Incoming NADA Chairman Mike Alford: EVs can prove dealer value

Preparing for the electric vehicle future while protecting and evolving dealers' longtime business models are at the top of Mike Alford's agenda.

Alford, incoming chairman of the National Automobile Dealers Association, aims to help NADA and the industry plot the path toward electrification with digital sales tools, dealer-friendly regulations and new EV-centric revenue streams.

Alford, 57, is dealer principal of Marine Chevrolet in Jacksonville, N.C., and Trent Buick-GMC-Cadillac in New Bern, N.C.

In his previous role as NADA's regulatory affairs committee chairman, Alford helped educate lawmakers in Washington on how changes to the Military Lending Act could hurt the auto industry and car buyers.

Solving regulatory issues remains on his short list as NADA's chairman in the year ahead.

"We need to make certain that our voice is heard and that we communicate and educate our dealers to ensure that they're aware," he said.

Alford spoke with Staff Reporter Hannah Lutz. Here are edited excerpts.

Q: What are your main priorities as NADA chairman?

A: One of the things I am most excited about is continuing on and building on a strategic plan with [CEO] Mike Stanton and his leadership team at NADA. One of the things that we want to make sure that we do is really focus on the journey to electrification. What's the outcome for dealers strategically as we go forward? The path toward electrification is upon us, and I certainly see an omnichannel approach. I think brick-and-mortar franchise dealers are clearly the path to scaling EVs, and it's clearly an opportunity to show we are a strategic advantage in the successful electrification of the fleet nationally. As part of that journey, I want to make certain that we continue that dialogue with all stakeholders and we work toward a clearer understanding of what the business model looks like where dealers participate, especially in some of these new streams of revenue that are forthcoming.

What are the top issues facing NADA?

We have issues legislatively that we're focused on. We have regulatory issues that we're dealing with. In the regulatory space, voluntary protection products, dealer participation and the FTC's amended Safeguards Rule are just a few of the issues we are close to and keeping dealers aware of.

We are still dealing with [last in, first out tax deferments]. That issue is upon us right now, and we're working through it. I think we have done a good job educating folks and making the awareness of that issue cascade to all parties.

Another issue is this whole omnichannel approach and making sure that we understand how we deal with data, how we deal with leveraging the strategic advantage of real estate, of our customer base and of connections in local markets but also the great efficiencies and technologies that are availing to us now and our legacy OEMs. We can meet the customer where they are in the buying process, and we can deliver that vehicle to them 100 percent digitally, or we can do 30 percent. We need to meet them on that journey. That's exciting to me. As we get better clarity and as new products roll out, there is real opportunity for legacy OEMs and for the dealer body.

How will your experience as NADA's regulatory affairs committee chairman help you in this position?

It was such an eye-opening journey, the two years I sat as chair in the regulatory affairs space. There are issues that come upon us, like the Military Lending Act issue, without any notice or comment that probably someone thought was in the best interest of our customers. Being able to work with those agencies, both the legislative and regulatory sides, of a big problem like that and to pursue an outcome was fascinating. There are a number of regulatory issues that are upon us or that could be upon us in the near term.

I think our team does an exceptionally good job of staying on top of those issues and working with all stakeholders to make certain that we have a good outcome. And if we don't have a good outcome, then we work to turn it around. Regulatory is a big focus of our role in the coming year.

What's the value of an in-person NADA Show vs. last year's virtual event?

I am really excited to come together as an industry again. You can do a lot on Zoom, but you miss so much by not having the opportunity to connect with our OEM partners, our vendors and each other as dealer principals. The data is going to show that this convention is well attended. It's going to be a homecoming. I'm just really looking forward to it. I can't wait.

What are you hearing from dealers in terms of consumer incentives for EVs? Many automakers say these incentives will be necessary to drive adoption. Do dealers support this?

What I hear from dealers is we are very, very excited about these products that are forthcoming. I reserved a Silverado EV for my personal use. I'm so pumped about it. Dealers want to see EVs be successful. We want to be part of that journey. If that means incentives, they need to be done in such a way that scales EVs in conjunction with the rate of how quickly they are truly coming to market. We have to scale EVs, but at the same time, we can't have a gap on the ICE side. We've got to know that balance. Affordability will allow us to deliver EVs at scale.

With the inventory shortage, many dealers are selling above sticker price. How is NADA advising them?

NADA has provided a blog addressing this issue. The interesting dynamic about that is there really are no consumer incentives to speak of. A lot of dealers are adding accessories to vehicles, and trade differential is fascinating. If you look at transactions in terms of trade difference, the consumer is actually doing very well there because the trade-in values are at a greater percentage than whatever the retail pricing is. But inflation is real.

Where should average inventory levels sit after the chip shortage is resolved?

Ideally, it would be great to be 45 to 60 days on the ground as we come out of the chip shortage. It's a level that meets our customers' immediate needs. It's a proper level of supply and is also efficient.

The chip shortage has improved to the point where we are starting to see better inventory opportunities on the retail level. The consumer is coming around to think it'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 handle a capital-intensive enterprise like an automobile dealership.

Dealers reported record profitability in 2021. What will it take to maintain those margins?

The accelerated terms that we have as dealers and strong fixed operations and expense control. Dealers definitely had a great year last year. OEMs had a great year last year. Some of the efficiencies of this business model relative to inventory turn, especially as we go forward with higher cost of capital in terms of interest rates, will be critically important to continue to have the types 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 the consumers are excited about the product offerings that we have.

Are facility requirements likely to change as digital retailing of automobiles grows?

The facility requirements are changing in terms of what dealers are being asked to provide — in terms of charging infrastructure, in terms of the types of lifts and tools that you need in order to safely and properly service electric vehicles. Digitally as well, we are all going to be working together on processes that are more efficient and faster and will be good for both the retailer and the OEM.

What's your message to dealers who don't want to sell EVs or who don't want to go digital?

That is the beauty of the journey. Everybody gets to make their own decisions and decide what's best for their individual situation. I am really excited about the electrification of the fleet, and although there are some unknowns, the opportunity to sell and service EVs and at the same time, to sell and service ICE vehicles and pre-owned creates in the intermediate term more opportunities for every retailer.

How is NADA working with the Biden administration?

We are working and staying abreast of CAFE initiatives. We are working and staying abreast of the tax policy. We are working and staying abreast of Build Back Better. We give our input on all of those legislations just like we would do with any administration. It's industry-specific. We try to build our cases consistently across administrations on these key issues.

How is NADA advising and providing resources for dealers on how to prepare for the rollout of EVs?

The EV business model is going to be different than the ICE business model. What is the outlook for fixed ops relative to EVs? That's still to be determined. Going to market with EVs, I think it will be an omnichannel approach. I think the role of the dealer in terms of truly scaling EVs beyond the initial adoption of them is going to involve brick-and-mortar. It's going to involve working with a family who has an ICE vehicle and then an EV. And then over time, maybe it's all EV. I think the role of providing great service after the sale, helping them make sure they are meeting their budget and the utilization that they need will evolve pretty quickly. I think as you see EVs go more mainstream, you're going to see the importance of dealers manifest itself.

Is NADA concerned about the reservation systems that many automakers have rolled out for EVs and other high-profile vehicles?

We are very much focusing on reservations. I am a big believer in the allocation system based upon turn and earn. Reservation shouldn't be an allocation. I think that's really, really important to ensuring that you don't create other outcomes with a reservation that are unintended.

Is NADA concerned about legislative efforts to allow startup EV manufacturers to sell directly to consumers?

Yes. That's being dealt with state by state. I would say a lot of the concern is, what's the ultimate benefit to the end user, not only in terms of selling the vehicle but servicing the vehicle, safety concerns, recalls, what have you?

We believe in the franchise system. We're going to continue to evolve. We have to. I think [the franchise system is] the equitable way to offer EVs across 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 equitably scale EVs, the franchise system is the best way to do that.