Pub. 17 2018-2019 Issue 2

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 . 3 , 2 0 1 8 8 new jersey auto retailer NADA Director’s MESSAGE | BY RICHARD A. DESILVA, SR. On balance, President Donald Trump has been tremendously positive for the U.S. auto industry. Less than a month before President Trump was inaugurated, Peter Welch, President & CEO of the National Automobile Dealers Associ- ation (NADA) spoke at the Automotive News World Congress and warned that, after back-to-back years of record auto sales, the industry was on the cusp of the first slowdown since the Great Recession. Since ours is a cyclical business, he knew that years of 17-million-plus annual sales couldn’t last forever. And then a funny thing happened. The headwinds began to ease. The economy, already doing well, really started to gain steam. Jobs were being created at a healthy rate, and unemploy- ment continued to fall. Consumer confidence was up. And the demand for new vehicles remained strong—so much so that in 2017 we had our third consecutive year of new-vehicle sales topping 17 million. Then came the Tax Cuts and Jobs Act at the beginning of 2018. As of June, industry analysts were again making 17-million-plus predictions for 2018 sales. It was in this context that an alarm went off when the Trump Administration announced plans to impose tariffs of as much as 25% on imported automobiles and automotive parts, threatening higher vehicle prices and reduced choices for the American auto buying public. Higher vehicle prices and reduced choices could reduce consumer demand and throw into reverse the economic gears that have been driving new vehicle sales forward. Why is President Trump threatening action that could hurt our industry and customers? I believe the President has identified and is deeply concerned with three things that are hurting America: 1. The loss of manufacturing jobs in the U.S. over the past 30 years; 2. The U.S. trade deficit, which ballooned to $568 billion in 2017; and 3. An unlevel international trade playing field that puts the U.S. at a significant disadvantage in many areas, even with our strongest trading partners. NADA fully appreciates the Administration’s desire to address these imbalances, but they (and many dealers) object to the tools being considered by the Administration to achieve these goals. That’s because tariffs or the imposition of import quotas are blunt instruments that fail to account for the reality of today’s globalized auto industry. No vehicle is 100% domestic The world’s automobile manufacturing and assembly industry, and the integrated global supply chain upon which it relies, is extremely complex. Because of that, it is not unusual for foreign nameplate automobiles assembled in the U.S. to have a higher “domestic parts content” than domestic nameplate automobiles assembled in the U.S. Every single American-made car and truck is partially an import. Therefore, tariffs on autos and parts would affect every make and model sold in the U.S., making this an issue that engulfs the entire industry. In addition, when American consum- ers take their vehicles to a dealership service or body shop for maintenance or repair, the parts used for that work may well have been imported. But far from being burdensome to domestic manufacturing, this interconnectedness has created domestic U.S. manufacturing op- portunities for all OEMs—not to mention a wide array of choices for consumers. In 2017, 52% of new vehicles purchased from American franchised dealers were assembled in the U.S. Of the remaining 48% of U.S. sales that were imported, more than half were assembled in either Canada or Mexico. The broad impact of tariffs Competition by manufacturers, and among dealers, provides our customers with unparalleled transportation options and choices. But this vibrant industry could be undermined by tariffs or quotas which would lead to: • Higher new vehicle prices. A 25% tariff applied to all imported vehicles and auto parts would lead to: a $4,400 average increase in the price of all vehicles sold in the U.S.; a $2,270 average increase in the price of all U.S.-assembled vehicles sold in the U.S.; and a $6,875 average increase in the price of all imported vehicles sold in the U.S. • A loss of dealership jobs. A 25% tariff on imports will result in the loss of 117,500 of the 1.1 million U.S. new-car dealer- ship jobs (a loss of 7 jobs per franchised dealership). • Less choice and decreased competition. Global companies Auto Tariffs Pose a Risk to Every Dealer The following is an edited version of a story published by Peter Welch, President & CEO of the National Automobile Dealers Association.