Once a distant "what if," the EV revolution is now in full swing. While all-electric vehicles still command a relative minority of the automotive market, that piece of the pie is getting bigger every year. In 2019, EVs comprised 1.4% of all U.S. auto sales. In 2020, that number had risen to 1.7%, then 3% in 2021, and finally 7.2% in 2023, according to data from Clean Technica.

Conventional petrol-powered autos may always have a place in the American automotive industry, whether we eventually land on a 50/50 market share or gas-driven cars become more of a niche interest. But anyone who's even glanced at recent sales data can tell you that we're seeing the most significant automotive culture shift since the expansion of the American highway in the late 1950s.

In short, if you work in any corner of the American auto industry, you need to consider how you'll adapt to these changes. A big part of that is identifying your assets and making the most of them, and that extends well beyond tangible, concrete assets like machinery, warehouse inventory, real estate, and so on. Intangible assets can be just as valuable, or even more valuable, than the assets you can touch with your hands.

What Are Intangible Assets?

Defined as broadly as possible, intangible assets include anything one can possess that is not physical in nature. In essence, it's everything that makes a company a company, as opposed to just a factory, a warehouse, or a sales floor. When a movie studio builds a new movie set, that's a tangible asset. When they buy the rights to a beloved superhero, that's an intangible asset. Examples of intangible assets in the automotive manufacturing field may include the following:

• Customer-based assets: Email lists, production backlogs, customer contracts and agreements. If Netflix were to sell the company off, the subscriber base would be one of the most attractive features for the new owner.
• Contract-based assets: This could include lease agreements, construction permits, advertising agreements, and licensing rights. Employment contracts are typically included under this definition.
• Technology-based assets: This means patents, and even unpatented technology unique to your manufacturing process, data sourced through research and development, and trade secrets such as recipes.
• Marketing-related assets: This would include some obvious assets like internet domain names, logos, trade names, and so on, but could also extend to things like how you package your finished product. Anything related to branding is typically considered under marketing-related assets.
• Artistic and media-related assets: Training videos, artwork and text used in brochures, photographs, video, and anything dedicated to print, screen, canvas, or audio recording typically falls under this definition.

As you can see, there will be some overlap here and there. For instance, is an advertising jingle an artistic asset or a marketing asset? Identifying, separating, and categorizing these assets by type is part of the process, and it won't always be immediately apparent how each asset should be filed.

The Value of Intangible Assets in a Changing Automotive Landscape

Intangible assets largely come down to the trust you've earned in managing your business. Customers sign up for your email list because they trust you. Your logo and advertising material depend on the trust they command. Any contract, from a lease agreement to a long-term employment contract, is a matter of trust. The value of that trust isn't directly affected by changes in the industry.

Ford may be the best example of a contemporary automaker. The Ford F-Series has been the top-selling vehicle in the U.S. for decades, but the brand saw a noticeable dip in 2023 when it fell short of the combined sales of its leading competitors, the Silverado and the GMC Sierra. But, at the same time, they dominated the full-size hybrid/EV pickup market, selling 24,165 Ford Lightnings, according to Hagerty.

If this illustrates nothing else, it illustrates the value of a trusted brand name. Undoubtedly, some drivers were hesitant to buy an electric vehicle until Ford threw their hat in the ring.

Facing the Challenges Related to Intangible Assets Throughout the Closure Process

There is at least one way in which intangible assets are easier to liquidate, transfer, or otherwise capitalize on throughout the process of closure: There are fewer logistical considerations involved. There may be a video library that needs to be stored or a stack of documents that needs to be shipped, but, by and large, it's physically easier to transfer branding rights or employment contracts between parties than it is to do the same for large machinery or hundreds of boxes of automotive parts.

The legal complications about intangible assets are another matter entirely, though, and frequently far more complex than the legal complications that come with selling off a fleet of work trucks or a few industrial generators.

An employee may have no interest in transferring their contract to a new employer. Advertising material may be owned in part by designers, photographers, writers, and artists who agreed to a specific contract that would be voided by the sale of the company. How many times have you rewatched a favorite TV show on a streaming platform only to find that the theme song has been changed because Hulu couldn't get the rights to the original music?

Beyond these differences of opinion in how to interpret a contract, you also have tax issues to navigate. For instance, if you have a subscriber list for a discontinued service, and that list is now worthless, how do you claim that loss when you file your Form 966?

That brings us to another point: Identifying worthless intangible assets. While many of your intangible assets may hold more value than you realize, there are also going to be assets that, after a closure or sale, are scarcely worth the paper they're printed on.

In short, it's a minefield, and the only way to get through it is to go step by step.

A Brief Walkthrough of the Closure Process as it Pertains to Intangible Assets

The basic process of closure looks the same whether you're talking about tangible or intangible assets, with the key differences coming down to how these assets are identified, categorized, and managed. A step-by-step breakdown of the process as it concerns intangible assets would look like this:

1. Initial planning: Once the decision has been made to close a facility, it's down to those in management positions, starting at the executive level, to get an overview of the situation and set an outline for the process with attention to the company's goals.
2. Inventory and identification of intangible assets: Just as you need to make a list of tangible assets, you need to do the same for intangible assets. To get the most value out of a closure, it's necessary to overturn every rock and ensure that all contracts, leases, patents, copyrights, media libraries, and informal agreements have been accounted for.
3. Ensuring legal compliance: Before any further steps are taken from inventory and identification, legal compliance needs to be ensured. That is, ensuring that the company has full ownership of any assets being claimed, ensuring that anyone who needs to be notified of the closure is notified, and making certain that no tax laws or industry regulations are being broken.
4. Employee transition and communication: An extension of the previous step, and an important one. You will want to check with the Department of Labor to ensure that you're doing right by your employees and not violating any labor laws in the transition.
5. Documentation and reporting: Finally, it is important to maintain comprehensive records throughout the whole process. The more detailed your notes, logs, and records as you go, the easier it will be to get through any red tape, filing issues, or other complications as you go.

Why You Should Work With a Specialist

Closing a small facility might be easy enough to handle with a small team. If you own a metal shop with a press brake, a box of hand tools, and two employees, then your inventory and paperwork burden might be something you can handle in an afternoon. Running a factory, a warehouse, or a processing plant that's a completely different scenario.

And it's not just the business scale that affects the process. When it comes to intangible assets, we're talking about legal and economic complications that even the most experienced business owners, managers, and accountants might struggle to keep up with if that's not where they specialize.

NRI Industrial: Your Intangible Asset Recovery Partner

There is no escaping changes in one's industry, and when we see a major shift like the pivot to all-electric vehicles, those who are affected by that shift will need to adapt. This is an extensive and challenging process, whether you're managing a whole suite of upgrades and pivoting to take the lead in the new paradigm, or simply close shop and move on. In any event, partnering with a service that specializes in intangible asset recovery and management is key to a fast, successful, relatively stress-free process.

Get in touch with NRI Industrial if you're seeking an experienced partner who can guide you through that process.