introduction
Following the restructuring of the US auto industry, the US auto market is now dominated by seven major consolidated car companies: General Motors, Ford, Chrysler/Fiat, Toyota, Lexus, Hyundai, and Honda. In particular, as the US brands recovered, each brand re-imaged itself as energy efficient by lowering the fuel consumption of all car models and consolidating the number of their dealers. In an effort to reduce operating costs, these dealers invest in facilities that match their brand’s fuel efficiency efforts.
To get an idea of the kind of fuel efficiency efforts US car brands are making, consider Ford’s new EcoBoost engine. According to Ford, the EcoBoost engine combines advanced direct injection technology and turbo-charging with a gasoline engine. The end result is an engine that can deliver up to 20% better fuel economy, 15% lower CO2 emissions and better driving performance when compared to larger capacity engines.
Car dealers are interested in energy efficient indoor lighting and energy efficient outdoor lot lighting. They are increasingly comfortable with LED lighting technology as they have seen it become mainstream in car headlight and taillight applications. LEDs are now mainstreaming into dealer showrooms and the outdoors.
Section 179D EPact . Tax Opportunity
Under Section 179D of the Energy Policy Act (EPAct), auto dealers who make eligible energy-reduction investments in new or existing locations can get a direct tax deduction of up to $1.80 per square foot.
If a building project does not qualify for the maximum direct tax deduction of EPAct $1.80 per square foot, there is a tax deduction of up to $0.60 per square foot for each of the three main building subsystems: lighting, HVAC (heating, ventilation, and air). . conditioning), and building envelopes. A building envelope is any item on the outer perimeter of a building that touches the outside including roofs, walls, insulation, doors, windows and foundations.
Unique Opportunity 2011: Enhanced Bonus Tax Depreciation
Outdoor lot lighting is normally eligible for MACRS depreciation, but building owners who install LED lighting systems after September 8, 2010 to December 31, 2011 can immediately claim the 100% depreciation tax bonus. Even if building owners skip this 2011 window, they can enjoy a 50% tax depreciation bonus on equipment used from January 1, 2011 to December 31, 2012.
Outdoor Lot Lighting
Outdoor lot lighting is lighting that only illuminates the landscape or building exterior (but not parking areas or walkways) and plant growth lights, but is not related to the operation or maintenance of the building. Outdoor lot lighting systems are usually pole mounted or freestanding and serve to illuminate sidewalks, parking lots or recreational areas.
For the first time in US Tax History, based on the bonus depreciation benefits described above, 100% of the cost of an outdoor lighting project can be charged for tax purposes.
Dealer Facility Restructuring at Ford, General Motors and Chrysler
With the total number of US dealers dropping from more than 30,000 to about 18,000, as sales volume recovers, each dealer by definition must become a much larger facility capable of supporting higher sales and service volumes. There has been an overall decline in US auto sales over the last decade and a decline in the number of car dealerships since the 1970s.
When energy-efficient tax incentives were first introduced in 2005, foreign car dealers were financially strong and focused on dominating the small and efficient car market, meaning that foreign brands were making energy-efficient lighting upgrades to their dealer locations and taking advantage of the EPact tax savings. . For example, Emich Volkswagen of Denver has installed LED lights in all of its new and used car dealerships. The LED retrofit project reduces the energy use of VW Emich lighting by nearly 80% and dealers will receive a return on investment in approximately 18 months based on the energy savings from 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 in the footsteps of their foreign counterparts.
Federal Lighting Ban
Dealers who have not upgraded their lighting in the last five years or more often have inefficient T-12 or metal halide lighting whose production or import is now prohibited by the federal government. Therefore, sooner or later these dealers will be forced to upgrade to more efficient lighting such as T-5 and T-8 fluorescent lamps, or new highly efficient LED lamps.
LEDs are up to four times more energy efficient than traditional incandescent bulbs, meaning that their ability to lower energy operating costs is twofold: energy savings and associated tax savings.
wade through
Ford has closed the long-standing Mercury brand. Therefore, he has chosen to consolidate select Ford and Lincoln dealerships across the country. Some exclusive Lincoln-Mercury dealers experience lower gross sales volumes than just Ford dealerships or Ford-Lincoln dealerships combined. While there were many factors that influenced Ford’s decision to reduce the Mercury brand, what was important was the effect the reduction in brand number had on Ford’s dealer strategy going forward.
Fewer brands in its portfolio, combined with an improving financial situation, will allow the automaker to focus not only on product quality, but also on overall cost reductions. Ford’s anticipated annual operating profit of around $8 billion would be its best since a $10.2 billion profit in 2000, when US industrial auto sales were 33 percent higher. Achieving higher profits on lower sales volumes has been a key strategy for the company since Chief Executive Alan Mulally arrived in October 2006. The indications are that some of the building upgrades required will range from $300,000 to $1,500,000 per dealer. Some dealers reject these figures, which could result in more shutdowns unless dealers accept the energy and tax savings that come with more efficient lighting equipment. Upgrading to long-lasting energy LED lighting is a way to reduce ongoing operating and maintenance costs.
General machine
The biggest reduction in dealer facilities occurred at General Motors, which has downgraded itself to four brands, namely Cadillac, Chevy, Buick and GM after ditching Oldsmobile, Pontiac, Saab, Saturn and Hummer. GM has unveiled the largest and most extensive re-imaging plan of any domestic auto dealer. They send inspectors to analyze all the attributes of their dealership facility, including appearance, location, and overall quality. Many dealers who were lucky enough not to be discontinued are now required to make major facility upgrades.
Chrysler
Chrysler has merged with Fiat, giving Fiat a major US distribution network for a more fuel-efficient product line. Recently reported dealer data showed that the median pre-tax income of Chrysler dealers fell to $150,000 during the economic downturn. This means that a $15,000 reduction in facility energy operating costs equals a 10% increase in pre-tax revenue.
Dealers can combine energy-efficient LED lighting with energy-efficient HVAC in both (air-conditioned) and non-air-conditioned facilities for a $1.20 EPact tax discount per square foot.
Conclusion
The newly configured US auto industry is becoming increasingly focused on fuel efficiency, both for vehicles and dealer facilities. By upgrading indoor and outdoor lot lighting to LEDs, dealers have the opportunity to significantly reduce their energy expenditures while realizing substantial tax savings.
