Welch Offers Charge to Industry to Confront Affordability Problem Together



DETROIT (Jan. 10, 2017)—NADA President and CEO Peter Welch on Tuesday challenged the entire automotive industry to acknowledge and confront the numerous threats to vehicle affordability with a strong and unified voice, calling the next four years a “unique opportunity” to ensure that personal transportation remains affordable for millions of Americans.

Welch, speaking at the 2017 Automotive News World Congress in Detroit, cautioned against taking a lax or tepid approach to advocating on behalf of Americans consumers – who are the ultimate arbiters of the industry’s success or failure – particularly at a time when government regulations and mandates are adding enormously to already increasing prices for new cars and trucks.

“Over the past 20 years, the single biggest driver of vehicle price increases has been excessive government regulations and mandates,” Welch said. He warned that further unchecked regulatory costs could lead to a period of “demand destruction” where millions of Americans lose out on the technological, safety and fuel efficiency benefits that come with new vehicles.

“Unless we as an industry, working with policy makers at all levels of government, start looking through the lens of customer affordability, we risk imposing a new luxury tax on the vehicles our members sell which, in turn, will depress the SAAR, reduce fleet turnover, and deprive large swaths of Americans of the opportunity to obtain and benefit from the ownership of a new car or truck – that’s what I mean by ‘demand destruction,’” Welch continued. “That’s a road that we as an industry and as a nation cannot afford to take.”

Welch’s charge to the entire industry was to avoid any temptation to “rest on our laurels” during the next four years.

“I understand the reluctance in some quarters not to be seen as too eager to push the regulatory pendulum back in the other direction just because a Republican is soon to be in the White House,” Welch said. “But if demand is sapped four years from now because new vehicle price points are no longer attainable to otherwise willing buyers, we’re going have much bigger problems on our hands than political optics.”

Additionally, Welch challenged his colleagues to confront the serious threats to brand loyalty and price transparency – threats that he said the industry must first acknowledge are “of our own making.”

“In a world where customers crave fairness and transparency in price, why do some manufactures still deploy unfair marketing strategies that produce huge variations in price between various customers?” Welch asked, referring specifically to unfair stair-step incentive programs, indiscriminate price tag coupons, “and other schemes that are too complicated, not consumer friendly and that are not available to all dealers regardless of their size or location.”

“This unfairness leads to multi-tier pricing that has always, and will always, cause our customers to be skeptical of what dealers tell them,” he said. “Simply put, these types of programs are trust killers.”

And Welch warned of a gathering storm resulting from the millions of recalled vehicles that don’t get prompt repairs because of a lack of available replacement parts.

“The current situation we’re in, where millions of vehicles are under recall, and millions of customers have to wait months on end for repair parts, is completely unsustainable for any brand that expects to thrive in the future,” said Welch.

“In the same way that poor quality slowly, but methodically, erased billions of dollars of brand value for domestic manufacturers in the 1980s, I believe that the scores of recalls that aren’t immediately addressed and repaired will soon destroy billions of dollars of brand value for those manufacturers who don’t move heaven and earth to get replacement parts onto dealership shelves as fast as humanly possible,” he added. “Customers can forgive a recall if the defect is fixed promptly. But for many customers, waiting 10 months or longer for a part is just unacceptable – and it kills brand loyalty.”

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