Trade News

Nobody ever said this business was going to be a cakewalk

The convention of franchised auto dealers, officially called the NADA Show, later this week in Dallas gives us a good opportunity to talk in this issue about the trends and pressures auto retailers everywhere are dealing with right now.

And there's a bucket of them.

There's the ongoing dance between dealers and factories to set agreeable ground rules on how electric vehicles will be sold and serviced. There's the issue of the languishing leasing market. There's the confusion over how tax credits are going to be doled out on EV purchases. And there's the likelihood that higher interest rates are going to turn store floorplanning back into a cost for retailers to contend with.

We delve into all that and much more this week.

These are new issues looking to be resolved. And the NADA Show is a yearly reminder that the car business is flush with resources and powerful in the wisdom of it…

Japanese tire maker Bridgestone Corp. is developing tires for use by crewed rovers on the moon. The tires are metal and airless, designed to withstand the moon's extreme temperatures, rocky terrain and cosmic radiation better than traditional tires. Because the moon surface is covered in a layer of incredibly fine sand, Bridgestone opted for a double-tire structure with two tires attached to each wheel — like on large trucks here on Earth. That results in a contact patch area roughly six times that of standard passenger car tires, allowing for pressure to be dispersed across a larger surface. Bridgestone believes that some of its lunar solutions will help it develop new ideas for advanced concepts here at home.

As someone who has been selling new Toyotas for more than 50 years, Steve Gates said he never would have believed that he and his fellow brand dealers could have had as much success as they did last year with so few vehicles in stock.

"I was absolutely certain, when this all started, I thought I needed to jump off a bridge because I didn't think that there was any way that we could survive with virtually no inventory," said Gates, dealer principal of Gates Auto Family, a group of 11 rooftops in Kentucky, Tennessee and Indiana that includes three Toyota stores.

Gates is a dealer council veteran but is taking his first spin as a chairman, with the Toyota National Dealer Advisory Council. He's also a former chairman of the American International Automobile Dealers Association. Gates said he has been selling Toyotas since he was a senior in high school, and the current sales process looks surprisingly familiar.

"My dad became a Toyota dealer in 1970, and th…

As Infiniti creates its product road map for the next generation, retailer Steve Lapin has ideas.

The Infiniti National Dealer Advisory Board chairman would like a pair of new models to bookend the Japanese luxury brand's portfolio.

"If we're going to become this aspirational brand, we would need a six-figure GT-R-type car," Lapin told Automotive News. "We need a differentiator."

Lapin's ideas might not be so fanciful.

Infiniti previously brainstormed a racy halo car before ditching it to focus on more practical segments. The Japanese brand displayed a running prototype of a Formula One-inspired high-performance hybrid coupe at the 2018 Paris auto show.

Based on the Q60 coupe, the Project Black S concept featured a dual-hybrid electrified powertrain that boosted Infiniti's 400-hp VR30 twin-turbo V-6 engine into an estimated 563-hp electrified power source. With a top speed of 153 mph, the Black S could sprint from 0 to 60 mph in under four…

The turmoil at Jaguar Land Rover's headquarters in the U.K. has not impacted dealers, says Larry Zinn, chairman of the Jaguar Land Rover Retailer Cabinet.

CEO Thierry Ballore, after just two years on the job, left abruptly in December.

The reinvention of Jaguar as an all-electric superluxury brand remains on track, with a new three-vehicle lineup due in about two years.

And while most of JLR's competitors have found ways to earn significant profits while dealing with the microchip shortage, JLR hasn't had a profitable quarter in almost two years.

The automaker has a backlog of more than 250,000 orders for the Range Rover, Range Rover Sport and Defender.

But the shortage of vehicles isn't all bad news. It has helped reduce incentives and prompted customers to order their vehicles, often with expensive customized features.

Dealers, Zinn said, had a great 2022.

"Jaguar Land Rover dealers have been performing at a very high level…

Kia hasn't said whether production of its EV9 three-row electric vehicle will be shifted to a U.S. factory from Korea when it comes online in the fall to qualify for $7,500 in federal tax credits. But James Morrell, chairman of the Kia Dealer Advisory Council, said there's no way to deal with the new law without building the EV9 in the U.S.

The private reveal of the new EV9 at last year's NADA meeting was the brand's "biggest excitement," said Morrell, who has been head of the dealer council since 2019.

"It's an EV that people can get behind," Morrell told Automotive News. "It's not some wacky, small, futuristic-looking vehicle that's only going to appeal to a small niche. It's a seven-passenger SUV that's electrified so there's going be a huge demand for it."

But the complex new requirements of the Inflation Reduction Act were a buzzkill on dealers' anticipation.

"There's a lot of trepidation from headquarters and from the dealers on introducing…

Polestar has opened a pop-up snowroom in Finland.

That's not a typo.

The electric vehicle maker's newest retail location is built entirely out of snow — more than 105,000 cubic feet of it, harvested from a nearby ski resort. The cube-shaped building was constructed over just 20 days in Rovaniemi, which lies on the Arctic Circle.

The Polestar Snow Space is open until late February for consumers to book Arctic test drives of the Polestar 2 EV. At that point, Polestar will demolish the structure and return the snow to the ski slopes.

"The city of Rovaniemi is known for its wonderful design," Martin Österberg, marketing manager of Polestar Finland, said in a statement. "We wanted to honor this by creating a beautiful work that was inspired by our brand's minimalistic and pure design language. The choice of building material was easy due to the location and our desire to use circular materials: of course, it had to be built…

Mark Hollmer has joined Automotive News as a reporter covering dealers and retail technology.

Hollmer, 53, most recently wrote about insurance and mortgage industry technology for Insurance Business America and Mortgage Professional America, publications owned by Key Media in Sydney, Australia.

Before that, Hollmer spent more than seven years writing and editing at Wells Media's Carrier Management publication, where he covered the property/casualty insurance industry with a focus on insurance technology startups.

He began his career as a reporter at The St. Albans Messenger in Vermont. Hollmer is an alumnus of Canisius College and Syracuse University's S.I. Newhouse School of Public Communications.

Publics' floorplan pinch Net floorplan interest for the 6 major publicly held dealership groups was a big expense for the retailers in 2019 before turning into a profit center in 2021 as rates tumbled and floorplan assistance from automakers offset interest costs. But that lift is projected to fall this year because of higher rates. In Millions 2019 Q1 $-40.1 Q2 $-30.3 Q3 $-16.8 Q4 $-2.6 2020 Q1 $-10.6 Q2 $17.7 Q3 $52.2 Q4 $66.3 2021 Q1 $65.7 Q2 $91.1 Q3 $79.9 Q4 $86.5 2022 Q1 $87.8 Q2 $85.3 Q3 $63.9 Q4 $52 Source: Benchmark Co.

Higher interest rates and car prices, combined with a likely influx of new-vehicle inventory as the industry's supply shortages start to ease, mean floorplanning revenue for dealerships will drop — or even flip to a cost — bringing about the end of its status as an unlikely profit center.

Floorplan as a profit source is a pattern seen when the Federal Reserve has aggressively raised its benchmark lendi…