CONFIDENTIAL
El Segundo, CA 90266
TEL: 424-297-1070 | URL: www.kosmont.com
CATHEDRAL CITY
AUTO CENTER SWOT ANALYSIS
January 2026
DRAFT - CONFIDENTIAL
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INTRODUCTION
Kosmont Companies ("Kosmont"), a real estate & economic development advisory firm serving hundreds of cities and local governments for 39 years, has been retained by the City of Cathedral City ("City") to conduct a Strengths, Weaknesses, Opportunities, and Threats (“SWOT”) Analysis for the City’s Auto Center. ▪ Kosmont's expertise covers a full range of economics & real estate advisory services including:
➢ Market and Feasibility Analyses
➢ Fiscal Impact & Economic Benefit Studies
➢ Economic Development Strategies & Implementation
➢ Business/Retailer & Developer Recruitment
➢ Identification of Funding Sources & Financing Strategies ➢ Public-Private Transaction Structuring & Negotiation
▪ Winning track record of initiating and implementing projects for municipalities ➢ In-house team includes economists, registered municipal advisors, financial analysts, lawyers, real estate professionals, former city managers
➢ Extensive network of brokers, investors and market data for real-time information, and industry leadership Disclaimer: The analyses, projections, assumptions, and any examples presented herein are for illustrative purposes and are not a guarant ee of actual and/or future results. Actual results are difficult to predict as a function of market conditions, natural disasters, pandemics, legislation and administrative actions .
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EXECUTIVE SUMMARY
As part of its current Comprehensive Economic Development Strategy (CEDS), Riverside County has incorporated a SWOT analysis of Cathedral City’s automotive industry. The analysis evaluates the sector’s strengths, weaknesses, opportunities, and threats, with a special focus on how it compares to neighboring areas like Indio and La Quinta. The findings will help inform strategies to support and sustain this vital part of the local economy. The auto industry plays a crucial role in Cathedral City’s economic development, aligning with two of its five strategic pillars: Business Attraction, Retention, & Expansion and Workforce Development. The City is home to approximately 17 automotive brands, including many mid-priced and some luxury manufacturers, such as Cadillac and Lexus.
Cathedral City Auto Center has over a dozen dealerships concentrated at the intersection of Hwy 111 and Auto Park Drive. Isolated dealers include Volvo and Infiniti west of the main auto cluster, Acura and T esla on Perez Drive, and Ford, Lincoln, and Mazda east of Date Palm Drive. In general, auto malls across the State of California represent a major source of fiscal revenue for a city’s General Fund. City is more heavily reliant on auto sales tax revenues than most cities. Auto sales represent 60% of the annual retail sales tax and account for almost 20% of the total general fund revenue (~$12 million) each year through the Bradley-Burns 1% sales tax and the City’s additional 1% Measure B Use Tax. Automobile sales are cyclical. Following a slowdown in 2020 due to the COVID-19 pandemic, increased demand pushed sales by 25% in 2021. Since then, sales have stagnated with modest annual declines between 2022 and 2024. In May 2025, the City’s Economic Development Department hired Kosmont to conduct a SWOT Analysis. Kosmont held several meetings with City staff and auto dealers to inform to SWOT Analysis.
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EXECUTIVE SUMMARY - COMPETITION
There are several auto clusters in the Coachella Valley outside the City. These include:
❑ Indio
❑ Palm Springs
❑ La Quinta
❑ Palm Desert
❑ Rancho Mirage
Indio Auto Center, located on the north side of I-10, is a major competitor to Cathedral City featuring Chrysler/Dodge, Ford, Kia, Honda, and T oyota dealers. La Quinta has Nissan, Cadillac, Chevrolet, and Hyundai dealers further east on Hwy 111.
Palm Springs features luxury dealerships (BMW, Porsche, Mercedes-Benz, and Genesis), while Rancho Mirage has ultra- luxury dealerships (Ferrari, Rolls Royce, Aston Martin, Jaguar, and McLaren). Both are located along Hwy 111. Palm Desert is predominantly focused on the used car market with a CarMax along I-10 and several smaller independent used car dealers.
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EXECUTIVE SUMMARY –
5-YEAR MOTOR VEHICLE RETAIL SALES GROWTH
Kosmont utilized the State Department of Finance database to collect motor vehicle retail sales for various cities over the past 5 years. The table shows the growth in auto sales for the City and Coachella Valley, as compared to other significant auto centers in the Valley and So Cal.
Cerritos Auto Center is the largest auto mall in the State generating $1.5 billion in annual sales, greater than entire Coachella Valley of $1.3 billion. Cerritos and the Valley experienced 38 / 39% growth, respectively, between 2018 & 2023.
Between 2018 and 2023, Palm Desert and La Quinta featured the slowest growth in motor vehicle retail sales. Conversely, Palm Springs experienced significant growth (~140%), due to new dealerships opening. It is important to note that there has been about 20% inflation over that period, which accounts for much of the increase in revenues as actual vehicle sales have been relatively flat (nationwide).
Motor Vehicle Retail Sales 2018-2023
City 2018 2023 % Growth
(2018-23)
Cathedral City $431,381,009 $562,236,018 30%
Palm Desert $82,725,948 $88,135,039 7%
Palm Springs $90,816,359 $217,950,425 140%
Indio $278,913,820 $377,913,454 35%
La Quinta $78,878,472 $90,764,023 15%
Coachella Valley $962,715,608$1,336,998,959 39%
Moreno Valley $327,969,569 $472,129,171 44%
Cerritos $1,108,149,106$1,534,232,876 38%
West Covina $435,021,237 $705,819,727 62%
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EXECUTIVE SUMMARY - SWOT
STRENGTHS
• Largest concentration of dealer franchisees in Coachella Valley • Good walkability between dealers in main Auto Center
• Strong history and established dealerships
• The undeveloped I-10 Corridor east of Palm Drive faces lesser wind impacts than the interstate areas west of Cathedral City
WEAKNESSES
• Lack of cohesive marketing message
• Need infrastructure upgrades
OPPORTUNITIES
• Hwy 111 is main thoroughfare for residents of the Coachella Valley – potentially identify / market as “Blvd of Cars” • Proactive business community and continue to foster good relationship with the City
THREATS
• Neighboring cities selling competing brands
• Neighboring cities investing inn auto industry
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STATEWIDE NEW VEHICLE SALES DATA
According to the California New Car Dealers Association, California light vehicle (car, sport-utility vehicle [SUVs], and pickup truck) registrations/sales/leases increased by 8% in Q1 2025 and are on pace for 1.7 million units, the annual average for past 5 years. Statewide vehicle registrations peaked in 2016 at 2.0 million and declined modestly almost every year since. While T esla is the largest franchise in the State, the manufacturer saw a 15% drop in vehicle sales for Q1 2025. Sales of EV cars from other manufacturers saw a 30% increase. Pickup trucks and SUVs represent over 70% of new vehicles and Asian automakers represent over 50% of total vehicle registrations in California. Zero-emission vehicles (ZEVs) were 20% of new cars, dramatically below the State CARB requirement of a 35% target share in 2026 (Congress just passed a bill in May 2025 banning that California mandate).
T esla, T oyota, and Honda lead in car and light truck sales, while Ford, Chevrolet, and Dodge lead in full-size truck sales.
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INCENTIVE PROGRAMS
Kosmont’s research found examples of policies and programs other cities have implemented that use performance- based incentives for auto dealership development:
Loans: La Quinta gave $1-2 million for dealership remodel to be repaid from taxes generated following loss of Kia dealership in 2008
Signage: La Quinta invested $600,000 for new monument signage and landscaping Rebates:
➢ Sacramento provided $100,000 per year rebate of sales tax for dealership remodel ➢ Adelanto adopted policy to attract new dealers to Hwy 395 corridor giving rebate of 90% of sales taxes dropping by 10% each year for 10 years
➢ Ontario provided 10-year sales tax rebate of up to 50% of sales tax for new car dealers; Moreno Valley does similar rebates for a negotiated number of years and percentage
Fee waivers: Temecula offers development impact fee waivers for new construction or remodel Districts: Cities can use property tax increment by forming special districts such as Enhanced Infrastructure Financing District (“EIFD”) to fund infrastructure / street improvements
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CATHEDRAL CITY INCENTIVE PROGRAMS
Cathedral City’s Municipal Code, specifically Chapter 3.46, outlines tax incentives designed to encourage the opening, operation, and expansion of retail businesses. The City has provided significant incentives to the auto dealers over the past decade:
In 2016 City negotiated with Honda of the Desert a tax sharing deal to facilitate expansion/improvement of Honda and Toyota dealership operations for 50% of sales taxes up to $427,000. In 2024 City amended agreement for same 50% share above baseline year for 10 years or until they receive additional $4,000,000. In 2017 City negotiated with Palm Springs Motors a tax sharing agreement to facilitate remodeling of Mazda dealership – 50% of sales tax above a $400,000 annual baseline for 10 years or until they receives $1.4 million in total rebate. The Mazda Agreement has since expired an no tax incentive was paid to Palm Springs Motors for this agreement. In 2023 City paid 75% of the cost of a new LED reader board ($359,074) in exchange for free advertising on the board for 15% of message time each hour for 10-year period.
In 2024 City entered into a license agreement with Palm Spring Motors to pay 50% of cost ($135,680) for refurbishing old LED signs in exchange for free advertising for 15% of each hour’s messages. The city has contributed towards other smaller reader boards which include various license agreements.
Kosmont recommends that City utilize services of economic consultant for negotiating future incentive and development agreements.
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MARKETING STRATEGIES
Implementation
Timetable (Est.) Strategies
Short-T erm
(0-1 year)
• City to promote “Shop Local” campaign focusing on purchasing from Cathedral City auto dealerships (city initiate)
• Auto dealerships should unify by incorporating other dealerships into the Auto Center group for collaboration and joint marketing efforts (e.g., more regional attraction to 111 Corridor) (dealers initiate) • City to host regular meetings with Auto Center dealerships to enhance ongoing communication (city initiate)
• Encourage and invite auto dealerships to community events to spread awareness (city initiate) Medium-T erm
(1-3 years)
• Cohesive Signage – Dealers should create auto center signage program (e.g., banners, entry monuments, directional signage to showcase Auto Center (dealers initiate) • City to develop a defined geographic Auto Center district (city initiate) Long-T erm
(3-5 years) • City to examine zone change to increase more areas for auto sales
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INFRASTRUCTURE IMPROVEMENT STRATEGIES
Implementation
Timetable (Est.) Strategies
Short-T erm
(0-1 year)
• City to continue coordinate regular law enforcement and code enforcement activities at the Auto Center to enhance visual aesthetics and safety and work with dealers for coordinated private security, camera system, and enhanced security coverage (city initiate)
• Enhance Capital Project Improvement Budget for Hwy 111 and adjacent arterial streets to enhance the visibility and access to the Auto Center (city initiate) • Examine future infrastructure and streetscape improvements that can delineate Auto Center from other business and residential areas (city initiate)
Medium-T erm
(1-3 years)
• Explore formation of an assessment district for Auto Center dealerships for ongoing property maintenance (can also be utilized for marketing and security) (city initiate) Long-T erm
(3-5 years)
• Consider the formation of an Auto Center Community Facilities District (“CFD”) or an Enhanced Infrastructure Financing District (“EIFD”) to fund new hardscape and landscape improvements. Estimated cost for an EIFD or CFD is approximately $100K (city initiate) Notes: Infrastructure improvement strategies may require on-going City financial commitments currently not budgeted.
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DIRECT SUPPORT STRATEGIES
Implementation
Timetable (Est.) Strategies
Short-T erm
(0-1 year)
• City to promote lease agreements for auto dealerships to utilize City parking lots and other public facilities (city initiate)
• City to consider loan agreements to assist dealerships with property rehab and upgrades (city initiate) • City to develop financial incentive policies and continue financial agreements to assist dealerships to expand and/or attract new dealerships (city initiate)
• City to explore strategies for site acquisition to assist with dealership expansion (city initiate)
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IMPLEMENTATION PRIORITIES
1. Evaluate infrastructure deficiencies along Hwy 111 and repair options (city lead)
2. Evaluate future infrastructure/ streetscape improvement for Auto Center and the creation of development standards for E. Palm Canyon corridor (city lead)
3. Allocate more code enforcement officers and resources to work with Police to address dealership impacts (staffing and part of budget adoption) (city lead)
4. Hold public meeting (study session) to discuss importance of auto sales to health of City (city lead)
5. Set regular meetings (monthly/quarterly) with all dealers to discuss challenges and opportunities (city lead)
6. City to initiate survey of dealers to understand willingness to provide matching $$ with City $$ or pay assessments for BID/CFD (city lead)
7. Research cost and reach of various advertising mediums (dealers lead)
8. Solicit PR firm to design cohesive branding for signage websites (dealers lead)
9. Approve a "Shop local campaign“ (city lead)
10. Evaluate incentive policies and rehab loan/grant policies establish guidelines (city lead)
11. Approve investment plan for year 1 (part of city's budget adoption and Capital Improvement Plan) (city lead)
12. Evaluate success of various initiatives and decide on next year programs (city lead)
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CATHEDRAL CITY
AUTO CENTER SWOT ANALYSIS
THE ANALYSES, PROJECTIONS, ASSUMPTIONS AND ANY EXAMPLES PRESENTE D HEREIN ARE FOR ILLUSTRATIVE PURPOSES AND ARE NOT A GUARANTEE OF ACTUAL AND/OR FUTURE RESULTS. ACTUAL RESU LTS MAY DIFFER FROM THOSE EXPRESSED IN THIS
ANALYSIS, AS RESULTS ARE DIFFICULT TO PREDICT AS A FUNCTION OF MARKET CONDITIONS, NATURAL DISASTERS, PANDEMICS, SIGNIFICANT ECONOMIC IMPACTS, LEGISLATION AND ADMINISTRATIVE ACTIONS. 2301 Rosecrans Ave., Suite 4140
El Segundo, CA 90245
TEL: 424-297-1070 | URL: www.kosmont.com
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APPENDIX
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DEALERSHIP MEETING NOTES – MAY/JUNE 2025
Indio provides a lot of assistance. We don’t want to lose market share and wants City assistance so Cathedral City dealerships can be more competitive.
We want the City to help and look forward to ideas that City can assist the dealerships. Indio is streamlining its process.
Cathedral City Auto dealerships have a long history. Last main investment dates back to 1994. Road and streets are old. Infrastructure is aging. Cathedral City Auto Center has no visual draw from Hwy 111 to bring people into the Auto Center. Strong competition from Indio and they are investing in their infrastructure. Cathedral City Auto Group is a good group of dealers. Marketing is not enough. Need City assistance with marketing, hard cost, ongoing maintenance. Can we form a Business District or Assessment District? We need the City’s assistance to be more competitive. City needs to invest in the auto mall. Need stronger visual enhancements and infrastructure improvement. Need marketing assistance and assistance with soft costs (landscaping and ongoing maintenance).