|Auto Imports to the US||Current Import Tariffs|
|Country of Origin||$Billions||Cars||Truck/SUV|
* currently exempt from tariffs under NAFTA.
* China recently agreed to drop to 15% in response to tariff threats.
There has been much ado about automotive tariffs and a potential trade war in the sector. The threatened increase in the US tariff to 25% would have devastating effects on the automotive sector, both here and abroad, and undoubtedly lead to retaliatory tariffs overseas. Hopefully this is a positioning and negotiating strategy, not a goal of the administration. The recently announced cease-fire with Europe with the aim to get all automotive tariffs to 0% in both directions is certainly encouraging.
Interestingly, I don’t see any winners from a trade war. “Domestic” automakers are thoroughly global company’s now, making tons of cars and sourcing parts internationally. And alternatively, almost all of the “foreign” manufacturers build lots of cars here and employ thousands of US workers. For instance BMW exports about 70% of the vehicles they produce in the US and helped lower the trade deficit in 2017 by more than $1 Billion. There will certainly be some makers who are hurt worse than others, but it’s shades of gray.
So how legitimate are our cries of unfair automotive trade tariffs? Well if you look at cars, we have every right to complain. Until just recently, China’s import tariff was ten-fold ours, and Europe wasn’t much better. But it’s a different situation when it comes to trucks and SUVs. Back in 1963 Europe imposed an import tariff on US chickens. We struck back with a 25% import tariff on trucks and SUVs. The so-called Chicken Tax has virtually eliminated truck and SUV imports ever since (with the exception of Canada and Mexico, which are exempt under NAFTA). That is why all of the foreign manufacturers plants in the Southeast part of the country make SUVs, not cars.
We hired an intern for the summer. Stuart is the 16 year old son of a good friend and hunting buddy, so we’re keeping him busy with everything from picking weeds to passing out marketing materials. Part of his responsibility is to write a blog. I told him there are two rules; 1) he’s free to write about anything he wants (which I’m already regretting a bit), and 2) it better be entertaining. Here’s blog #1! (I love how he puts a header on it like I’m going to grade it) – Lewis Brazelton
June 12, 2018
The weekend leading up to my first week at Brazelton Auto, I didn’t know what to expect. The only person that I knew there was Lewis Brazelton. Now if you hadn’t met Lewis, you be able to pick him out of a crowd with a basic description. 6’4, gray hair with a fairly sized bald spot and he is usually wearing something circled around jeans and cowboy boots. On my first day interning at Brazelton, I had the chance to meet everyone in the office. Each office had a different character working within it. The first person I had met was former “Varsity Memorial High School Cheerleader,” Bill Lang. Bill used those cheer muscles and sprung to open the door and I could tell he would eventually appreciate my helping hand. The next person I met was Debbie Morgan or the Brazelton Auto PA and speaker system. The office to the right of Debbie’s is Modi’s. The lights were mostly dim, which created a proactive vibe specifically meant for Modi. Across the hallway sat another rookie at Brazelton, Sarah. She had only started a week before I came but it seemed like she had already been working there for years. I kept on moving towards the next offices to find Brad and Gabe. If you ever want a meal plan to shed those couple of pounds, Gabe is your guy. If you are ever considering of disregarding Gabe’s meal plan, Brad is your guy. But before I had my meet and greet of the office, I met what could be known to some people as the face of Brazelton Auto; our keen and helpful receptionist, Natalie.
I forgot to mention that I am also 16 years old and have no working experience at all. Yet my dad and Lewis behooved me to work at Brazelton Auto. I have been working here for about two and a half weeks and it has served as a tough but ethically rewarding job. As I said earlier, each office holds a different character. That is what makes each and every one of those people an integral part of the team that has created and keeps on progressing this company. For instance, there has never been a time where we haven’t all had lunch together or with someone else in the office. Everyone has a role here business related or not and everybody feeds off of each other’s energy in the office. That is what makes this company special; the employees. I can’t wait to continue the rest of my summer here at Brazelton Auto where I’m understanding how to work and sweat, while also finding ways to have fun with the people working around me.
I can’t blame my parents. They raised me right. Growing up in Memorial and Tanglewood, all my friends have real jobs. Professionals. But I’m getting ahead of myself.
I started my first company at 15 years old (landscaping), so of course bought a used truck to go with it. Seems like I spent as much time under that truck as in it. I rebuilt motors and swapped out the tranny, suspension, interior, etc. For fun we’d go out to Addicks dam and get stuck in the mud.
Eventually I went off to college. I graduated with a degree in Beer and spent the next two years cowboying on various ranches in Texas and Montana. Eventually I caught a slight case of maturity and decided I needed a real education, so went back to school for my MBA. That decision was a real encouragement for my flabbergasted father, but it turned out to be more of a head fake when I slipped into the car world.
In grad school I took an Entrepreneurship class. We were required to build a start-up business plan and present it to venture capitalists. My concept was basically an inspection and certification program for used vehicles. This was in 1990, before anyone had ever heard of a certified used car. After grad school, I raised some money and started that business. It survived, but never thrived. My first sign of trouble was in a meeting with the patriarch of a well known local dealership group. I got about half way through my pitch on how our inspections would help him sell more and better used cars. He stopped me and said these words I’ll never forget; “Why the f*&% would I want to know what’s wrong with my cars?”.
I’ve basically been standing against dealer mindsets like that ever since. Basic questions about the industry just wouldn’t go away for me. Why was the car buying process so painful? Why does the dealer/buyer relationship have to be antagonistic? Why does it take 2+ hours to do the documentation after you’ve agreed on the deal?
I sold out of my first business, and for a short stint ran the largest leasing company in Houston. Then in 2002 I hung out my shingle for Brazelton Auto. Leasing allowed us to handle new cars as well as used. I was determined to do it differently. From the very beginning we instituted two policies that were foreign to the industry;
- Flat fees
- No commissions
I’d argue for the first time in the industry we elevated the relationship over the transaction. You see all dealers will say they want to earn your business forever, but in reality very few car buyers stick with one brand of vehicle forever. Realistically, the dealer knows you will probably not buy that brand of vehicle again the next time you’re in the market, so they had better get what profit they can from you while they can. Contrast that to Brazelton Auto. We handle new and used, any make or model. If we do our job right, you should come back to us forever for all of your vehicles. So we’d rather make a little on each of your next 20 cars, than as much as possible on your next car.
One other thing reinforced this relationship focus; I didn’t have money to advertise in those early days. I sent a letter out to everyone I knew, describing what I was doing. A few people started calling, then a few more. It was all word of mouth. Even today, 93% of our business is repeat or referral. Basically all of our clients know each other. That’s great news, unless we screw up! Word spreads awfully quick and we don’t want to tarnish our reputation. Which is not to say we don’t screw up occasionally, but when we do, we bend over backwards to rectify the situation.
So those are our roots. Fortunately, our client base has steadily expanded. We did branch out in 2012. We left our small, rented office space and purchased a new facility that allowed us to 1) add a full service department and 2) keep some of our best trade-ins as inventory. Our service department certainly added to the scope of our offerings, but we brought the same template we’d grown up with;
- All makes & models
- No commissions (most people don’t realize service advisors are commissioned salesmen)
For better or worse, I learned the car business on my own. I made plenty of mistakes, particularly early in my career, and most of them were expensive lessons to learn. But that independence also allowed me to stay outside of that dealership mindset. Today we’re hardly that one man show we used to be. I’ve been blessed to work with a great team of friends who share my vision for client service. Of course, none of this would be viable at all without our great group of loyal clients who not only sustain us with their business, but grow us with their referrals. Thanks to all who have been a part of that!