Introduction

Following the restructuring of the US auto industry, the US auto market is now dominated by seven major consolidated auto companies: General Motors, Ford, Chrysler/Fiat, Toyota, Lexus, Hyundai and Honda . In particular, as the US brands recover, each is recognized as energy efficient by reducing the fuel consumption of all car models and consolidating their number of dealerships. In the quest to reduce operating costs, these dealers are investing in facilities that align with their brand’s fuel efficiency efforts.

To get an idea of ​​the kind of fuel-efficiency efforts American car brands are making, consider Ford’s new EcoBoost engine. According to Ford, the EcoBoost engine combines advanced direct injection and turbocharging technology with a gasoline engine. The end result is an engine that can deliver up to 20% better fuel economy, 15% lower CO2 emissions and improved driving performance compared to larger displacement engines.

Car dealerships are interested in both energy efficient interior lighting and energy efficient exterior lot lighting. They are becoming more comfortable with LED lighting technology because they have witnessed it being integrated into automotive headlight and taillight applications. LEDs are now being integrated into dealer showrooms and outdoor lots.

EPA Section 179D Tax Opportunities

Pursuant to Section 179D of the Energy Policy Act (EPAct), because dealers who make qualified investments to reduce energy consumption at their new or existing locations can earn immediate tax deductions of up to $1.80 per square foot.

If the construction project does not qualify for the EPAct’s maximum immediate tax deduction of $1.80 per square foot, there are tax deductions of up to $0.60 per square foot for each of the three major building subsystems: lighting, HVAC (heating, ventilation, and air-conditioning). conditioning), and the building envelope. The building envelope is every element of the building’s outer perimeter that touches the outside world, including the roof, walls, insulation, doors, windows, and foundation.

Unique Opportunity in 2011: Enhanced Bonus Tax Depreciation

Exterior lot lighting is normally eligible for MACRS depreciation, but building owners who install LED lighting systems after September 8, 2010 through December 31, 2011 can earn a 100% depreciation tax credit. immediately. Even if building owners miss this 2011 window, they can enjoy a 50% tax depreciation credit on equipment placed in service from January 1, 2011 through December 31, 2012.

Outdoor Lot Lighting

Exterior lot lighting is lighting that illuminates only the landscape or exterior of the building (but not parking areas or walkways), as well as plant grow lights, but is not related to operation or maintenance of the building. Outdoor lot lighting systems are typically pole-mounted or free-standing and serve to illuminate sidewalks, parking lots, or recreation areas.

For the first time in US tax history, based on the additional depreciation benefits described above, 100% of the cost of an outdoor lighting project can be allocated for tax purposes.

Restructuring of dealership facilities at Ford, General Motors and Chrysler

With the total number of US dealerships falling from over 30,000 to approximately 18,000, when sales volumes pick up, each dealership will, by definition, have to be a much larger facility capable of supporting increased sales and service volumes. There is a general decline in car sales in the US over the past decade and a drop in the number of car dealerships since the 1970s.

When the energy-efficient tax incentives were first enacted in 2005, foreign car dealers were financially strong and focused on dominating the market for small, efficient cars, which meant that it was mainly foreign brands that who were making energy-efficient lighting upgrades at their dealership locations and taking advantage of EPAct tax savings. For example, Emich Volkswagen of Denver has installed LED lighting throughout its new and used car dealership. The LED upgrade project reduced Emich VW’s lighting energy use by nearly 80% and the dealer will realize a return on investment in approximately 18 months based on energy savings from their LED lighting and conservation rebates Offered by Xcel Energy and the City and County of Denver. .

Due to their restructuring and market demand for more efficient vehicles since 2008, American car brands have followed the lead of their foreign counterparts.

Federal Lighting Bans

Dealers that have not upgraded their lighting in the last five years or more often have inefficient T-12 or metal halide lighting that is now federally banned from production or import. So sooner or later these fixtures will be forced to upgrade to more efficient lighting, such as T-5 and T-8 fluorescents, or new high-efficiency LED lighting.

LEDs are up to four times more energy efficient than traditional incandescent bulbs, which means their ability to reduce operating energy costs is twofold: energy savings and related tax savings.

Ford

Ford has closed its former Mercury brand. Consequently, it has chosen to consolidate certain Ford and Lincoln dealerships across the country. Some combined Lincoln-Mercury-only dealers experienced lower gross sales volume than Ford-only or combined Ford-Lincoln dealers. While there are many factors that influenced Ford’s decision to reduce the Mercury brand, what is important is the effect a reduced number of brands will have on Ford’s dealer strategy going forward.

Fewer brands in its portfolio, combined with its better financial position, will allow the automaker to focus not only on product quality, but also on cutting costs across the board. Ford’s anticipated annual operating profit of about $8 billion would be its best result since a profit of $10.2 billion in 2000, when US auto industry sales were 33 percent higher. Making higher profits with lower sales volume has been a key to the company’s strategy since Chief Executive Alan Mulally arrived in October 2006. Indications are that some of the required building upgrades will range from $300,000 and $1,500,000 per dealer. Some dealers are wary of these figures, which may result in more closures unless dealers are receptive to the energy and tax savings that come with more efficient lighting equipment. Upgrading to long-life energy LED lighting is one way to reduce ongoing operating and maintenance costs.

general motors

The biggest reduction in dealership facilities has been at General Motors, which has shrunk to 4 brands namely Cadillac, Chevy, Buick and GM after shedding Oldsmobile, Pontiac, Saab, Saturn and Hummer. GM has launched the largest and most extensive re-image plan for national car dealerships. They sent inspectors to analyze all attributes of their dealership facilities, including appearance, location, and overall quality. Many dealerships that were lucky enough not to be laid off are now required to make major improvements to their facilities.

chrysler

Chrysler merged with Fiat, giving Fiat a significant US distribution network for its line of more fuel-efficient products. Recently reported dealer data indicated that the average Chrysler dealer’s pre-tax profit fell to $150,000 during the economic downturn. This means that a $15,000 reduction in facility energy operating costs is equal to a 10% increase in pre-tax profit.

Dealers can combine energy-efficient LED lighting with energy-efficient HVAC in the air-conditioned (air-conditioned) and non-air-conditioned portions of the facility for $1.20 per square foot EPAct tax deductions.

conclusion

The newly formed American auto industry is increasingly focusing on fuel efficiency, both for vehicles and dealer facilities. By upgrading interior and exterior lot lighting to LED, dealerships have the opportunity to significantly reduce their energy costs while realizing substantial tax savings.