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By Counterman
Trade associations for the major automakers and parts manufacturers recently
link hidden, please login to view urging lawmakers to pass legislation including the restoration of full first-year deductibility for research-and-development (R&D) expenses. Co-signing the letter were the Alliance for Automotive Innovation; American Automotive Policy Council; Autos Drive America; MEMA, The Vehicle Suppliers Association; and the Truck and Engine Manufacturers Association, which collectively represent millions of workers in the auto industry.
“Congress must restore this tax provision to enhance U.S. competitiveness, job creation and innovation as soon as possible,” said Ann Wilson, MEMA’s executive vice president of government affairs. “As this industry is facing massive transformation, R&D is crucial. Many of our members are smaller, innovation-driven vehicle suppliers and are struggling with the financial burden to remain competitive in the global marketplace. Restoration of yearly deductibility goes a long way in addressing these fundamental challenges.”
For almost 80 years, motor vehicle and component manufacturers relied on the availability of full first-year deductibility of R&D expenses. A new law implemented in 2022 now forces businesses to spread that deduction over five years, making R&D exponentially more expensive, the associations assert.
The trade associations lament that the change has been “particularly burdensome for the auto industry, threatening thousands of jobs.” Of the $538 billion spent on R&D activities in the U.S. in 2020, more than $23 billion (4.3%) was invested by the motor vehicle industry, according to the associations.
“More than 10% of U.S. auto jobs are in the R&D space,” said John Bozzella, president and CEO of the Alliance for Automotive Innovation. “The auto industry invested $23 billion in R&D activities in recent years – the third highest of any manufacturing sector. By restoring the full deductibility of R&D expenses, Congress can ensure that investment keeps moving in the right direction – supporting U.S. jobs, expanding American innovation and boosting global competitiveness.”
As the letter is distributed, the trade associations are mobilizing members and employees to urge members of Congress to immediately pass legislation restoring full first-year tax deductibility for R&D expenses to protect jobs and preserve the motor vehicle industry’s financial health and competitiveness.
“American Automakers Ford Motor Company, General Motors Company and Stellantis invest heavily in R&D,” said Gov. Matt Blunt, president of American Automakers Policy Council. “These critical investments are vital if American automakers are going to lead the transportation revolution and offer customers the most innovative products in the world. The ability to deduct R&D expenses is needed to ensure our domestic auto production continues to be competitive in the global market.”
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By Counterman
Executives on AutoZone’s most recent earnings call were upbeat about the growth prospects for the company’s international stores.
AutoZone began publishing its international same-store sales numbers in September, along with its overall FY-2022 fourth-quarter results.
In the fourth quarter, AutoZone’s stores in Mexico and Brazil posted year-over-year same-store sales growth of nearly 15% on a constant-currency basis – compared to 1.7% for the company’s domestic stores.
In the first quarter of AutoZone’s fiscal-year 2023, which ended Nov. 18, same-store sales growth in Mexico and Brazil outpaced U.S. stores again. On a constant-currency basis, AutoZone’s international stores posted year-over-year same-store sales growth of nearly 11%, compared to 1.2% for its U.S. stores.
On AutoZone’s Dec. 5 conference call, CEO Bill Rhodes noted that “international has become a more important part of our growth story and an area where we are increasingly deploying capital.”
“We are very excited about the short- and long-term growth prospects of international,” Rhodes added. “Our expectations are we will continue to grow mature-store volumes both in DIY and DIFM and we plan to accelerate new-store openings over the next several years, ultimately getting to a minimum of 200 international new stores by 2028.”
During the first quarter, AutoZone said it opened five new stores in Mexico and four in Brazil. As of Nov. 18, the company had 6,316 stores in the United States, 745 in Mexico and 104 in Brazil, for a total store count of 7,165.
“These [international] businesses had impressive performance last quarter and should continue to grow at a robust pace for the remainder of fiscal 2024,” said Phil Daniele, who will succeed Rhodes as CEO in January. “We are leveraging many of the learnings we have in the U.S. to refine our offerings in Mexico and Brazil.”
Although AutoZone isn’t breaking out bottom-line data for its international stores, CFO Jamere Jackson provided some insight on profit margins during the question-and-answer session with analysts.
“From a margin standpoint, we’re very pleased with the progress that we’re making on margins – both gross margins and total operating margins,” Jackson said. “In our business in Mexico, which is much more mature than what we have in Brazil, we’ve been very pleased with the actions we’ve been able to take on the merchandising side of the business, and that’s given us a very healthy gross margin in that business.”
Considering “the inherent advantages” of low-cost labor, Jackson added, “it’s a very attractive operating-margin structure in Mexico, and we believe as our business in Brazil matures and scales over time that we’ll see similar advantages in Brazil.”
However, as AutoZone aggressively invests to open new stores in Brazil, Rhodes cautioned that “we’re still losing money there.” Those new stores “are causing a pretty good headwind,” Rhodes added, but such challenges are “not unanticipated.”
While Rhodes and Daniele made a point to highlight the same-store sales growth in Mexico and Brazil during the call, Daniele emphasized that “the No. 1 focus for the remainder of the year will be on growing [market] share in our domestic commercial business.”
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By Counterman
Earlier this week, the Automotive Service Association, the Society of Collision Repair Specialists and the Alliance for Automotive Innovation sent a letter to Congress reaffirming their commitment to a 2014 national agreement on automotive Right to Repair.
In the letter, the organizations “commit that independent repair facilities shall have access to the same diagnostic and repair information that auto manufacturers make available to authorized dealer networks.”
While the organizations hailed the letter as a show of unity between independent repairers and OEMs on the principle of consumer choice, the Auto Care Association and MEMA Aftermarket Suppliers swiftly dismissed the letter as an act of subterfuge on the part of automakers.
“Auto Care Association objects to the so-called right-to-repair pact between ASA, SCRS and the Alliance for Automotive Innovation,” Auto Care President and CEO Bill Hanvey said in an email blast. “Auto Care Association, an original signatory to the 2014 memorandum of understanding, was not consulted about, was not a party to and does not support the agreement.”
Hanvey noted that neither ASA nor SCRS signed or supported the 2014 memorandum of understanding, and asserted that the associations “represent a small fraction of the independent repair market and do not speak for the automotive aftermarket.”
“Auto Care Association, on the other hand, is a national trade association representing over 536,000 companies and affiliates that manufacture, distribute and sell motor vehicle parts, accessories, services, tools, equipment, materials and supplies,” Hanvey said. “Auto Care Association serves the entire supply chain of the automotive aftermarket for the nation’s 292 million registered motor vehicles. Those businesses include over 280,000 repair facilities and 915,000 technicians nationwide.”
Ultimately, Hanvey called the agreement “a thinly veiled response by the automotive OEMs to HR 906: The REPAIR Act.”
“While the agreement purports to be relevant, all it does is affirm the 2014 memorandum of understanding rather than implement a meaningful solution to preserve the entire automotive aftermarket and the competition and consumer choice that it creates,” Hanvey said. “The agreement between the Alliance, ASA and SCRS is not only designed to create confusion, but also has numerous flaws.”
Among those flaws:
The agreement is non-binding. There is no way to force OEM participation or to enforce OEM compliance. The agreement does not cover all automakers and there is no requirement for new OEMs to join. The agreement does not obligate OEMs to provide vehicle owners or aftermarket direct access to telematically generated repair and maintenance data. Instead, the OEMs have agreed to make repair and maintenance data available through OEM-controlled systems and tools. Regarding telematics and the wireless transmission of vehicle repair and maintenance data, the OEMs only agree to give access if the data “is not otherwise available” through the OBD II port. This means an independent shop could be forced to subscribe to multiple third-party tools to get access to telematics data, rather than through a single direct source. The agreement fails to address the safety and security of the wirelessly transmitted vehicle data. “The efforts we’re seeing this summer to stop our industry’s momentum of securing our right to repair are only ramping up,” Hanvey concluded. “From the recent NHTSA letter to this new right to repair ‘pact’ from the automakers, there has never been more of a critical time to speak up and make our voices heard in Washington. I hope to see you all in D.C. with us this fall during our Legislative Summit on Capitol Hill, where we will speak in one unified voice with members of Congress on the importance of supporting our industry by passing the REPAIR Act.”
‘Agreement Falls Short’
In a statement, MEMA Aftermarket Suppliers called the agreement “a step in the right direction to ensure that consumers are protected.” However, the pact “falls short of all the protections necessary to ensure consumer choice now and into the future for all parties, not only signatories of the pact.”
“As a transportation industry, we believe that we have one opportunity to pass federal legislation and that legislation must include the ability to prioritize and protect consumers’ access to both light-duty and heavy-duty vehicle repair and maintenance through all iterations of vehicle technology on the road today and to come,” MEMA Aftermarket Suppliers added.
The association asserted that Right to Repair legislation must include:
All vehicles in operation – light-duty, medium-duty and heavy-duty Access to telematics and diagnostics data beyond that available just through the OBD II port An enforcement mechanism The ability for independent repair shops, using bi-directional communication, to update vehicles and parts to the latest software Addressing the risk of repair monopolies Language to protect consumers’ access to both light-duty and heavy-duty vehicle repair, maintenance and parts of their choosing through all iterations of vehicle technology on the road today and to come “The agreement does advance the conversation around right to repair and consumer choice, but if automakers and repair shops are prioritized over consumers, fair competition and a free market would not be realized,” the association said. “As a key stakeholder in protecting consumers’ rights and an essential part of the value chain, MEMA Aftermarket Suppliers must be a part of the conversation.
“MEMA Aftermarket Suppliers welcomes the opportunity to work with all parties to align on a federal solution that reflects the principles of consumer choice and a free market, includes the expertise of the supplier community, has a mechanism for real enforcement and prioritizes consumers, their safety and their economy – and the innovative industry we serve. The Right to Equitable and Professional Auto Industry Repair (REPAIR) Act (H.R. 906) addresses these needs, and MEMA Aftermarket Suppliers continues to support this bill that addresses the above concerns and creates a repair ecosystem that puts consumers at the center.”
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By Counterman
The Automotive Service Association, the Society of Collision Repair Specialists and the Alliance for Automotive Innovation have sent a letter to Congress reaffirming their commitment to a 2014 national agreement on automotive Right to Repair.
The organizations represent the nation’s independent repair facilities, auto body shops and leading automakers, respectively.
In the letter, the organizations reaffirm their agreement on the 2014 memorandum of understanding, “and commit that independent repair facilities shall have access to the same diagnostic and repair information that auto manufacturers make available to authorized dealer networks.”
In an attachment to the letter, the organizations reiterate: “There shall be available for purchase by owners of motor vehicles and by independent repair facilities on fair and reasonable terms the same diagnostic and repair information, including service manuals and technical repair updates, that a manufacturer makes available to its authorized dealers through the manufacturer’s internet-based diagnostic and repair information system or other electronically accessible repair information system.”
In
link hidden, please login to view, the repairers and automakers also wrote: “This commitment was created with our mutual and valued customers in mind: vehicle owners. It affirms that consumers deserve access to safe and proper repairs throughout a vehicle’s lifecycle [and] it is built to last because it anticipates changes in automotive technologies and market evolutions.” Highlights of the agreement include:
Access to diagnostic and repair information – Independent repair facilities shall continue to have access to the same diagnostic and repair information that auto manufacturers make available to authorized dealer networks. This applies to:
Telematics data needed to diagnose and repair a vehicle if not otherwise available; All vehicle technologies and powertrains, including gasoline, diesel, fuel-cell, electric battery, hybrid and plug-in hybrid electric powertrains. Education and training – A pledge to work together on education and training programs so mechanical and collision repair facilities are fully aware of exactly where and how to obtain repair information,including:
Directly through an automaker’s repair website; Shared access points like www.OEM1Stop.com; Via third-party information providers, software and tools. Future advancements – As vehicle technologies and the corresponding demands on repairers evolve, the commitment ensures a level playing field and a forum to discuss future repairer needs as they develop.
Repairers and Automakers ‘In Lockstep’
As state legislatures and Congress consider automotive Right to Repair laws, including the REPAIR Act, the parties noted: “…independent repairers and automakers are not at odds on automotive data access, but rather in lockstep on this fundamental principle: Consumers should have choice when it comes to repair options and the ability to have their vehicle serviced in well-equipped shops by well-trained technicians anytime, anywhere, anyplace.”
The organizations note that independent repair facilities perform 70% of post-warranty vehicle repairs today, while automakers’ own certified collision networks are comprised of shops that are more than 70% non-dealer owned.
“Automakers support Right to Repair, and today’s independent auto repair market is working well with lots of competition,” said John Bozzella, president and CEO of the Alliance for Automotive Innovation. “Auto repairers across the U.S. have access to the same repair and diagnostic information provided to auto dealers. It’s not just automakers who say this. It’s the Federal Trade Commission. And with today’s agreement; it’s also the thousands of independent auto repairers and small businesses in all 50 states who together with automakers have once again made this fundamental commitment to customers.”
In the letter, the organizations note that the Federal Trade Commission “has rightfully placed a focus on the repair options available to consumers for all the products they purchase – far beyond just automobiles.” The agency has highlighted automotive repair “as a model for other industries to follow.”
“Consumers should absolutely be able to choose quality repairs, performed in accordance with the specific procedures detailed by the vehicle engineers,” said Amber Alley, chairman of the Society of Collision Repair Specialists, and manager of Barsotti’s Body and Fender in San Rafael, California. “They should have the right to be able to do so in an independent repair facility that has invested in the training, equipment and skillset development to meet the rigorous demands of sophisticated, modern vehicles. This expectation is achievable, and consumer options for repairs are not limited by automakers; quite the contrary. Consumers should have the right to a proper and safe repair, and this agreement reinforces the commitment that the entire industry will have the ability to train, equip their facilities, and perform repairs as intended by the vehicle engineers.”
‘Agreement Falls Short’
In a statement, MEMA Aftermarket Suppliers called the agreement “a step in the right direction to ensure that consumers are protected.” However, the pact “falls short of all the protections necessary to ensure consumer choice now and into the future for all parties, not only signatories of the pact.”
“As a transportation industry, we believe that we have one opportunity to pass federal legislation and that legislation must include the ability to prioritize and protect consumers’ access to both light-duty and heavy-duty vehicle repair and maintenance through all iterations of vehicle technology on the road today and to come,” MEMA Aftermarket Suppliers added.
The association asserted that Right to Repair legislation must include:
All vehicles in operation – light-duty, medium-duty and heavy-duty Access to telematics and diagnostics data beyond that available just through the OBD II port An enforcement mechanism The ability for independent repair shops, using bi-directional communication, to update vehicles and parts to the latest software Addressing the risk of repair monopolies Language to protect consumers’ access to both light-duty and heavy-duty vehicle repair, maintenance and parts of their choosing through all iterations of vehicle technology on the road today and to come “The agreement does advance the conversation around right to repair and consumer choice, but if automakers and repair shops are prioritized over consumers, fair competition and a free market would not be realized,” the association said. “As a key stakeholder in protecting consumers’ rights and an essential part of the value chain, MEMA Aftermarket Suppliers must be a part of the conversation.
MEMA Aftermarket Suppliers welcomes the opportunity to work with all parties to align on a federal solution that reflects the principles of consumer choice and a free market, includes the expertise of the supplier community, has a mechanism for real enforcement and prioritizes consumers, their safety and their economy – and the innovative industry we serve. The Right to Equitable and Professional Auto Industry Repair (REPAIR) Act (H.R. 906) addresses these needs, and MEMA Aftermarket Suppliers continues to support this bill that addresses the above concerns and creates a repair ecosystem that puts consumers at the center.”
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