Pub. 15 2016-2017 Issue 4

N E W J E R S E Y C O A L I T I O N O F A U T O M O T I V E R E T A I L E R S I S S U E N O . 1 , 2 0 1 7 6 new jersey auto retailer Chairman’s MESSAGE | BY RICHARD A. DESILVA, JR. CHAIRMAN’S MESSAGE  continued on page 10 Border Adjustment Tax Would Create Huge Hit To Vehicle Affordability It’s been just about two months and the new Trump Administration, so far, appears to offer a mixed bag for deal- ers and the business community at-large. On the positive side, the real potential for tax and regulatory reform and stepped up infrastructure investment could make for another banner year for car sales and improved profitability for dealers. But the increasingly bitter divisions inWashington and a dramatic shift towards protectionist economic policies could spell trouble for car buyers and ALL dealers, not just those representing import nameplates. House Republicans have floated a proposed Border Adjustment Tax (BAT) as part of their tax reform platform. The BAT, rumored to be 20% on any item imported into the United States, would price many consumers right out of the new vehicle mar- ket. UBS Securities analysts have estimated the BAT could raise average car prices in the US by 8%, or something like $2500 per vehicle. Baum and Associates estimate that most automakers would have to raise prices thousands of dollars—some in excess of $10,000 or $15,000 for high-end imports, if the proposal is passed in its original form. While, on the surface, the proposed BAT appears to be a divisive issue between import and domestic dealers, the reality is that a BAT will impact the affordability of virtually EVERY vehicle in EVERY dealer- ship’s showroom or parked on dealers’ lots. The American International Automobile Dealers Association (AIADA) has been at the forefront of the indus- t r y’s push- back on the BAT, while the National Automo- bile Dealers Association (NADA) has expressed concern and adopted a “wait and see” position on the, as yet, ill-defined tax proposal. NJ CAR has supported the AIADA’s position, recently sending a contingent of dealers and Next- Gen Committee members to participate in the AIADA’s “Fly-In” event and to meet with several of our elected officials to voice our opposition to the BAT and educate them on the impact the proposal would have on vehicle affordability. The auto industry is one of the bell-weathers of the nation’s overall economy. When vehicle sales increase, it is a good indicator that the economy is growing and consumers are more comfortable making major pur- chases. That is, as long as those purchases remain affordable and represent good value. Any proposed policy that would negatively impact vehicle affordability would create a domino effect. An aging fleet of vehicles on the road normally leads to increased sales, as consumers purchase safer,more fuel-efficient and technologically-advanced vehicles. This increase in sales is further driven by vehicles remaining affordable for most consumers. The retail auto industry drives a large portion of the United States’ economy. Any policy that results in a dramatic increase in vehicle cost would make vehicles LESS affordable for many consumers and drastically reduce demand for new vehicles. And the dominos would continue to fall… As I’m writing this column, no specific leg- islative language for the proposed BAT has been released. No bill has been introduced in Congress or specific plan pushed by the Trump Administration. No hearings have been set. But one thing is clear- if House Re- publicans hope to pass their tax cuts, theywill need to find away to pay for them. Right now, the proposal being floated is the BAT, which means your customerswill be footing the bill. Regardless of the fate of the BAT proposal, NJ CAR, the AIADA, and the NADA, must keep reminding our elected officials to consider the impact on affordability of ANY proposal, from tax reform or trade deals to CAFÉ standards or energy policy. One of my priorities as Chairman this year is to get more of our members politically active. I encourage dealers to engage with their members of Congress. Invite them to your dealership. Visit them in their office.