WANADA Bulletin # 5-13 Washington Auto Show Special! February 5, 2013 Headlines… Car buyer choice, demographic shifts discussed in Auto Show’s Affordable Mobility Summit on Capitol Hill Automakers raise concerns about 2025 fuel efficiency mandate at Auto Show Capitol Hill Summit Audi of America President describes OEM’s road to success and plans for the future in keynote remarks at Auto Show Sec. of Energy announces workplace EV program at Auto Show Media Day events at The WAS spotlight breadth and success of industry and its public policy priorities WAS Sneak Peek Preview draws Washingtonians to Show, Jan. 31 WANADA’s Member “Reception within the Reception” at Auto Show Preview Keith Crain, Automotive News recognize Edsel Ford at dinner in his honor at the Auto Show Thought for the Week… Preview of coming attractions… 2013 WAS Policy Summit on Capitol Hill, Jan. 30 Car buyer choice, demographic shifts discussed in Auto Show’s Affordable Mobility Summit on Capitol Hill At the leadoff event on the first Public Policy Day of the 2013 Washington Auto Show (WAS), speakers with diverse viewpoints discussed whether consumers are willing and able to take advantage of the new technologies for better fuel economy. The panel was heard at the National Journal Policy Summit on Affordable Mobility by a standing room-only crowd in the historic Caucus Room of the Cannon House Office Building, last Wednesday, Jan. 30. “The standards are farther out Summit on Affordable Mobility in the Cannon House Caucus Room than we’ve ever had,” said dealer and NADA Government Affairs Chairman Don Chalmers. “We would prefer it if they were in five-year increments.” The fuel standards passed last year will boost the overall fuel economy to 54.5 mpg by 2025. (Current fuel economy is below 30 mpg.) The WANADA Bulletin is a membership publication published weekly by the Washington Area New Automobile Dealers Association 5301 Wisconsin Avenue, N.W., Suite 210 Washington, DC 20015 Tel: (202) 237-7200 Fax: (202) 237-9090 WANADA Bulletin #5-13 2013 Washington Auto Show Page 2 February 5, 2013 All points of view were represented. In addition to Chalmers, the first panel consisted of Mitch Bainwol, president and CEO, Alliance of Automobile Manufacturers; Rebecca Lindland, director of automotive research, IHS Automotive; Gina McCarthy, assistant administrator for the EPA Office of Air and Radiation; and Mary Nichols, chairman of the California Air Resources Board. Consumers are the biggest winners from the CAFE standards, McCarthy said. “They save money every time they put gas in the tank.” But Chalmers pointed out that car buyers need to From left, moderator Fawn Johnson, National Journal; Mitch get financing. “[Lenders] don’t look at fuel Bainwol, Alliance of Automobile Manufacturers (center); Gina economy or how much money you will save,” he McCarthy, EPA; and Mary Nichols, CARB said. “They look at your income.” “How many vehicles does that take out of the market?” Chalmers queried. Vehicle affordability is a crucial element to the success of the fuel economy regulations, added researcher Lindland. “We could delay the greening of the fleet if we don’t make these vehicles affordable.” Lindland noted that the average income for a Volt buyer is $150,000, versus $58,000 for the industry overall. Consumers now are risk-averse, she said, and reluctant to try new technology. Lindland, who does studies of consumer attitudes and behavior, said people are still living paycheck to Q & A at Affordable Mobility Summit paycheck. “To tell someone they’ll save money over five years doesn’t help when they’re looking at this week’s paycheck.” The panelists spoke of how shifting demographics would change the U.S. auto industry. “Younger people are delaying getting their driver’s licenses,” said Lindland. “Some don’t get one at all.” In cities where it’s practical, like Washington, younger drivers are happy to use car-sharing services instead of buying a car. “There are 80 million people less than 35 years old in this country,” said Lindland. “They will change mobility.” Because of this demographic shift, IHS is changing its auto sales forecast for the next 10 years From the Auto Show at the Summit (left to right), by millions of units, though specifics have not been John O’Donnell, assistant producer; Kevin Reilly, made public. assistant chairman; and George Doetsch, past chairman Another question the panel discussed: barring a gas WANADA Bulletin #5-13 2013 Washington Auto Show Page 3 February 5, 2013 tax – which certainly wouldn’t pass the current Congress – how can consumers be persuaded to buy more fuel-efficient vehicles? “It’s a matter of getting consumers to look at the total cost of the vehicle,” said Lindland. Consumers should put a value on not having to pay for gas at all if they drive an electric car. She cited the example of a friend who puts gas in his Volt twice a year. The rest of the time, the electric charge is enough for his daily commute. “That’s an incredible amount of money saved,” Lindland said. Though past studies have shown consumers’ willingness to buy more fuel-efficient vehicles is closely tied to higher gas prices, Mitch Bainwol, president of The Alliance of Automobile Manufacturers, offered a different perspective. Researchers who asked consumers about their vehicle purchase intentions from May to December 2012 saw no shift in the type of vehicle they wanted, though gas prices fluctuated 15 percent. And when a consumer trades in her current vehicle (average age 11 years) for a new one, there is an immediate, massive improvement in fuel efficiency, said Bainwol. 2013 WAS Policy Summit on Capitol Hill, Jan. 30 Automakers raise concerns about 2025 fuel efficiency mandate at Auto Show Capitol Hill Summit “The challenge in the marketplace is really severe,” said Chrysler’s director of regulatory affairs Reg Modlin about the 2025 fuel efficiency standard. “The market has to pull it, it can’t be forced.” Modlin was speaking at the second panel of the National Journal Policy Summit on Affordable Mobility during the 2013 Auto Show’s Public Policy Day, Jan. 30. Toyota’s Vice President of Technical and Regulatory Affairs, Tom Stricker, agreed that the standard poses “quite a challenge,” but said manufacturers committed to it in preference to the uncertainty of state-by- state fuel efficiency standards, reminiscent of the California Low Emission Vehicle program. There are only about 500,000 hybrids on the roads now, and 55 percent of them are Toyotas. “They are a technology that consumers have accepted and will continue to accept,” said Stricker. (From left) Amy Harder, National Journal; Tom Stricker, Toyota; Though there may be broad public Robert Bienenfeld, Honda; and Reg Modlin, Chrysler agreement that the United States needs to lower emissions of the CO2 variety, “consumers don’t care about the policy when they buy a car,” said Stricker. Because of the difficulty of meeting the standard, the midterm review scheduled for 2017 will be crucial to ensure the goal is still viable, Stricker said. Toyota’s main thrust to meet the standard will be creating a more fuel-efficient internal combustion engine and more hybrids. Honda will concentrate on improved engine technology and improved road load (power consumption from features such as air conditioning and light), said Robert Bienenfeld, senior manager for environment and energy strategy for American Honda. Although newer technology in hybrids and plug-in electrics will be available after 2020, most changes will be evolutionary, he said. WANADA Bulletin #5-13 2013 Washington Auto Show Page 4 February 5, 2013 For Chrysler, the question isn’t technology, but consumer acceptance and cost, said Modlin. In 2020, we must ask, “Are consumers buying the technology? Will they continue to?” There’s no infrastructure for compressed natural gas or diesel, so those aren’t serious contenders currently. Natural gas does have a future in the transportation marketplace, Stricker said, but it’s not yet clear what it is. Natural gas vehicles for fleets are one possibility, as is using natural gas to make hydrogen for fuel-cell vehicles. What about a gas tax as a policy measure? “The gas tax is incredibly regressive,” said Honda’s Bienenfeld. “The first thing that happens when gas prices go up is that people downsize. That’s not a vote for new technology.” Alternatively, said Stricker, when gas prices go up and GDP is strong, automakers invest more in advanced technology. “In the next 10 to 15 years, we’re going to see more clarity in what consumers want,” said Bienenfeld. 2013 WAS Public Policy Day On-Site, Jan. 31 Audi of America president describes OEM’s road to success and plans for the future in keynote remarks at Auto Show The Newsmakers’ Breakfast hosted by the International Motor Press Association (IMPA) and the Washington Automotive Press Association (WAPA) led off the 2013 Washington Auto Show Industry/Media Day, Jan. 31, with keynote remarks by Scott Keogh, president of Audi of America. Opening with a tribute to his new hometown, Keogh continued with a description of the company’s new business model as its sales have jumped from 101,600 in 2010 to 139,300 in 2012. “We felt we needed to be in D.C. to be part of the conversation,” Audi of America President Scott Keogh said, in Keogh direct reference to the importance of OEM/U.S. lawmaker relations. When Audi came here in 2006, it was the seventh most cross-shopped brand; now it’s second. The transaction price is up nearly $10,000, and sales are up 55 percent. “And dealers are key players investing $206 million in facility Reporters crowd into Audi keynote presentation.