AutoNation Puts a Bow On It, Russian Used Cars, A Rabbi Uses Chat GPT

February 17, 2023
It’s Friday, folks! Today we talk about this morning’s earnings release from AutoNation with a killer opening line. We also talk about the Russian used car market as we near the 1 year anniversary of the Ukraine invasion. We also talk about a Rabbi who used ChatGPT to write a sermon.
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In a press release issued just this morning, AutoNation announced their Q4 earnings report indicating a 2% increase in YoY revenue and a 26% drop in net profits.

  • Capped off a record year of $27 Billion
  • Led the press release with the phrase, “America's most admired automotive retailer…”
  • “Our commitment to our Customers was recognized in Reputations' Automotive Reputation Report as we were ranked the No. 1 Public Dealer for 2022”, said CEO Michael Manley"
  • Said success was due to: focusing on operational excellence, including Customer satisfaction, sales efficiency, sales effectiveness, and asset utilization
  • Also opening four additional AutoNation USA stores and adding nine franchises acquired from the Moreland Auto Group
  • “Enhanced their digital storefront”
  • Acquired Repair Smith mobile service company
  • $1.7 billion was deployed to repurchase 15.6 million shares, reducing shares outstanding by 25% from a year ago.

If you think there are affordability issues in new cars in the US, consider what is happening in the Russian used car market as we approach the 1 year anniversary of the Russian invasion of Ukraine where the new car business which is heavily dependent on imports has been decimated.

  • Used cars accounted for 75% of all vehicles sold in 2022
  • 1 ruble = $0.013
  • Avg new car 2.33mrbls = $31,289
  • Avg used car .89mrbls = $11,900
  • 2.62x
  • US new avg: $49,388
  • US Used avg: $29,533
  • 2019 sales of new and used were even
  • In 2022, 19.6B New 57.7B used (almost 3x)
  • One employee at a major Russian company, Anton, felt lucky to get a used Skoda (offshoot of VW)  in December, for 2.5 mrbls which was almost twice the price as it was only a year earlier

We’ve been talking a lot about Chat GPT and many of its potential benefits and risks over the last months. A NY Rabbi, Joshua Franklin, recently used the AI generator to write a 1,000 word sermon based on a portion of the Torah focusing on intimacy and vulnerability

  • He told the congregation that he was reading someone else’s sermon and the congregation assumed it was written by "wise, smart, thoughtful individuals.” but then he revealed the real ‘author’.
  • At the end of the sermon, there was applause. The Rabbi said "Now, you're clapping — I'm deathly afraid, I thought truck drivers were going to go long before the rabbi, in terms of losing our positions

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Kyle Mountsier, Paul Daly

Paul Daly  00:33

The production team just surprised us with a new intro video. Recap with some chill music. I came down with that today we're talking about auto nation putting the bow on the year Russian used cars and a rabbi using chat. The people really made it to the rabbis and,

Kyle Mountsier  00:49

man. It just got everywhere, didn't it?

Paul Daly  00:52

Yeah. We'll save can save. I could discuss. I want to start talking about that one right now. But we'll have to save that to the end because there you go. The Rabbi's chat. GPT something I feel like we're going to talk about for a second but it's Friday, everybody. Welcome. Welcome. Welcome to everybody on the Livestream. Everybody on podcast world hope you had an awesome week. And we're going to kick off the weekend, right? Getting Saturday with a little bit of news, a little bit of fun with a little bit of stuffy stuff. Hey,

Kyle Mountsier  01:20

I just want to have we mentioned this every Friday, but we're going into all things use carbon this Friday, if you miss this Friday, this is a digital transformation room. And I'm excited about it because I have a lot of passion about what digital means to the automotive industry, especially retail auto. And I'm hoping that the conversation serves the audience. Well, and also, just so yeah, if you don't follow that if you're not on clubhouse, make sure to track that down, because I think it's going to be a really good one this

Paul Daly  01:47

week. Yeah. And if you don't know what clubhouse is, it's the clubhouse app. on Apple, you know, on the App Store, Google Play clubhouse app, just do the sign in thing and just search all things used cars, and then the room will probably pop up. If you have a really hard time, just send us an email crew at a Watch the email inbox from now until 9am. Eastern. If you missed the show, you'll be able to see the replay if you get there after the fact. So, so good. It's all good. Hey, also, we announced yesterday, we're gonna say one more time, we'll talk about it more, but we're going to be Kyle and I are going to be emceeing or not emceeing. We're gonna be moderating some panels at the Reuters automotive event in Las Vegas, May 16, and 17th. We also got some OG a soda crew out there, Steve Greenfield is going to be emceeing Brian Kramer is going to be out there making trouble and a bunch of other people. So if you can get out there and hang with us, we're also doing a collaborative podcast with Reuters on the floor of the event, because that's what we do. So it's Come on, we gotta be a good morning. Good morning, Larry. I always like when Larry dropped. Comments. Good

Kyle Mountsier  02:47

to see you, sir. Yeah. All right. If you don't, if you listen to the podcast every day, and you don't ever check out the live stream, we live streamed Facebook, YouTube, Twitter, LinkedIn. So you know, check us there every once in a while you don't have to every day we know it's a lot. But

Paul Daly  03:03

it's a great, that's a great point. If you'll see a smile, we promise you will see a smile and not that good looking. But you'll see a smile. Like smiles the most attractive thing you can put on every day. We like a boss, let's really all I got going for me. So in a press release that was just released like a couple of hours ago, maybe maybe an hour and a half AutoNation announced their q4 earnings, indicating a 2% increase in year over year revenue. That's good increase in revenue, and q4 a 26% decrease in net profits year over year. Now that sounds dramatic, but it's actually not that dramatic. It's what everyone wants to put as the headline. But the truth is, they just capped off a record year of $27 billion in sales, that's a couple of bucks. They they let the press release with this statement. I read it twice. I was like that is bold. Then I read why they did it but ready, America's most admired automotive retailer.

Kyle Mountsier  04:09

That's what I love it. It's like, hey, we like not the most profitable not the most, just like customers love us. So that's pretty hard. That's a pretty good way to lead off and especially if you can back it up, which I mean, they so comes out with a report every single year and a lot of the public's are really intent on making sure that they are a part of that report. And you know, the CEO Mike Manley said our commitment our customers was recognized and reputations automotive reputation report, and they were ranked number one as the number one public dealer for 2022. So hey, I you know, I think that I don't think it's that that far outside of the truth is what they what they dropped at the front of the press release.

Paul Daly  04:53

I mean, we could be like, you know, asoto is the automotive industry's most admired news and commentary. community and then we'd have to put a little asterix on that be like in a poll of the owners right yeah they went on to say the success of the year was due to get this focusing on operational excellence, including customer satisfaction, sales efficiency, sales effectiveness and asset utilization allotted lots of big words in there because we expect but they also open for additional automation USA stores at a nine franchises when they acquired the Moreland Auto Group. They said I don't know what this means you might have more insight into this they said they enhanced their digital storefront you know what changes they made this year?

Kyle Mountsier  05:40

Yeah, I mean, well, that's that's gonna be probably in just website enhancements. You know, I haven't seen anything that's been like mind boggling for modernization.

Paul Daly  05:50

But yarn comms teams got to talk about the digital stuff. I'm sure they got permits. They also required repair Smith which recovered back when they did it which is a mobile service company we love that move super cool. And they said what they deployed $1.7 billion to repurchase 15 point 6 million shares. So you know, when you're when you're doing share buybacks,

Kyle Mountsier  06:11

you're good shape. You're in good shape.

Paul Daly  06:13

Congrats alternation on an amazing year. That's a

Kyle Mountsier  06:16

good drop for, you know, mid q1 for us all to feel good in the auto industry. salutely.

Paul Daly  06:21

Absolutely. So I don't know, I guess I guess I could go speak Yes, is really generic, but we'll get there. Speaking of the auto industry, you're gonna go? I'm not even gonna credit that with a full segue. But check this out. So if you think this is, well, this is the one year anniversary, we're approaching it of a pretty somber thing, actually, the Russian invasion of Ukraine, and what that's done to obviously, the people in the culture, and we're going to talk about right now what it's done to the auto industry. So if you think affordability issues with new cars in the US are an issue, consider what's happening in the Russian new car, used car market as we approach this one year anniversary. Basically, that industry is so dependent on imports, and so dependent on outside infrastructure, that literally the new car market has been completely decimated us cars, in 2020, accounted for 75% of all vehicles sold.

Kyle Mountsier  07:14

Wow, that's a wild proposition. Like if you just think about that as a as a new car franchise dealer in the US like what the average, you know, it's typically like a three to one, it's probably it's the other way, for most New Car Dealers, sometimes you get to that one to one. But it most of the time, it's like anywhere between two to one and three to one is the is the average new cars to use cars. And so you know, just to have a whole market be flipped on that is a pretty wild proposition.

Paul Daly  07:44

Here's got some numbers to talk about. I had to do way too much math and conversion early in the morning today, because I didn't realize this, but we're talking about billion rubles of the Russian ruble is that the currency in Russia and like, we're talking like in the billions and trillions of Russian rubles when we're converting back to I'm like, This is too many zeros for this morning. But I did it, I did the work because you're worth it. One ruble is 1.3 cents. So the average new car is 2.3 3 million rubles, which is $31,289, the average US car is about $11,900. So that's almost approaching a 3x value. So like think about that for a second for a new car, you're gonna pay three times the price for an average new car as you would for an average used car. So that price disparity is massive in the US, basically, average new cars right around 50,000 The average used car is right around 30,000. So

Kyle Mountsier  08:40

still a multiple but more like 1.5 and not 2.6 Yeah, I

Paul Daly  08:45

mean, it's it's approaching craziness, actually. So in 2019 here's probably the most interesting stat to me anyway, in 2019, new car sales used car sales were about even as far as like total total dollar amount. So yeah, yeah. So when one now just a few years later, 3x three times us car sale. Yeah. So it's like the new car sales have dropped significantly. And basically, if we remember a lot of the companies pulled out, you know, Volkswagen pulled out diesel pulled out and everybody's pulling out one employee at a Russian company who doesn't want to give his full name Anton. He said he felt lucky to get a used Skoda Skoda is like a VW offshoot in December, which is which was almost twice the prices one year earlier. And he felt lucky. Like because he got he got a foreign car because really like any of the local stuff, or a lot of the Chinese made stuff, it's just not as reliable. It's not as desirable in Russia.

Kyle Mountsier  09:41

I put this story. I mean, you think about what that does to the global market, like Russia is a massive market player and so like vehicles are and new vehicle sales and manufacturers are impacted by so many countries. And so you think about what the trickle down effect of That little new cars that many used cars in and then like supply chain issues trying to get your vehicles into a major market like that. There's just, there's so many dynamics that that pushes into European markets, Asian markets, US markets, that a lot of times just keeping your eyes on that and understand that, you know, that's not going to be something that a customer walks through the door today and like a salesperson is like Did you know, Russia? Bah Bah, you know, yeah. What it does is it sets your mind on like, okay, that now now I get a better better reality for what the rest of the world is seeing with production and sales, and how that might be impacting how a customer engages with buying a new or used car today.

Paul Daly  10:42

Yeah, that's that's a great way to get it to the ground. One of the reasons that I thought it'd be cool for us to talk about this today is to just broaden out our mindset for a minute, with a personal story about what the automotive industry is in. This is not a local industry. It's not a nationwide insurance industry. This is a global industry. And at the Digital dealer in Las Vegas, the one where we had the big the big troublemaker event where we had the live podcast and right it was when you and I realized that like it was really the synthesis of a soda, as you see it today was that event. There were some some Russian dealers there. And they came up to me. And the one guy was like, Hey, you have to this is this is the Russian Paul J. Daly, he says, and I should have brought up the picture. Except I felt like Rocky next to Drago, because the guy was like, taller than me. But he had a black hat. He had a beard. He's wearing a black shirt, we took a picture together. And so like when I read this, like my heart is heavy for the auto industry because we have so many good folks over in Russia that like just want to, like serve people in the auto industry. They were trying they were there. They were trying to increase their customer experience. They're working on their digital platforms, they were building their brand. And just a lot

Kyle Mountsier  11:53

of times we look at and it's like there's a conflict going on. And we just like globalized, whatever Russia is like politicize it, globalize it right. And and there's like real people on ground that are a part of our industry that are struggling to figure out how to serve customers in a place where they can't deliver new cars at a price point that makes sense anymore. Yeah, there you go.

Paul Daly  12:13

So thoughts and prayers with our fellow auto industry folks just out there trying to love people more than they love cars, however they can, with use cars and new cars with you hopefully sometime will actually have the opportunity to meet you in person when you're coming back to the auto conferences and, and things like that. So one final thing we've been talking about Chet GPT a lot lately. And And speaking of, I don't know, bridging cultural divides in automotive segway with automotive through automotive.

Kyle Mountsier  12:44

Hey Castleman, our best segue day sometimes we win. Sometimes we lose. We'll get there. Okay. It's rainy.

Paul Daly  12:49

I'm just coming back from vacation. I'm literally here to man. What is it? I woke up and I looked at the temperature this morning. I was like, It's 10 degrees warmer in Syracuse than it is in Nashville this morning.

Kyle Mountsier  12:59

Yeah, yeah. Well, it was 78 yesterday, and it's 32 today. So you know, that's,

Paul Daly  13:05

that's kind of upstate New York weather right there. We're connected to new thought. So we've been talking about chat GPT many of his potential benefits and risks over the last month. And this story, just we have to talk about a New York rabbi, Joshua Franklin recently used the AI generated to write a 1000 word sermon, based on a portion of the Torah focusing on intimacy and vulnerability. So basically, he tells the congregation that he's reading someone else's sermon when I read someone else's sermon this morning, and it was written, you know, and the congregation assumed it was you know, aflofarm Rabbi gonna read this. It was obviously written by some wise, smart, thoughtful individuals. But then he revealed the real author at the end of the sermon and get this. At the end of the sermon. When he got done reading it, there was a clause. And the rabbi said, I always have my I had a Jewish business partner years ago. And so I always pictured Eddie Blumenfeld, from Brighton Beach, Brooklyn, when I read saying that a rabbi racist, like, now you're clapping, I'm deathly afraid. I thought truck drivers were gonna be Yeah, I thought she basically says I thought truck drivers were going to go long before the rabbi in terms of losing positions to artificial intelligence. Guy, what do you think about this?

Kyle Mountsier  14:14

Well, and he says this that, you know, obviously chat GPT can get some facts, rights and can sound intelligent can synthesize ideas from widely adopted resources. But what it can't do is be extremely empathetic. And I think that that's, that's the part that like, I think people need, we need to tune ourselves as people to go What's the empathy on the other side of these words, right, and and tune ourselves to being empathetic? What other words because as all of this AI generation as copy and marketing copy and blog posts and information come out, and they are AI driven, like we have to as a people be attenuated to more empathy, because that's the piece that at least up Until now hasn't been baked, baked into to AI models. And and I think it'd be hard to at any point like you are there and I am here, how do we interact, I think is the is the real key. And so, yeah, it's it's, I don't know how to do that as a culture. And obviously, you know, these these parishioners were were, were impacted by this, this sermon by chat GPT. So, I, it's, it's a tough ask. But we just have to be ever like, way more present with the words that we're hearing and seeing and really read them for the the empathy, and I think that that's where like, videos is going to be more important. Where live live, things are going to be more important. Because you can't, you can't mess around with like someone being in front of you. So we'll see.

Paul Daly  15:54

Can you imagine like, can you imagine, like, you know, when he talks about empathy, and you know, in the in the in the dealerships and the service lanes, so much empathy has to do with like, taking a broad, it's easy when it's marketing, right, like, write me something about value propositions, great, we can do that. But when it's like, take all the indicators and your understanding of what's going on in the world, what's going on in your service, like what's going on with that person's vehicle, or what they're gonna buy or what they're trying to, like. There's still like, just the same reason full self driving doesn't work yet, right? Because there's just millions of kids at this point. Yeah, I know. I know. I just we can talk about though they will talk about it tomorrow. But there's so many inputs that like the synthesis, the beginning part of all of the effective communication is this awareness and understanding of that, right. And in this situation, chat GPT took what a lot of other people synthesize through perception through reading the texts through living life through serving other people. And that's what it pulled from but the synthesis is still happening every day, in the stores, on the phones in the emails with the video threads. So we thought there's fun to talk about it's another little texture to another little texture to what we're doing out here and I just saw a comment come up in the post and Brian Ortega just done me dirty this morning. He said segways are off today. Kind of like the Eagles. Second half, Brian, you know, I was I was coming away from that and I was feeling good about this Friday. Thanks for reminding me about that. You sir. Our chat GPT cannot duplicate you also. Ellie, thank you for the comment. A lot of working service is like social work. That is the truth. That is the truth. It is like therapy. That's what we are. We're out here just running some therapy. In the morning in the automotive industry. You are we are bottom line. We're just serving people. It's Friday. We believe in you and just believe in some people serve some people will see you next week.

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