SEMA News—May 2021

LEGISLATIVE AND TECHNICAL AFFAIRS

Law & Order

By Stuart Gosswein

FEDERAL UPDATE

U.S. House of Representatives Passes Wilderness Bill: The U.S. House of Representatives passed a bill that would permanently protect more than one million acres in Colorado, more than one million acres in Arizona, 821,000 acres in California, and 132,000 in Washington. The Protecting America’s Wilderness and Public Lands Act, H.R. 803, faces an uncertain future in the U.S. Senate where it may be blocked, given strong Republican opposition to the bill. The SEMA-opposed legislation is controversial because wilderness designations provide the highest level of permanent protection available, preventing the creation of roads and trails. SEMA supports a collaborative approach when making major land-use decisions, including input from local citizens, elected leaders and other stakeholders. Bill highlights include:

• Colorado: create 36 wilderness areas totaling 660,000 acres across Colorado to protect mid- and lower-elevation mountainous areas, including Handies Peak, Dolores River Canyon and Little Bookcliffs.
• Arizona: permanently withdraw more than 1 million acres of federal land north and south of Grand Canyon National Park from eligibility for any future mining claims but leave valid existing claims intact.
• Northwest California: expand nine existing wilderness areas and establish eight new wilderness areas totaling more than 300,000 acres.
• Central California Coast: set aside 287,500 acres as wilderness and two new scenic areas in the Los Padres National Forest and Carrizo Plain National Monument. The bill also creates a 400-mi. hiking trail to connect the wilderness areas in the southern and northern portions of the Los Padres National Forest.
• California’s San Gabriel Mountains: protect 139,700 acres by expanding the San Gabriel Mountains National Monument, establishing a new National Recreation Area and designating more than 30,000 acres as wilderness.
• Southern California: expand Santa Monica Mountains National Recreation Area to incorporate the 191,000 acres Rim of the Valley Corridor.
• Washington State: designate 126,544 acres on the Olympic Peninsula as wilderness and more than 5,000 acres more as potential wilderness.

STATE UPDATE

Arizona—License Plates: The Arizona House Transportation Committee passed SEMA-supported legislation to create new legacy license plates replicating examples from the state’s past to be available for display on all vehicles. The plates would cost $25. Currently, authentic vintage plates may be displayed only on vehicles that are eligible for either classic car or historic vehicle plates upon authorization from the DMV. The bill awaits consideration by the full House.

Hawaii—Exhaust Noise: The Hawaii Senate Transportation Committee passed SEMA-supported legislation that would allow the use, sale, alteration or installation of car mufflers that meet a 95-decibel noise limit. Under the current law, no person can sell, alter or install a muffler that will noticeably increase a vehicle’s noise. The bill currently awaits consideration in the Senate Judiciary Committee.

Hawaii—License Plates: The Hawaii Senate introduced SEMA-
supported legislation to require the display of only a single, rear-mounted license plate for all passenger vehicles. Under current law, vehicles must display two license plates. The bill currently awaits consideration in the Senate Committees on Transportation and Judiciary.

Iowa—License Plates: The Iowa Senate introduced SEMA-supported legislation that would allow certain vehicles to display a single license plate on the rear of the vehicle, including those registered as antiques or any vehicle that would require modification to accommodate a front plate. Current law permits the display of only a single plate for motor vehicles that are model-year ’48 or older as well as reconstructed or specially constructed vehicles built to resemble vehicles that are model-year ’48 or older. The bill currently awaits consideration in the Senate Transportation Committee.

Kansas—Antique Vehicles: The Kansas House of Representatives passed SEMA-supported legislation to redefine vehicles eligible to be registered as antiques. Currently, the Kansas Highway Patrol defines an antique vehicle as being “more than 35 years old and as close to the original as possible, without any significant alterations to the major component parts.” The bill would only require the vehicle to be more than 35 years old, regardless of the age of the component parts installed on the vehicle. The bill currently awaits consideration in the Senate Transportation Committee.

Kansas—Military Vehicles: The Kansas House of Representatives passed SEMA-supported legislation to allow for the registration and on-road use of surplus military vehicles. Currently, only antique military vehicles more than 35 years old can be registered for road use. The bill awaits consideration in the Senate Transportation Committee.

Michigan—License Plates: The Michigan Senate introduced SEMA-supported legislation to create two legacy license plates replicating examples from the state’s past to be available for display on all vehicles. Currently, authentic vintage plates may be displayed only on historic vehicles 26 years old or older, owned solely as collector’s items, and used only for parades and certain other events. The bill currently awaits consideration in the Senate Committee on Transportation and Infrastructure.

Minnesota—Ethanol: The Minnesota Senate reintroduced SEMA-opposed legislation to increase the standard biofuel blend to 15% ethanol. Currently, there is a 10% state-wide standard. Similar legislation was introduced in the state last year but failed to pass. The bill awaits consideration in the Senate Agriculture and Rural Development, Finance and Policy Committee.

Minnesota—License Plates: The Minnesota House of Representatives introduced SEMA-supported legislation to allow for the issuance of only a single, rear-mounted license plate for special-interest vehicles. Special-interest vehicles are defined as those owned for leisure purposes, driven less than 10,000 mi. per year, and not used for general transportation. The bill currently awaits consideration in the House Transportation Finance and Policy Committee.

Mississippi—Vehicle Titling: The Mississippi Senate introduced SEMA-supported legislation that would allow for the titling of vehicles at least 30 years old and missing documents on oath of ownership. Under current law, there is no such exemption from proper documentation for title applications for older vehicles. The bill currently awaits consideration in the Senate Finance Committee.

Missouri—Historic Vehicles: The Missouri Senate introduced SEMA-supported legislation that would allow historic vehicles to be issued license plates without an annual mileage restriction. Current law limits historic vehicle owners to 1,000 mi. of driving per year. The bill currently awaits consideration in the Senate Committee on Transportation, Infrastructure and Public Safety.

Montana—License Plates: The Montana House of Representatives passed SEMA-supported legislation to mandate that the state issue waivers for vehicles unable to display a front license plate. The law currently permits the display of a single rear-mounted plate for motor vehicles registered as street rods or custom vehicles, and a waiver may be issued for vehicles unable to display a front plate. This bill would require the waiver to be issued. The bill currently awaits consideration in the Senate.

New York—License Plates: The New York Assembly introduced SEMA-supported legislation to require the display of only a single, rear-mounted license plate for all passenger vehicles. Under current law, vehicles must display two license plates. The bill currently awaits consideration in the Assembly Transportation Committee.

New York—Vehicle Inspections: The New York Assembly introduced SEMA-supported legislation that would require a biennial safety inspection instead of an annual inspection for antique, classic and collector vehicles. The bill currently awaits consideration in the Assembly Transportation Committee.

Oklahoma—Military Vehicles: The Oklahoma House of Representatives introduced SEMA-supported legislation to allow the titling of surplus HUMVEEs (High-Mobility Multipurpose Vehicles or HMMWVs). Under current Oklahoma law, HMMWVs can not be titled in the state. This bill currently awaits consideration in the House Committee on Public Safety.

Virginia—Imported Vehicles: The Virginia House of Representatives passed SEMA-supported legislation to allow the DMV to issue a title for an imported foreign-market vehicle manufactured at least 25 years ago. Current law allows for only a negotiable title to be issued to such vehicles manufactured prior to 1968. The bill currently awaits consideration in the Senate Transportation Committee.

Washington—Military Vehicles: The Washington House of Representatives introduced SEMA-supported legislation to allow for the registration of former military-surplus vehicles. The bill limits usage to occasional transportation, exhibitions, veterans’ events, club activities, parades, tours and similar uses. The bill currently awaits consideration in the House Transportation Committee.

SEMA News—May 2021

REQUIRED READING

By Juan Torres

Wonder Women

Among the councils and professional networks that SEMA members can join (visit www.sema.org/councils-networks) is one that represents women in the automotive aftermarket industry. The SEMA Businesswomen’s Network (SBN) is comprised of a dynamic group of professionals whose mission is to provide networking, education and recognition opportunities for professional women in the industry to enhance their careers and positively impact the growth of the entire automotive aftermarket. The following are publications that have documented SBN programs and the successes of some of the network members.

SEMA News—May 2021

INDUSTRY NEWS

Fast Facts

Longtime industry veteran Steve Whipple joined Jegs High Performance as its new director of private-label sourcing, where he will work with racing manufacturers to help bring products to market through the Jegs brand. Whipple comes to Jegs from Edelbrock, where he served as vice president of sales and marketing since joining the company in 1999. Prior to Edelbrock, Whipple was a general manager for Nitrous Oxide Systems, and before that the national sales manager for Super Shops Inc., an automotive performance center. Whipple also currently serves on SEMA’s Board of Directors.

BorgWarner Inc. announced that the company agreed to acquire AKASOL AG—a German developer and manufacturer of high-energy and high-performance lithium-ion battery systems. The move is expected to allow BorgWarner to expand its electrification capabilities. AKASOL has more than 300 full-time employees. It has one facility in the United States and three in Germany.

Cloyes Gear & Products Inc., backed by Hidden Harbor Capital Partners, hired Troy Angst as CFO. Angst brings 30 years of experience to his new position, joining Cloyes most recently from Sharp Tooling Solutions in Romeo, Michigan, where he served as CFO. Before that, Angst served as CFO for Tritec Performance Solutions in Fenton, Michigan.

Lucas Oil Products Inc. announced the promotion and addition of three key members to its leadership team. Katie Lucas (left) was named vice president of strategy and philanthropy, and Megan Burakiewicz (middle) is now director of people operations. Additionally, the Lucas Oil racing division promoted Dan Robinson to vice president of motorsports operations. Lucas will oversee company strategy and business development initiatives as well as design and implement a corporate social responsibility strategy with a concentration on philanthropy and employee engagement. Burakiewicz will work closely with Lucas Oil employees to ensure the most effective and rewarding work environment possible. Robinson will be responsible for all operational aspects of three unique large-scale motorsports operations, including operations, marketing, human resources, scheduling and event planning.

M1 Concourse, based in Pontiac, Michigan, announced that its CEO, Jordan Zlotoff, will step down from his position effective March 1, 2021, to pursue new professional ventures. Timothy McGrane (pictured) will step up as the new CEO. Zlotoff has been with M1 Concourse since the initial construction of the private garage community began in 2015. He served as the director of business development and director of operations prior to assuming the role of CEO in March 2019. McGrane is the former executive director of the Blackhawk Automotive Museum and most recently served as the CEO of Laguna Seca Raceway in Monterey, California.

Race Winning Brands (RWB) announced a new partnership with ASAP Trading USA LLC, a sales and marketing agency company with offices in San Diego, California, and Lima, Peru. ASAP Trading USA is now the exclusive authorized representative company for three RWB brands, including Wiseco, Boostline and K1 in Mexico, Central America and South America.

Kelford Cams appointed Angel Robles vice president of business development—Americas. According to Managing Director Tony Gault, Robles’ appointment is part of Kelford’s commitment to support its expanding U.S. client base. Robles’ experience in both sport-compact and modern U.S. domestic markets fits with the company’s growth strategy.

VP Racing Fuels Inc. announced the appointment of James McVey to business development to focus on the OEM business. He previously served as vice president of sales and marketing at GreenStar LED, where he led the conversion of high-pressure sodium street lights to smart city LEDs in San Antonio, Texas, and other cities in North America and overseas.

PerTronix Performance Brands, a leader in the automotive aftermarket with key brands in the ignition, exhaust and fuel-delivery segments, announced that it acquired Taylor Cable Products Inc., located in Grandview, Missouri. Taylor Cable Products provided products to the performance and racing markets for more than 90 years, including racing sparkplug wires, battery boxes, battery cables and other accessories for the performance and OEM markets.

Mahle took over the air-conditioning business covering Japan, Thailand and the United States from the former Keihin Corp. (now Hitachi Astemo Ltd.), and antitrust authorities gave their approval. Four production sites and one development center are now being integrated into the Mahle Group. With this acquisition, Mahle is strengthening its position in the field of air-conditioning systems. A total of around 1,700 people are employed at the new locations.

Longtime racing professional Darin Morgan joined BES Racing Engines, based in Guilford, Indiana. Morgan will be responsible for assisting BES owner Tony Bischoff in several areas, including product development and cylinder head assembly. Morgan, who has 35 years of experience in race-engine building, including more than two decades with Reher-Morrison Racing Engines and, most recently, Mast Motorsports, will relocate from Nacogdoches, Texas, for the new position.

Kooks Headers and Exhaust (KHE) announced three new hires within its performance aftermarket and racing company. Kyle Cook was hired as manufacturing engineer. He will oversee the design and manufacturing of fixtures and improving manufacturing efficiency and finding ways to ease the flow of production. KHE also hired Shelbie Huffman as marketing coordinator. Huffman will be tasked with implementing social-media programs, website promotion and development, digital marketing and coordinating special events. Ryan Reed was appointed sales rep/business development for Kooks Industries (KI) and private label. Reed will be tasked with managing existing businesses and growing future business for KI and private-label sales.

Air Flow Research (AFR) announced that Alex George joined its team. George will be responsible for growing the company’s online presence and overall customer engagement in his new position. He brings more than six years of automotive aftermarket experience, holding positions in sales, marketing and operations. George will also play an instrumental role in AFR’s marketing communication strategy.

G-Force Racing Gear announced the hiring of Danilo Oliveira as the company’s new director of marketing. Oliveira has worked in the motorsports industry since 2006. He worked for OMP Racing and adidas Motorsport. Based in Miami, Florida, Oliveira will also handle G-Force Racing Gear’s international sales.

SEMA News—May 2021

INDUSTRY NEWS

PRI Announces Return of PRI Trade Show For 2021

Performance Racing Industry (PRI) has announced the return of the world’s premier event for motorsports professionals—the PRI Trade Show—to the Indiana Convention Center in downtown Indianapolis on December 9—11, 2021.

“The racing industry is resilient and continues to push forward, and PRI very much reflects that spirit,” said PRI President Dr. Jamie Meyer. “Racing businesses have demonstrated remarkable passion and perseverance over the last 12 months. Many have even reported record sales and month-over-month revenue growth.

As planning for the Show continues, PRI will introduce a new membership program for motorsports professionals designed to unite the industry on a number of efforts—legislative advocacy, business resources, career development and more. Exhibitors at this year’s Show, for example, can take advantage of benefits that include discounted booth space, which in most cases covers the cost of membership.

Exhibitor booth space applications for the 2021 PRI Trade Show, which includes a sign-up option for PRI Business Membership, are now available. Details for Trade Show attendee registration, PRI Individual Membership, and the ’21 PRI Road Tour will be announced at a later date. To learn more, visit
www.performanceracing.com.

SEMA SAN Driving Force Newsletter Goes All Digital

Through the SEMA Action Network (SAN), SEMA members and enthusiasts have played a critical role in defending the industry from government overreach for more than two decades. Since 1997, the award-winning Driving Force publication identified pending legislative and regulatory issues—along with spotlighting lawmaker allies—to keep enthusiasts nationwide informed through the SAN.

After careful consideration, the decision was made to discontinue publication of a printed edition of Driving Force and instead focus on delivering a fully digital experience. Existing subscribers with current email addresses will continue receiving the Driving Force online in their inboxes. Print-only subscribers and others not receiving updates may submit their email for ongoing free delivery.

The SEMA SAN website (www.semasan.com) contains a full archive of articles appearing in the newsletter as well as access to additional no-cost grassroots advocacy tools—including the tag-and-title toolbox 50-state license plate resource and a new multimedia lobbying guide.

While there, sign-up to stay informed on issues in your region by subscribing at www.SEMAsan.com/join.

SEMA and PRI Coalition Request Support for Racetracks Impacted by COVID-19

SEMA and the Performance Racing Industry (PRI) has formed a coalition in partnership with 17 organizations that represent recreation, sports and amusement live venues that have experienced significant revenue declines during the COVID-19 pandemic. The coalition is focused on creating a federal program to provide grants to racetracks and other live entertainment businesses impacted by state and local attendance restrictions during the pandemic. The coalition formally submitted a letter to the U.S. House and Senate Small Business Committee to request the creation of a $15 billion grant program that would provide a lifeline to racetracks and other live entertainment businesses.

The COVID-19 pandemic had a devastating effect in 2020 on racetracks and racing circuits around the world, with most major racing series forced to delay or postpone key events or to cancel entire racing seasons altogether. It is important that members of Congress hear from SEMA members about providing financial support to racetracks. For details, contact Eric Snyder at erics@sema.org.

Goodyear Acquires Cooper Tire

Goodyear Tire & Rubber Co. and Cooper Tire & Rubber Co. announced that they entered a definitive transaction agreement under which Goodyear acquires Cooper in a transaction with a total enterprise value of approximately $2.5 billion. The transaction will expand Goodyear’s product offering by combining two portfolios of complementary brands. It will also create a stronger U.S.-based manufacturer with increased presence in distribution and retail channels while combining both companies’ strengths in the highly profitable light-truck and SUV product segments. The combined company will have approximately $17.5 billion in pro forma 2019 sales.

Founded in 1914, Cooper is the fifth-largest tire manufacturer in North America by revenue, with approximately 10,000 employees working in 15 countries worldwide. Cooper products are manufactured in 10 facilities around the globe, including wholly owned and joint-venture plants. The company’s portfolio of brands includes Cooper, Mastercraft, Roadmaster and Mickey Thompson. The transaction is subject to the satisfaction of customary closing conditions, including receipt of required regulatory approvals and the approval of Cooper shareholders. The transaction is expected to close in the second half of 2021.

SEMA News—May 2021

FROM THE HILL

Business-Unfriendly California

Proposed Changes to Proposition 65 Make It Harder to Do Business in the Golden State

By Daniel Ingber

California appears to be doing everything in its power to burnish its reputation as the least business-friendly state in the union. Exhibit A is California’s Proposition 65 (Prop. 65), a California law that gives consumers and attorneys the ability to sue businesses that do not include warning labels on products containing certain chemicals. Prop. 65 has been a boondoggle for plaintiffs’ lawyers, a burden on businesses nationwide that manufacture, distribute or sell products that go to California, and is of little use to California consumers—its intended beneficiary. Now, California is proposing regulations that would make Prop. 65 even more onerous on SEMA-member companies. Enough is enough!

Overview

First, a little background on Prop. 65. Prop. 65 was a ballot initiative enacted by California voters in 1986. It requires warning labels on products containing chemicals listed as known to cause cancer, birth defects or reproductive harm. There are more than 1,100 chemicals currently on the list. Prop. 65 doesn’t stop anyone from selling their products no matter what chemicals they contain—it is simply a law that requires consumer warning labels under certain circumstances.

Prop. 65 is not limited to businesses with a presence in California but applies to all businesses with 10 or more employees—wherever they are located—that sell products in California. Prop. 65 applies to everyone in the distribution chain from manufacturers to distributors and retailers, though the law tries to put the burden as high on the distribution chain as possible—meaning manufacturers are a frequent target of enforcement.

Although the state can pursue enforcement, most suits are brought by private parties (meaning trial attorneys) claiming to be “acting in the public interest,” who will then receive a portion of the fine or settlement ultimately assessed. These lawsuits, which are known as “bounty hunter” suits, are becoming more and more common, and are essentially lawyers shaking down small businesses for quick settlements. After all, most small businesses, when threatened with fines up to $2,500 per day per violation and daunted by the idea of spending money to hire their own attorney will pay a tidy sum to make the nightmare go away.

Prop. 65 Requirements

So, what does Prop. 65 require? The law requires you to label a product if it contains a chemical that the California Office of Environmental Health Hazard Assessment (OEHHA) lists as “known to cause cancer or birth defects or other reproductive harm” and the product exposes the consumer to the chemical in excess of the “safe harbor” amount of exposure, which is usually listed in micrograms/day (https://oehha.ca.gov/proposition-65/proposition-65-list). Even if your product has a significant concentration of the listed chemical (parts per million), it may create very little exposure to the consumer because the part is “under the hood” and rarely handled after installation. Aftermarket auto parts often fall into this category.

There are two chemicals that are frequent Prop. 65 targets for the specialty auto aftermarket: lead in brass parts and DEHP. DEHP is a phthalate used in the production of polyvinyl chloride (PVC) and plastics to make them softer, more flexible and durable. Phthalates are used in a variety of products from pipes to plastic wraps, artificial leather, electrical wire insulation and adhesives.

New rules for labeling products went into effect on August 30, 2018. Under these rules, a warning must contain:

• A graphic depiction of a yellow triangle containing an exclamation point;
• Specify at least one chemical for which the warning is being provided if the label is not included on the product or packaging;
• Include the website www.P65Warnings.ca.gov.

Under the 2018 rules, if the warning is placed directly on the product or product packaging, a “truncated” (short-form) label that does not include a specific chemical may be used. A warning must be given at or before the point of purchase. If a product is sold through a catalog or website, the warning must be listed next to the product or on the product-specific webpage. Under the 2018 rule, if a product contains a truncated warning, a truncated warning may also be used on the website or catalog. If an unlabeled product is sold at retail, a retail sign may be used.

Protecting Yourself

A business can protect itself from Prop. 65 liability by labeling its product or ensuring the product does not require labeling. Often, a company does not know what chemicals are in the products they manufacturer, distribute or sell, and, if a listed chemical is present, what level of exposure it creates. A business can usually best protect itself in the following ways:

Product Testing

Hiring a toxicology expert to evaluate your product for exposure amounts can be prohibitively expensive, costing up to $10,000 per product. Many businesses choose to have laboratory testing performed to determine the presence and concentration of a listed chemical in a product because it is relatively inexpensive and because plaintiffs’ attorneys usually rely only on lab testing when making a decision whether to pursue prosecution. Settlement agreements often contain provisions that commit a manufacturer to reduce the concentration of the listed chemical without any reference to exposure.

Contracts

Businesses can protect themselves through agreements with upstream suppliers or sellers requiring them to label a product, certify that a product does not require labeling, or indemnify the business for Prop. 65 violations.

Preemptive Warnings

Even if a business is not certain whether a product requires warning, it can choose to comply with the Prop. 65 warning requirements as a preemptive measure. Under the 2018 rules, if it is possible to place the warning directly on the product or product packaging, a business can use the truncated warning that does not require the listing of a specific chemical (and in such cases, may also use the truncated warning in its catalog or on its website). In cases where on-product or on-packaging warnings are not feasible, a business may choose to provide a preemptive warning listing the chemical most likely to be in the product (for example, if a tool has PVC handles, a warning for DEHP). One must tread carefully, because if the product does not contain the chemical that is subject to the warning requirement but contains another chemical that is, the warning will not be compliant.

Under the 2018 rules, preemptive warnings appear to be the favored avenue of compliance. Often, the cost of providing a warning is lower than the cost of laboratory testing and can help insulate a business from being sued. Although the California Attorney General looks at “over-warning” with disfavor, SEMA is unaware of any cases brought against a business for labeling a product that does not require one. In some cases, a preemptive warning may be the most cost-effective way to mitigate risk. And as mentioned above, many aftermarket products are only handled at installation and do not create any exposure to the consumer regardless of the presence of listed chemicals.

Proposed New Short-Form Warning Regulation

Relying on the 2018 Prop. 65 rules, many businesses retooled their packaging and labeling processes, at significant cost, to include a short-form warning directly on the product or product packaging. In January 2020, OEHHA blindsided the business community with new proposed regulations that would impose new costs on businesses transacting in California. If implemented, the new regulation would include the following:

• Only allow use of the short-form warning on products with 5 sq. in. or less of label space.
• Eliminate use of short-form warnings for internet and catalog warnings.
• Require that the name of at least one chemical be included in the short-form warning.

These regulatory changes would impose significant costs on SEMA members who currently rely on the 2018 rules to affix a short-form warning directly on their product and product packaging that has more than 5 sq. in. of label space. The proposed regulations would also force companies that rely on printed catalogs to place a longer warning on their catalog pages, which would occupy precious space. Infuriatingly, OEHHA stated that the proposed rules “will not have a significant adverse economic impact affecting businesses[.]”

SEMA anticipates that these regulations will lead most businesses to continue to preemptively label products and list the chemicals most likely to be in the products that are most frequently the target of enforcement. (There are 12 chemicals that make up the vast majority of Prop. 65 enforcement, and aftermarket auto parts notices of violation have been focused almost entirely on DEHP and lead). The proposed regulations impose significant costs on businesses that recently incurred costs to comply with the 2018 rules and provide little benefit to California’s consumers.

What is SEMA Doing to Help?

SEMA and its members submitted comments to OEHHA in March and has joined forces with the California Chamber of Commerce to oppose the proposed regulations. We anticipate that the new rules will be finalized in the second or third quarter of 2021 with a one-year phase-in period after the regulation is finalized to make appropriate changes. SEMA will continue to update its members on the final regulations and other changes to Prop. 65.

SEMA is active in the Proposition 65 Coalition of the California Chamber of Commerce to promote legislation and regulations to decrease the cost of Prop. 65 compliance. Substantive changes to the law itself require a two-thirds vote from each chamber of California’s legislature, making legislative changes difficult to accomplish. Nonetheless, SEMA and the Proposition 65 Coalition are looking at every opportunity to create a friendlier environment for doing business in California.

Source

For more information about Proposition 65 and Prop 65 warnings, visit: www.oehha.ca.gov/proposition-65 or www.p65warnings.ca.gov.

Proposed New Short-Form Warning Label

Example of a new short-form warning for a consumer product exposure to the carcinogen Di(2-ethylhexyl)phthalate (DEHP) would read:

WARNING: Cancer Risk From Di (2-ethylhexyl) phthalate (DEHP) Exposure—www.p65warnings.ca.gov.

Examples of acceptable warning labels under current regulations:

Cancer

WARNING: This product can expose you to chemicals, including [name of one or more chemicals], which is [are] known to the State of California to cause cancer. For more information, visit www.p65warnings.ca.gov.

Birth Defect

WARNING: This product can expose you to chemicals, including [name of one or more chemicals], which is [are] known to the State of California to cause birth defects or other reproductive harm. For more information, visit www.p65warnings.ca.gov.

Combined Cancer/Birth Defect

WARNING: This product can expose you to chemicals, including [name of one or more chemicals], which is [are] known to the State of California to cause cancer or birth defects or other reproductive harm. For more information, visit
www.p65warnings.ca.gov.

Current Short-Form Warning

WARNING: Cancer and Reproduction HARM— www.p65warnings.ca.gov.

Type Size: The warning text must be the same size as other consumer information presented on the package and may not be smaller than 6-point type.

SEMA News—May 2021

BUSINESS

The UTV Race Heats Up

How Consumer Thirst for Excitement and Escape Is Boosting the Market

By Mike Imlay

The powersports UTV market seems to get better and better each year, not just in terms of the vehicles themselves but also in terms of the increasing number of consumers flocking to the side-by-side lifestyle. It’s a phenomenon that not even a pandemic can stop.

Since the Yamaha Rhino first popularized UTV recreation in 2004, numerous OEMs have flooded the market with a diversity of side-by-side models aimed at youth, families, outdoor aficionados and hardcore racers. According to Motorcycle & Powersports News Editor-at-Large Brendan Baker, today’s UTV space has become fiercely competitive, with most OEMs churning out quality, capable products. Current favorites include Polaris and its RZR models, Yamaha with its Wolverine, Honda and its Talon lineup, and Can-Am, best known for its Mavericks. Each manufacturer also offers additional lines tailored for a variety of levels and uses. (For the utility-minded sportsman, even John Deere has entered the fray with its stalwart Gator models.) Among all those brands, however, Polaris is currently the dominant player.

“Overall, the difference is that Polaris has been doing it longer,” Baker explained. “They have the name and more models out there. They’re the Harley of the side-by-side market, but you’ve also got a lot of second-tier-level OEMs coming out with decent products—newer stuff at a lower price point, more value brands. People want a UTV, but they don’t necessarily want to take out a second mortgage to get it.”

2020 in Hindsight

As it did in so many sectors, COVID-19 shook the 2020 UTV market. Several of its largest OEMs temporarily shut production facilities, and dealers contended with lockdowns early last year. But like the vehicles themselves, the side-by-side segment proved remarkably resilient.

“I think everybody was pleasantly surprised and happy that the industry had a record year in 2020, which you wouldn’t have guessed going into March,” Baker said. “Somewhere in April, things started to turn around because people got the stimulus money. There were still people working and logging in from home, but they were also like, ‘Hey, what can I do during a lockdown?’ And that’s when they decided, ‘I’m buying a dirt bike, motorcycle or UTV,’ and things really took off.

“I almost think [the national shutdown] helped. It cleared out a lot of the inventory the dealers had. A lot of used and pre-owned stuff got sold off as well. In the end, demand was up and they were able to move product.

“We don’t have exact UTV numbers, but Polaris was up 29% in their off-road segment for the fourth quarter of 2020. That’s a pretty good jump that’s representative of the industry. UTVs have always been strong. They’re about half of the powersports market—they’re that powerful. If anything, more riders came in last year, and I don’t see that slowing down.”

According to industry experts, surging interest in UTV motorsports has also primed consumer enthusiasm for the vehicles—and that enthusiasm continued unabated despite the pandemic and the resulting cancellation of many 2020 events. When King of the Hammers (KOH) announced that its 15th annual off-road race would take place in February 2021 with enhanced COVID-19 safety precautions, all eyes were on Johnson Valley, California. Could KOH pull it off? Would the spectators show? The answers were yes and emphatically yes. Attendance topped 10,000.

That bodes well for other motorsports events, which have become the latest proving grounds for UTV manufacturers and specialty-equipment suppliers, observed Jim Ryan, marketing director for SCORE International. As the old saying goes, competition betters the breed.

“UTVs have been part of SCORE [desert racing] for many years now,” Ryan said. “In fact, we have six classes, and they all represent a developmental area for the OEMs. UTVs are our factory wars now. It’s not Ford, Chevy, Dodge. It’s not even Honda, Kawasaki, Yamaha, Husqvarna or KTM. It’s Polaris and Can-Am. Arctic Cat was in there for a while, and now there are also Robby Gordon’s new Speed UTV lines. That’s where the factory riders are, and that’s where the factory efforts are.”

Ryan added that UTV participation has grown to now represent about 20% of the SCORE field.

“We have unlimited classes, we have stock classes, turbo classes, non-aspirated classes, open, unlimited classes, which involve everything in the UTV category,” he said. “The ability of UTVs to finish even the most brutal races is quite impressive, and there’s an entire industry built up around the aftermarket. There are probably 40, 50, 60 hardcore manufacturers attached to that area in terms of performance applications and general or appearance modifications. Every category from automotive suspension to wheels, tires, safety equipment—all that transfers straight over into UTVs nowadays.”

Ryan further noted that SCORE’s social-media numbers continue to indicate a high level of fan engagement for the UTV classes and that the old “race on Sunday, buy on Monday” axiom is very real with UTV consumers.

The Race for Market Share

That thirst for motorsports-inspired performance means there’s plenty of opportunity for aftermarket businesses considering a jump into the marketplace, according to BOOSTane founder and engineer Ian Lehn.

“The water is not only warm, it’s scorching hot right now,” he said. “As a lot of people are now aware, BOOSTane and Driven Racing have come together in a collaborative partnership for engineering and new market development, and the first crack that we’re going to be taking is the powersports market.”

He added that today’s UTV drivers expect extreme levels of performance and efficiency from their vehicles—demands that he believes can’t be achieved without addressing fuel and lubrication.

“We’re going to be offering a fuel additive as a race-fuel alternative for higher-performance applications,” Lehn said. “Our engineering teams have been working together on a few different products still in development, including an application-specific engine oil for both wet-clutch and non-wet-clutch applications for Polaris, Can-Am, Honda and Yamaha vehicles. The last piece will be an oil specific to the front and rear diffs.”

A racer himself, Lehn believes that the low cost of entry is drawing more drivers into UTV motorsports, along with enthusiast consumers energized by what they see at the competitions.

“The opportunity is there for a family of four to purchase one vehicle and keep up with the maintenance versus buying four separate ATVs or four separate motorcycles,” he said. “With one UTV you’ve got a vehicle to go out and have fun in the outdoors all year round. The vehicles are designed for subzero temperatures and speeding through the desert and everything from racing to hunting, overlanding and camping. They have a lot of versatility. It doesn’t matter what your business model is—there’s a part of these vehicles and their market segment that [any company] could probably influence.”

Hypertech General Manager John Lambert said that his company added a thus-far successful UTV product line just over two years ago.

“We wanted to introduce our Max Energy Spectrum Power Programmer for the market, along with a supporting product line of popular high-quality accessories,” he said. “Our tuning product was an obvious introduction of Hypertech to the market.”

In a short time, the company’s many offerings have grown to include not only the CARB-approved power programmer for Polaris but also suspension limiting straps, a pistol-grip shifter, and such utility items as front-door storage bags, a UTV recovery kit, a tire repair kit, and other performance and safety items.

“We’re the first company to obtain an executive order (EO) for aftermarket tuning for the Polaris RZR,” Lambert said. “We also obtained an EO for our Xtreme Blow-Off Valve, which is also an industry first.

“The accessory product line came to fruition because of discussions we had with employees who are also off-roaders with UTVs. We want to serve these enthusiasts with a full product line that shows off our expertise in product design by offering numerous products that are all top-notch.”

According to Lambert, the latter point is essential to standing out in the crowd of businesses rushing into the market.

“It seems that there are a lot of people and companies trying to make products for UTV consumers,” he observed. “That means a lot of online sellers racing to the bottom of the pricing ladder. You can see that many products sacrifice quality to position themselves competitively at the lowest price. We decided to buck that trend and make products that showcase quality and performance.”

Crossing over to the UTV realm has been an equally natural and profitable progression for lighting suppliers like Oracle Lighting.

“A big focus of what we’ve been doing lately has been powersports and adapting existing products to work in those applications and also developing new products specifically for powersports,” said Oracle Director of Development Justin Hartenstein. “A big part of our customer base is off-road-type vehicles, whether for the truck market or the Jeep and SUV market, so a lot of our products in those categories lend themselves to powersports use as well.”

Hartenstein said that adapting lighting and other aftermarket products to UTVs doesn’t necessarily require a lot of engineering. Today’s larger side-by-sides aren’t much smaller than a Jeep or a compact SUV, so many of Oracle’s universal products easily exchange across platforms. (The company also makes vehicle-specific applications.) Moreover, UTVs share many features in common with their larger vehicle counterparts.

“The lighting systems on them are really similar to automotive lighting systems,” Hartenstein said. “They have daytime running lights, high beams, low beams and fault lights in some applications, so we approach [product development] the same way we would for OE-replacement parts for something like a modern SUV.”

Modification-Hungry Consumers

When it comes to the customer base, Hartenstein said that UTV enthusiasts are especially prone to specialty upgrades, with many consumers opting to purchase less-expensive utility or base models from UTV dealers so they can spend more on customizing them for desert running, trail riding, mud bogging, or simply hunting, fishing or ranch chores.

“Just because they’re utility vehicles doesn’t mean people don’t like to modify them,” he said. “For example, there are plenty of people modifying the Polaris Ranger just because it’s a lower price of entry. They might spend a little less on the purchase price but put money into aftermarket parts—wheels, tires, lights and things like that to make it stand out.”

In fact, as with fullsize trucks and Jeeps, wheels and tires are among the first and most popular upgrades UTV purchasers undertake.

Cameron Parsons, product engineer and field analyst for the competition and specialty tires division of Toyo Tire USA Corp., said that the company introduced its 32x9.50R15 Open Country SxS in 2019. It’s a popular size used on more aggressive side-by-side vehicles and in off-road racing.

“We’ve had a special interest in this segment for years, largely due to our recent race wins and season championships in both desert and short-course racing,” he said. “As the popularity of side-by vehicles grew among both enthusiasts and racers, it only made sense for Toyo to draw inspiration from our Baja-race-winning Open Country M/T-R and build a similar tire geared toward side-by-side applications.”

Parsons characterized the UTV tire market as “very competitive” for tiremakers.

“Side-by-sides are quickly changing and becoming more capable with each new model,” he said. “For that reason, we approached this segment from a motorsports perspective, where tires are put to the most strenuous tests in terms of performance and durability.

“A majority of side-by-side owners are interested in exploration, speed or both. We’ve also found that many of these owners enjoy modifying and upgrading their vehicles to enhance their capabilities further. They don’t take their side-by-sides for easy drives on flat roads. They drive through rough and complicated terrains, slide through fast corners, and they occasionally seek out jumps when they can find them.”

That translates to seemingly limitless opportunities for the aftermarket. In addition to wheels and tires, engine and tuning enhancements and lighting, frequent consumer buys include exhaust and suspension components, sound systems and mobile electronics, winches and recovery gear, and helmets, harnesses and related safety products. Replacement windshields, doors and roof options as well as cargo-management solutions and tools for the trail are also big sellers.

In the end, Baker said, the UTV market is all about motorsports-inspired performance and a freedom-loving lifestyle.

“There’s so much possibility with these vehicles, and people are going to want more of the already fair amount of aftermarket parts available,” he asserted. “And the more, the merrier, in my opinion. The cream will rise to the top, and a lot of SEMA companies already know how to build good product. It’s just a matter of gearing it up for UTVs.”

Explore the Opportunities

SEMA Market Research estimates that more than 80% of UTV owners will purchase accessories for their vehicle and lifestyle. Further, research indicates that the average accessorizer will spend in excess of $1,700 outfitting their side-by-side. To explore this and additional research relating to this market, go to www.sema.org/market-research where you can download the “SEMA Powersports: UTV Accessorization Report” along with other market reports to assist your aftermarket business.

By Ashley Reyes

Creating an environment that avoids micromanagement leads to employee self-sufficiency and, consequently, to productivity. During the webinar “Reducing Micromanagement and Increasing Employee Self-Sufficiency” taking place, Thursday, May 13, at 12:00 p.m. (PDT), managers and supervisors will learn tips for reducing micromanagement and how they can build confidence, efficiency and productivity within their departments that will lead to the long-term growth of their staff and company.  

During the SEMA webinar, managers and supervisors will learn:   

• How to identify common micromanagement habits and understand the impact on the organization.
• Best practices for setting a team up for success and ensuring that project goals are being met as a team.
• Ways to increase comfort levels between both the manager and employees
• Tips for proactively reducing micromanagement.

Attendees will participate in a breakout session following the webinar presentation to share their previous micromanagement experiences and discuss what they have learned.

Register here.

By SEMA Washington, D.C., Staff

SEMA-supported legislation was reintroduced in the 2021-2022 session of Congress that would provide tax credits to cover 50% of the expenses associated with exhibiting or attending a trade show. The bipartisan Hospitality and Commerce Job Recovery Act of 2021 (H.R.1346/S.477) would help businesses that participate in trade shows and the millions of men and women employed in the tourism industry.

SEMA’s Government Affairs Office is working in coordination with other key industry and trade groups to educate members of Congress and staff on the need to pass the Hospitality and Commerce Job Recovery Act of 2021. It is important that members of Congress continue to hear from SEMA members about the need to provide tax credits to businesses that participate in trade shows. To send a letter to your lawmakers in Washington, D.C., please click here.

Key provisions of the Hospitality and Commerce Job Recovery Act of 2021:

• Establish a tax credit for 50% of the cost of attending or exhibiting at a convention, business meeting or trade show in the United States between January 1, 2022, and December 31, 2024.
• Create a tax credit equal to 100% of the qualified restart costs paid or incurred to reopen facilities designed for conventions, business meetings or trade shows if the facility was forced to temporarily close or reduce operations due to the COVID-19 pandemic. Costs may include any renovation, remediation, personal protective equipment, cleaning, testing or labor to prevent the spread of COVID-19.
• Restores the Entertainment Business Expense Deduction for 2021 and 2022.
• Establishes a tax credit for restaurants or food service businesses that would cover any cost associated with reopening or increasing service at an establishment forced to temporarily close or reduce operations due to the COVID-19 pandemic. The credit would be effective between the date of enactment and December 31, 2022.
• Creates a tax credit for 50% of qualified travel expenses for individuals up to a maximum of $1,500 per household plus $500 for each qualifying child (maximum benefit of $3,000 for a family of five). The credit begins phasing out for individuals making more than $75,000 per year ($150,000 for married couples).
• Provides a temporary credit for unmerchantable inventory costs for small businesses that were lost due to necessary precautions to halt public gatherings.

For details, contact Eric Snyder at erics@sema.org.

By Ashley Reyes

During the upcoming Facebook live chat hosted by the SEMA Businesswomen’s Network (SBN), SEMA members are invited to tap into the expertise of a professional career coach and HR expert.  

With more than 15 years of experience interviewing candidates and serving as an HR resources to employees, owner of HR Culture Geek, Elizabeth Jacobs has insider tips and advice to help with every phase of a career, from résumé writing to interview prep and career planning.   

Tune in on the SBN Facebook page, Wednesday, May 5, at 12:00 p.m. (PDT), as Jacobs shares advice on how to land a dream job and navigate the workplace landscape with ease. As a live chat, participants will be able to get their questions answered during the event.

By Ashley Reyes

SEMA Chairman of the Board Tim Martin, President and CEO Chris Kersting and other SEMA/PRI executive staff will share updates about the industry’s top initiatives during the Virtual Town Hall, Tuesday, May 4, at 11:00 a.m. (PDT).  

Recognizing the changes that have taken place in the industry during the past year, the association has many new, enhanced and modified programs focused on current needs. During the 45-minute Virtual Town Hall, members will get updates about resources for emissions compliance, programs uniting the motorsports community and reconnecting the industry at in-person trade events this year.  

SEMA/PRI staff will talk about the status of current programs and events available to members and answer questions live during the Virtual Town Hall.  

By participating in the event, members can make their voice heard and provide their feedback on how SEMA can better serve the industry and membership.   

Register here.