among them, many struggled. The 1990s kicked off a new exodus, with names including Renault, Peugeot, Fiat, Daihatsu and Suzuki falling by the wayside.
 
Detroit’s Big Three, meanwhile, have pared back. Ford dropped Mercury and the short-lived Merkur, while Chrysler — in its various incarnations — abandoned names such as Plymouth and Eagle. And, following its bankruptcy a decade ago, General Motors pulled the plug on Hummer, Pontiac, Saturn and Saab.
 
It’s not that there haven’t been plenty of wannabes. After World War II, industrial magnate Henry Kaiser hoped to launch his own brand, announcing at an industry confab that he was ready to back it up with a $100 million investment. "Give that man one white chip," responded GM’s then president. Kaiser didn’t last long, nor did Malcolm Bricklin, who tried to launch his own brand in the 1970s.
 
But some things have changed and the door appears to be opened wider than it has been in years. The nascent shift from internal combustion to electric power is offering significant opportunity, especially for companies hoping to ride the coattails of Tesla.
 
Up-and-coming EV makers can only hope to enjoy a fraction of the recent success of the California-based automaker — currently the most valued car company, measured by market capitalization — in the world. Ignoring a slew of naysayers — indeed, mocking a great many of them — the company has broken from the pack. Notably, Fisker, which debuted at the same time and was largely seen as a rival, became the biggest seller of electric vehicles in the U.S. and the world.
 
After starting with a small roadster with limited range, the company now offers four models, with a next-edition roadster in the works as well as a pickup truck and a semi-truck on the horizon. Its growth has been rocket-like in recent months, prompting the company to announce a five-for-one stock split in an attempt to make the shares "more affordable for employees and investors."
 
Not including Tesla, the list of EV startups is a long one, with some of the most promising thought to be Lucid, Detroit’s Rivian and Nikola. The latter firm took advantage of the latest means of raising lots of money fast, a "special purpose acquisition company," also known as a "blank-check company," allowing it to quickly list on a stock exchange. Fisker and Lordstown plan to use that strategy, too, later this year.
 
How many of these EV entrepreneurs will make it is far from certain, and the road to market is already littered with fallen brands such as AMP and Bright Automotive, while others, such as Faraday Future, are barely holding on.
 
"The jury is still out on the new electrics," said Brinley. "They’ve got a long way to go before we know if they really will be a presence."
 
Part of the challenge is that EVs currently account for barely 1% of the U.S. market. While many experts are forecasting a big surge this decade, that remains to be proven out and the start-ups will have to face down not only Tesla but the established automakers which are investing tens of billions each year in new electric models.
 
Not all the new brand entrants are going electric. Vantas is sticking with conventional automotive technology but hoping to follow the low-ball pricing strategy first used by the Japanese, and then the Koreans who followed to the U.S. in the late 1980s. If it sticks to its timetable, Vantas could become the first new marque dealing in Chinese-made vehicles — though it likely won’t be the last. There are plenty of carmakers which hope to make that leap, including Great Wall and BYD, the latter already setting up a U.S. headquarters in Los Angeles.
 
Peugeot this month confirmed its own plans to set up U.S. distribution though, in this case, it is looking to return after a nearly 30-year absence. It was one of numerous European brands to pull out of the States in the 1990s due to declining sales — and regretting that decision ever since. The brand hopes to get a boost as it returns, since it is one of the flagship marques for Groupe PSA, which is finalizing a merger with Fiat Chrysler Automobiles.
 
Whether it can pull off a revival is far from certain, however. FCA had little luck reviving the Fiat brand in the U.S. And it hasn’t done much better with the other Italian brand it relaunched, Alfa Romeo.
 
There’s another group of new-marques headed for U.S. showrooms. These are spinoffs of familiar brands, such as Volvo’s new all-electric Polestar, and Hyundai’s high-line Genesis.

 

Others more accurately are referred to as sub-brands. BMW’s all electric i was one of the first. Now, Ford is positioning the revival of its Bronco nameplate as the launch of a new family of vehicles that will be marketed independently – even though they will be sold out of existing Ford showrooms. Hyundai is taking a similar approach with Ioniq, a BEV sub-brand, as is Volkswagen with its battery-powered ID models.

 

"These sub-brands may be a temporary thing," said Sam Abuelsamid, principal analyst with Navigant Research, pointing to how Toyota originally positioned Prius as a sort of sub-brand with a "family" of hybrid variants. Today, Toyota is focusing on hybridizing virtually its entire lineup, and Prius sales have dropped to niche levels.

 

Overall, Abuelsamid said, some of the new brands will crack the code and enter the U.S. market but, "I suspect some of the (others) won’t come to fruition. I just don’t think the market will grow enough to support all these new entrants."

 

Two forecasters offered contrasting takes on U.S. auto sales for the rest of 2020 vary, one more optimistic and one more pessimistic, in separate webinar presentations this month.
 
The optimist is Tyson Jominy, J.D. Power vice president of data & analytics. During a webinar hosted by The Wall Street Journal, Jominy said a lack of new-vehicle inventory is the biggest factor holding back sales.
 
He acknowledges an increase in subprime delinquencies but said auto lenders are not "stacking" risk as they had in the run-up to the Great Recession, for instance, by offering long loans to subprime customers with large amounts of negative equity.
 
Provided automakers can ramp up production to meet demand in the fourth quarter, Jominy said sales have "a shot to get back to zero." That is, 0% change by the end of 2020 in monthly sales from a year ago.
 
The pessimist is Charlie Chesbrough, senior economist for Cox Automotive. He’s more worried about consumer willingness and ability to buy. During a webinar hosted by the American International Automobile Dealers Association, Chesbrough said business shutdowns and job losses this year have damaged the U.S. economy and consumer confidence so badly that it could be three or four years before auto sales recover to pre-pandemic levels.
 
"The key takeaway is, we’re still in a very, very difficult position economically," Chesbrough said. "Even though tens of millions of people were losing their jobs, the hope was that once everything opened back up again, all these jobs would be reopened, too, and everybody would get back to work."
 
Since then, businesses are running more efficiently with fewer people, less office space and less travel. Meanwhile, he said Wall Street is applauding the trend with higher stock values. "What we’re concerned with now is if all these furloughed employees are going to become permanent layoffs."
 
But both analysts concur on many points, too. They agree lease customers who have been extending their leases during the pandemic represent additional pent-up demand when they eventually return to the market.
 
Both also acknowledge inventory is a major problem for both new- and used-vehicle sales. The recent drop in new-vehicle sales means fewer trade-ins today, and fewer nearly-new used vehicles three years from now, Chesbrough said.
 
And both worry about the potential for a "W-shaped" recovery. That is, an uptick in COVID-19 cases could cause a repeat of widespread business shutdowns. Jominy calls that scenario "the elephant in the room." But he also argues businesses can recover more quickly because of their prior experience.

 

A recent update to DriveChicago.com is resulting in a massive increase in the number of visitors that the web portal is sending directly to CATA member dealer websites. With this recent change, DriveChicago.com visitors who are searching for a vehicle are sent directly to a dealer website when clicking on a vehicle listing. This is resulting in 6,000-10,000 dealer website referrals from DriveChicago.com per month.
 
Until a few months ago, DriveChicago.com relied on traditional email leads, phone ups, and website clicks to send visitors to CATA member dealer websites. With this change, DriveChicago.com gets out of the way and sends that visitor to a dealer’s website, directly to the vehicle details pages.
 
"This is probably the most effective enhancement ever made on DriveChicago.com," said Richard Wickstrom, DriveChicago.com committee chairman. "By sidestepping the traditional vehicle details page and tired old email lead format, DriveChicago.com sends thousands of customers directly to CATA dealers. Many dealers are seeing more than 100 digital visitors per month as a result of this change."
 
For dealers, there was no setup necessary. DriveChicago.com’s technical partner, Automotive Internet Media, completed a setup for each dealership that deep linked directly from the DriveChicgo.com search results into each dealer’s vehicle details pages.
 
"Knowing that dealers spend tens of thousands of dollars optimizing their websites to generate sales, DriveChicago.com decided to cut out the middle man and drive customers right into dealers’ virtual showrooms," said Mark Bilek, DriveChicago.com general manger. "This one change instantly raised the relevance of DriveChicago.com to its dealers and is a sign of the CATA’s continued commitment to provide its members exceptional value."
 
To date, more than 90% of CATA dealers have been transitioned to this new process. To see how many visitors DriveChicago.com is sending to your website, simply view the referring sites within the Google Analytics report for your dealership website.

 

The Illinois attorney general’s office is suing a north suburban Chicago dealership for unfair and deceptive advertising and business practices, the office announced Aug. 12.
 
The dealership, which six years ago entered into an Assurance of Voluntary Compliance with the AG’s office over another matter, faces extensive civil penalties over the recent alleged practices.
 
Attorney General Kwame Raoul said the dealership violated its AVC by continuing to engage in acts or practices that violate the law, and the lawsuit seeks to rescind all contracts entered into with consumers when unlawful methods were used.  The dealership also would have to pay full restitution to the customers.
 
"(The dealership) knowingly and repeatedly took advantage of people through deceptive advertising — even after entering into an agreement with the attorney general’s office to stop using unlawful practices," Raoul said. "I am committed to seeking enforcement against businesses and individuals who violate the law to take advantage of Illinois consumers."
 
Raoul alleges the dealership further violated the Illinois Consumer Fraud and Deceptive Business Practices Act by deceptively using fake checks and coupons in its advertisements, failing to disclose a consumer’s potential responsibility for negative equity on a trade-in, failing to promptly pay off a loan on a traded-in vehicle, and advertising loan opportunities to those facing bankruptcy.
 
The dealership advertises through various media including its own website, third-party websites, newspapers, and direct mailers. The attorney general’s office opened an investigation into the dealership in 2014 after receiving complaints from consumers who were unable to purchase vehicles advertised by the dealership.
 
Consumers alleged that upon visiting the dealership to buy a vehicle seen in advertisements, sales representatives would say the advertised vehicle was already sold, then try to sell customers a different vehicle instead. In addition, consumers alleged that they continued to see the same vehicle in advertisements for weeks afterwards.

 

E. John Potempa, the father of longtime CATA staffer Sandi Potempa, died July 28. He was 91.
 
A proud U.S. Navy veteran, Mr. Potempa served as a police officer in Skokie and Rosemont, and as police chief in Bloomingdale. His passion for investigation led him to open his own firm, PPI: Potempa Private Investigations.
  
Mr. Potempa was involved with many fraternal and political organizations, including the DuPage County Chiefs of Police Association; the Illinois Association of Chiefs of Police; ASIS International, the world’s largest association for security management professionals; the American Legion; the Bloomingdale Township Republican Party; and the DuPage County Republican Party.
 
Mr. Potempa also was a past commander of the Alvin W. Koehn 5813 VFW, and of the Bloomingdale Township Republican Party. For many years, he was president of the homeowners association at his Bloomingdale subdivision.
 
In addition to Sandi Potempa, Mr. Potempa is survived by a son, Michael Fracaro. Donations appreciated to The Hundred Club of DuPage County.

Max A. Madsen, who at his height operated four family-owned dealerships, died July 26 at age 91.
 
Mr. Madsen was raised in Park Ridge, the son of first-generation Scandinavians who ran a family farm. He served as a 1st lieutenant in the U.S. Air Force from 1952 to 1954, then began a more than 50-year career in the automotive industry, beginning in the 1960s at Ed McKeown Chevrolet in Glen Ellyn. He later moved to Hanley Dawson Cadillac in Chicago, advancing to a managing partner.
 
The first Max Madsen Mitsubishi opened in Downers Grove in 1987, and it became one of the country’s most successful Mitsubishi franchises. The dealership currently is in Aurora.
 
Mr. Madsen enjoyed playing competition bridge, and he reached the prestigious level of Gold Life Master. Notable opponents included Charles Goren, the leading American bridge personality in the 1950s and ’60s; and actor Omar Sharif, one of the world’s top 50 contract bridge players. He continued to win national championships into his 80s.
 
Mr. Madsen was a regular supporter of local farmers markets, a trait he took from his mother, who baked as many as six pies a day to feed workers on the family farm during the decade after the Great Depression.
 
Survivors include Robin, his wife of 43 years; sons Terrance and Kevin; a daughter, Jody; step-sons Scott Grove and Adam Grove; 10 grandchildren; and four great-grandchildren. Services will be private. Memorials appreciated to the Air Force Aid Society.

 

Olaf Gjøvik, proprietor of seven new-car franchises in Sandwich and Plano, died peacefully July 22 at age 98.
    
Mr. Gjøvik served in the U.S. Navy during World War II, then he and his wife developed a 22-acre autoplex that employs more than 100 people. General Motors recognized his 50 years as a franchisee in 2018 at a special ceremony with multiple awards and citations.
 
Through the years, the towns surrounding Sandwich and Plano felt the benefit of Mr. Gjøvik’s generosity as he sponsored sports teams, donated cars to charities, and supported countless charities. He was a founding member of the Sandwich Rotary Club and held various positions including as president.
 
Renowned for his great storytelling and sense of humor, Mr. Gjøvik was a man of deep faith and was devoted to his church. He loved woodworking, boating and camping, hunting, and riding motorcycles (well into his 80s), and he often hopped into his motorhome to visit family around the country.
 
Mr. Gjøvik’s first wife, Florence, died in 2010 after a 64-year marriage. Survivors include his second wife, Candy; daughters Judy, Jan and Dawn; sons Mark and Scott; nine grandchildren; 12 great-grandchildren; and three great-great-grandchildren.
 
When appropriate after COVID-19 issues subside, the family plans to hold an event to celebrate Mr. Gjøvik’s life. Donations appreciated to the Open Door Rehabilitation Center in Sandwich; Fox Valley Older Adults, also in Sandwich; the Fox River Lutheran Church in Norway, Illinois; or the Salvation Army.

 

Two more nonprofits favored by area new-car dealerships were recent beneficiaries of the CATA’s Chicagoland Dealers Care program. The Young Entrepreneurs Academy in Palatine and the Children at the Crossroads Foundation in Chicago each received $1,500.
 
The CATA has been a longtime supporter of local charities. Since its inception in 2008, the Chicagoland Dealers Care program has donated more than $100,000 to local organizations supported by CATA member dealers. The CATA matches a dealer’s donation up to $1,500.
 
Hyundai of Palatine is a supporter of the Young Entrepreneurs Academy. Formed five years ago by the Palatine Area Chamber of Commerce, the Academy helps coach middle and high school-aged children on how to build and run their own businesses. In September of each year, up to 30 students have the opportunity to apply to a 25-week program. Students are paired with personal mentors who work with them every step of the way through the final phase of forming a business plan.
 
"When Hyundai of Palatine first submitted the Young Entrepreneurs Academy’s Chicagoland Dealers Care application to the CATA, we took one look at it and said ‘This is right in our wheelhouse,’ " said CATA Chairman Kevin Keefe. "The concept is wonderful, arming these young students with the education and resources for them to build and run their own businesses."
 
Similar to ABC-TV’s hit show "Shark Tank," the students have the chance to pitch their business ideas to local business leaders and investors. One student qualifies each year to present at a national level in Rochester, New York, in front of a panel of judges at the conclusion of the program. All students are pledged some funding to launch their business, and some have even reaped the benefits of receiving offers from local investors.
 
"To think that these young students are receiving legitimate offers from major investors is incredible," said Steven Gaus, executive director of the Palatine Area Chamber of Commerce. "We are so thankful for local businesses like Hyundai of Palatine and organizations such as the CATA who help fund our programming so that these students can achieve these extraordinary goals." 
 
"As a business owner myself, I couldn’t pass up the opportunity to help these young students who have similar passions," said Hyundai of Palatine/Leader Auto Group President Tamara Darvish. "The Young Entrepreneurs Academy does tremendous work within the Palatine community, and we’re committed to continuing to support their efforts."
 
Elgin Toyota has been a supporter of the Children at the Crossroads Foundation for five years. The Foundation was created in 1990 on the belief that economic circumstances should not predict the future. Maggie Daley, then Chicago’s first lady, founded the Frances Xavier Warde School in 1989 with the vision that it would be would be a place where all families would embrace and accept each other’s faiths and racial and socioeconomic backgrounds. Her goal was to have 30% of the school’s students benefit from financial assistance, a hope that became a reality with the inception of Children at the Crossroads Foundation.
 
Since then, the Foundation has changed the lives of more than 700 children by providing more than $15 million in financial aid.  Ever true to the foundation’s mission, 30% of the students who attend the Frances Xavier Warde School receive either full or partial financial assistance.
 
"We applaud the Children at the Crossroads Foundation for its tremendous work to help enrich these young students’ lives," said Keefe, the CATA chairman. "The Chicagoland Dealers Care program helps stretch our member dealers’ dollars a little further for wonderful organizations like this foundation, and it also helps shine a spotlight on new-car dealers’ positive impact within their communities."
 
Elgin Toyota is part of the Bob Loquercio Auto Group. Bob Loquercio, the group’s president and chief executive, said: "I was hooked on the Foundation’s mission from the first moment I attended one of its fundraising events. I knew I had to get involved, and here I am (as a board member), five years later."
 
Sarah Frick, director of advancement at the Foundation, said, "We’re so humbled by the Bob Loquercio Auto Group’s generosity as well as the contribution from the area’s new-car dealer association, the CATA."

 

The American Bar Association on Aug. 3 approved a resolution that, in part, urges governments at all levels to adopt laws and policies that promote the adoption of an enhanced nondiscrimination compliance system for dealer compensation for arranging and/or originating a vehicle finance contract by offering a safe harbor against pricing discrimination claims for dealers that faithfully implement the NADA/NAMAD/AIADA Fair Credit Compliance Policy and Program.
 
The resolution, which was co-sponsored by the ABA Section of Civil Rights and Social Justice, Section of State and Local Government Law, and the Commission on Homelessness, recommended "safe harbor" protection to dealers who faithfully adopt the NADA fair credit program in lieu of a recommendation that governments consider requiring dealer finance compensation to be in the form of a non-discountable fixed fee. This was one of several significant improvements to the original resolution, which sought to impose a series of new duties and restrictions on the dealer finance office. 
 
Officials of the National Automobile Dealers Association said the action represents the latest recognition by a diverse and growing number of public and private groups of the value of the optional NADA fair credit program as an effective mechanism to address fair credit concerns while preserving competition in the marketplace. The program, along with supporting materials, is available at nada.org/faircredit.
 
The NADA continues to encourage dealers to consider, in consultation with their counsel, whether to adopt the voluntary approach to fair credit compliance.

 

New light-vehicle sales improved for the third consecutive month in July. The July SAAR totaled 14.5 million units, a decline of 14.4% compared to July 2019 but up from the SAAR of 13.1 million units for June 2020.
 
In terms of raw volume, July sales were up by just over 120,000 units from June. And through the first seven months of the year, new light-vehicle sales were off by 22.1% compared with the same period in 2019. American consumers continue to choose light trucks over cars, with light trucks representing 76% of all vehicles sold in July and 75.4% of all new vehicles sold so far this year.
 
Similar to May and June, fleet sales fell more than retail sales did in July. According to Wards Intelligence, retail sales were off by 10% year over year, while fleet sales declined by a substantial 60% year over year. Vehicles have been selling quickly once they reach dealer lots. According to J.D. Power, 41% of all vehicles sold in July spent fewer than 20 days on the lot, up from 35% a year ago. Inventory constraints in popular segments may have limited some sales in July and, according to Wards Intelligence, final inventory numbers are expected to register an eight-year low for the month.
 
Because of such robust demand, incentive spending was dialed back in July. Preliminary estimates from J.D. Power pegged incentive spending per unit at $4,236, down from June 2020 but up by $166 compared with July 2019.
 
The NADA’s outlook has not changed much since last month, with forecasters expecting new-vehicle retail sales to continue to recover for the rest of the year, while fleet sales continue to struggle.
 
Inventory constraints in popular segments will be a headwind for new-vehicle sales for the rest of the summer. But barring any unexpected parts delays or vehicle plant shutdowns stemming from new COVID-19 outbreaks, forecasters expect that vehicle inventory levels will be at close to normal levels by the end of the summer. For 2020, they expect new light-vehicle sales to fall to between 13 million and 13.5 million units.