What were some of the biggest surprises of 2016?
The first big surprise was VW.
Sort of a late surprise was the presidential election and the outcome of that.
But no surprise to me was the fact that we had another record sales year. I was pleased to see that this year we stepped it up.
As sales slow, will dealers feel pressure from automakers that raise incentives to artificially move cars and trucks?
If we have to plateau, let's plateau at a record level. I'd rather plateau at 17.5 million than 16 million. Things are very robust.
The incentives were there at the end of the year. There will continue to be this desire to gain market share, so we can look for incentives to probably continue. But what I would hope is that the manufacturers would take a hard look at the incentives they have out there, and move away from the corrosive stair-step, two-tier pricing type of incentives that are negative for the brand image, negative for the dealer image. They're confusing to the consumer and they breed dissatisfaction. What we'd like to see at NADA is ... that incentives are fairly shared.
The average price of a car is rising. Are customers getting enough value for what they're spending on new vehicles?
The simple answer to that is the consumer has voted. Last year was a sales record, so they are still seeing the value. Consumer confidence is what drives our industry and it's incredibly strong at the moment. That's why I make the case that we could have another record year in 2017 just because of the strength of consumer confidence.
President Trump's campaign proposals for tariffs on Mexico-built cars and reworking the North American Free Trade Agreement are well-documented. Are you concerned that, if enacted, those policies would force automakers to raise vehicle prices?
It's too early to know what the impacts of the trade policies are. There's been tremendous speculation on whether we'd have tariffs. Nobody knows exactly what the Trump plan is at the moment. We'll start to get a clearer vision. I don't think anyone knows how it's going to impact vehicle pricing.
What I think we do know -- some of his message has resonated and you've already seen, early on, Ford and others are making decisions vis-a-vis Mexico. How that impacts prices, I don't know if we can say. Once we understand what the program is, dealers will adjust and we'll adapt. And NADA will be there to make sure that the things coming out of Washington, D.C., are not anti-affordability.
You've been vocal about needing to protect the franchise model. Tesla's direct-sales model won a victory in Virginia, and it continues to fight in other states. Will the Tesla model stick around?
Tesla doesn't impact the franchise system. The franchise system exists because each state gets to regulate their industry to the benefit and protection of the consumer. What that means is that the policymakers have to make a decision for the consumer, who puts them in place.
The question for the consumer is: Do you want to be in a vertically integrated system that can only pay retail, or would you prefer to come to a dealership where there is inter-brand competition and save money? The policymakers will make the right decision based on what the consumers will tell them to do, state by state, which means the franchise system will continue.
What do you think of the EPA's decision to continue with its 54.5 mpg emissions mandate?
The midterm review needs to occur as it was agreed to initially. In the review, they need to take into consideration the realities of the market, which would include the shift in mix from cars and hybrids to trucks and SUVs, so we are not punishing the consumer who says "This is what I want," and somehow you force them into something they don't want. In their wisdom, they contemplated the review to see what the market realities are going to be. They're different than what they thought they were going to be.
It's a very complex issue. The manufacturers need to know what the rules are.
How do you sell electric vehicles to buyers who don't want them?
You can train me all day long on how to sell an electric car. But no matter how well I'm trained, if the consumer doesn't want the vehicle, you can't sell it. We haven't found the price point in our market yet where the demand has surfaced. It's all about what the consumer wants, not what the government mandates. That's a problem for all of us.
There are some reasons why there isn't a market today. One of them is range anxiety, which [automakers are] trying to address. Another is charging time.
Any advice for Mark Scarpelli, the incoming NADA chairman?
Stay healthy and be prepared for anything.