New NADA President Mike Alford: Electric Vehicles Can Prove Dealer Worth
Resolving regulatory issues remains on his short list as NADA chairman in the coming year.
“We need to make sure our voice is heard and that we communicate and educate our dealers to make sure they are aware,” he said.
Alford spoke with staff reporter Hannah Lutz. Here are edited excerpts.
Q: What are your top priorities as NADA President?
A: One of the things I’m most excited about is pursuing and developing a strategic plan with [CEO] Mike Stanton and his leadership team at NADA. One of the things we want to make sure we’re doing is really focusing on the path to electrification. What is the strategic outcome for dealers as we move forward? The road to electrification is upon us, and I certainly see an omnichannel approach. I think physical franchise dealerships are clearly the path to scaling electric vehicles, and this is clearly an opportunity to show that we are a strategic advantage in the successful electrification of the fleet nationwide . As part of this journey, I want to make sure that we continue this dialogue with all stakeholders and work towards a clearer understanding of what the business model that dealerships are involved in looks like, particularly in some of these new revenue streams that are coming.
What are the main issues facing NADA?
We have legislative issues that we are focusing on. We have regulatory issues that we face. In the regulatory space, voluntary protection plans, dealer participation, and the FTC’s amended safeguard rule are just a few of the issues we are close to and keep dealers aware of.
We are still dealing with [last in, first out tax deferments]. This issue is upon us right now, and we are working on it. I think we’ve done a good job of educating people and making all parties aware of this issue.
Another issue is this whole omnichannel approach and making sure that we understand how we process data, how we manage how to leverage the strategic advantage of real estate, our customer base and connections in local markets, but also the great efficiencies and technologies that are available to us now and our former OEMs. We can meet the customer where they are in the buying process, and we can deliver that vehicle to them 100% digitally, or we can do 30%. We must meet them on this journey. It’s exciting for me. As we get better clarity and new products are rolled out, there is a real opportunity for the legacy OEMs and for the dealer corps.
How will your experience as chair of NADA’s Regulatory Affairs Committee help you in this position?
It’s been such an eye-opening journey, the two years I’ve served as president in the regulatory affairs space. There are issues that come to us, like the Military Loans Act issue, without notice or feedback that someone probably thought was in the best interest of our customers. To be able to work with these bodies, both on the legislative and regulatory side, of a big issue like this and seek an outcome was fascinating. There are a number of regulatory issues that concern us or that could arise in the short term.
I think our team is doing an exceptional job staying on top of these issues and working with all stakeholders to ensure we get a good outcome. And if we don’t have a good result, then we work to reverse it. Regulation is central to our role in the coming year.
What is the value of an in-person NADA Show compared to last year’s virtual event?
I’m really excited to come together again as an industry. There’s so much you can do on Zoom, but you’re missing out on so much by not having the ability to connect with our OEM partners, suppliers, and each other as master resellers. The data will show that this convention is well attended. It will be a return to basics. I can not wait to be there. I can not wait.
What are you hearing from dealers in terms of incentives for EV consumers? Many automakers say these incentives will be needed to drive adoption. Do resellers support this?
What I’m hearing from dealers is that we’re very, very excited about these products that are coming. I reserved a Silverado EV for my personal use. I’m so excited about this. Dealerships want to see electric vehicles succeed. We want to be part of this journey. If that means incentives, they should be done in a way that scales EVs based on how fast they actually come to market. We need to scale electric vehicles, but at the same time we can’t have a gap on the ICE side. We have to know this balance. Affordability will allow us to deliver electric vehicles at scale.
With the shortage of inventory, many dealers are selling above the list price. How does NADA advise them?
NADA has provided a blog dealing with this issue. The interesting dynamic about this is that there really aren’t any consumer incentives to speak of. Many dealers add accessories to vehicles, and the commercial differential is fascinating. If you look at the transactions in terms of the trade difference, the consumer is actually doing very well because the trade-in values are at a higher percentage than the retail price. But inflation is real.
Where should average inventory levels be once the chip shortage is resolved?
Ideally it would be great to have 45-60 days in the field as we come out of the chip shortage. This is a level that meets the immediate needs of our customers. It’s a good level of supply and it’s also efficient.
The chip shortage has improved to the point where we are starting to see better inventory opportunities at the retail level. The consumer is coming to think that’s not necessarily a bad way to do business, because digitally we can show them what’s coming, how it’s coming. We have the logistical knowledge of when it’s going to be here. It’s an efficient way to run a capital-intensive business like a car dealership.
Dealers saw record profitability in 2021. What will it take to maintain those margins?
The accelerated terms that we have as dealers and the strong fixed operations and expense control. The dealers certainly had a great year last year. OEMs had a great year last year. Some of the efficiencies of this business model versus inventory turnover, particularly as we move forward with a higher cost of capital in terms of interest rates, will be critically important to continue to have the kinds of results that we had last year. I think this year will be another great year because we’re going to have more inventory. I think there is pent-up demand and consumers are excited about the product offerings we have.
Are installation requirements likely to change as digital automotive retail grows?
Facility requirements are changing in terms of what dealerships are asked to provide – in terms of charging infrastructure, in terms of the types of lifts and tools you need to properly and safely service EVs . Also digitally, we will all work together on more efficient and faster processes that will benefit both the retailer and the OEM.
What’s your message to dealers who don’t want to sell EVs or don’t want to go digital?
That’s the beauty of travel. Everyone can make their own decisions and decide what is best for their personal situation. I’m really excited about the electrification of the fleet, and while there are some unknowns, the ability to sell and service electric vehicles and at the same time sell and service ICE vehicles and opportunity creates in the medium term more opportunities for each retailer.
How is NADA working with the Biden administration?
We work and stay up to date with CAFE initiatives. We work and stay abreast of tax policy. We work and stay current with Build Back Better. We give our opinion on all this legislation as we would with any administration. It’s industry specific. We try to build our files consistently across all jurisdictions on these key issues.
How does NADA advise and provide resources to dealers on how to prepare for the deployment of electric vehicles?
The EV business model will be different from the ICE business model. What is the outlook for stationary operations versus electric vehicles? That remains to be determined. Going to market with electric vehicles, I think it will be an omnichannel approach. I think the role of the dealership in terms of truly scaling electric vehicles beyond their initial adoption is going to involve brick and mortar. This will involve working with a family that owns an ICE vehicle and then an electric vehicle. And then over time, maybe it’s all EV. I think the role of providing great after-sales service, helping them make sure they’re on budget and getting the usage they need, will evolve quite quickly. I think as you see electric vehicles becoming more mainstream, you’re going to see the importance of dealerships come through.
Is NADA concerned about the reservation systems that many automakers have rolled out for EVs and other large vehicles?
We focus a lot on reservations. I am a big proponent of the round and win based allocation system. The reservation does not have to be an allowance. I think it’s really, really important to make sure that you don’t create other results with a pool that are unintended.
Is NADA concerned about legislative efforts to allow start-up EV makers to sell directly to consumers?
Yes. It’s done state by state. I would say a big part of the concern is what is the ultimate benefit to the end user, not just in terms of the sale of the vehicle but in terms of vehicle maintenance, safety issues, recalls, what have you got?
We believe in the franchise system. We will continue to evolve. We must. I think [the franchise system is] the fair way to offer electric vehicles in all 50 states and all markets. We have brick and mortar. We have the distribution methodology. We have the requirements to provide charging infrastructure in the communities in which we live. If you want to scale electric vehicles fairly, the franchise system is the best way to do it.