Battle Royale in the Markets, EV Credit Limit Lift, Amazon Drones (Maybe)

June 14, 2022
It’s Troublemaker Tuesday and we’ve got a full plate of trouble to talk about from the markets that just can’t seem to stay out of the headlines, to a joint letter from automakers to congress. We’re also talking about the potentially real arrival of Amazon drone delivery almost a decade later.
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Crypto Crash, Bear Markets, & Fed on Wednesday

  • Crypto markets lost more than 300B as most coins dropped to 24 month lows
  • BTC below 21k and ETH temporarily below 1,100
  • General market has stayed 20% below Jan session high for a sustained period indicating an official bear market
  • Fed may accelerate rate increases to .75 from previously stated .50 amidst inflation acceleration
  • Two consumer surveys have also shown households’ expectations of future inflation have increased in recent days. That data could alarm Fed officials because they believe such expectations can be self-fulfilling.
  • Take away: Focusing on the right affordability solutions is more important than ever

Major OEMs strongly urging congress to lift EV tax credit cap in joint letter

  • GM, Ford, Stellantis, and Toyota highlighted the fact that they are investing over 170 billion in EVs and asked that the cap be lifted and a ‘sunset’ date be put in place
  • Potential Republican wins in the midterms are raising concerns that conservative financial policies may eliminate the credits
  • In April, U.S. Sen. Joe Manchin, a key Democrat from West Virginia, questioned the need to extend EV tax credits in the face of strong consumer demand and Chinese production of battery components.
  • "There's a waiting list for EVs right now with the fuel price at $4. But they still want us to throw $5,000 or $7,000 or $12,000 credit to buy electric vehicles. It makes no sense to me whatsoever," Manchin said. "When we can't produce enough product for the people that want it and we're still going to pay them to take it -- it's absolutely ludicrous in my mind."
  • Take away: Don’t count on the money, but count on the demand. \

Amazon finally getting drone delivery moving real packages (probably)

  • The company announced that it would launch its inaugural drone delivery service in the town of Lockeford, California, later this year after it receives the green light from the Federal Aviation Administration. Almost 9 years after founder Jeff Bezos talked about it on 60 minutes
  • After several test crashes and employee’s who raised concerns were fired, the program seems to have recovered and will begin drone delivery of thousands of products which have yet to be specified.
  • Take away: Who’s lives in Lockeford that can send us a video?! Think of how service departments might be able to take advantage of this turn time?


SPEAKERS

Kyle Mountsier, Paul Daly, Kyle


Paul Daly  00:20

All right, the hat is going backwards flipping the switch for troublemaker Tuesday. It is a total Battle Royale in the markets. Evie tax credits being lifted maybe. And Amazon finally get into drone delivery find the people really want to fight. I don't know. Finally, but it's finally but it's a maybe we'll talk about that. And it's a finally but it's a maybe it's troublemaker Tuesday, everybody. If you don't know what that means, it means it's the day we lean in and double down on innovation. Because all innovation, let's face it, it's trouble for somebody


Kyle Mountsier  00:55

come on


Paul Daly  00:57

elimination trouble for somebody because like people defend what they have built. And innovation, by definition means doing things different way. So as troublemaker Tuesdays, we're going to focus on a couple things that like look have innovation at the center of them just like I guess let's be honest, that's kind of what we talk about every day. Right? Every, every day, that's your backwards. That's our innovation for today. Which isn't really an innovation. This is


Kyle Mountsier  01:22

actually the day when my my kids love the most when the hat goes backwards. You were crazy today.


Paul Daly  01:29

I've been I've noticed that Danielle has been saying when it comes to the officers that have backwards already. Hmm, right. Yeah. And today I said to her, I was like I was born with my hat backwards. I was born.


Kyle Mountsier  01:40

Actually I have I have one of my mentors in the automotive side of the retail side of the business. He always was like, I will never do business with a hat backwards guy. And I was like, it's gonna go wrong. Because after that, I've been throwing that hat backwards when it's necessary,


Paul Daly  01:56

getting in the way of his business sense of his business. And so we had our hat backwards yesterday and pumped up a ton of video content about our trip to Philly to get ready for the asotu conference, asotucon conference asotu con conference. So we released it yesterday. And we played it yesterday, the beginning of the thing, but if you go to our social media account on LinkedIn, Facebook, Instagram, you can see the video, I'm sure we'll see it again. But it gives you a good front row seat look at the inside of the space, which is bananas


Kyle Mountsier  02:26

is dope. Like, it's really just, I cannot wait to kind of have the event takeover. And just like literally, you'll feel like you're walking into this, like just all encompassing experience. And yeah, it's gonna be really exciting. We had a ton of people sign up for our 24 hour first release email. So if you go to a SOTU con.com, just know that if you sign up there, you're going to get a 24 hour head start on acquiring tickets. And what we know is we can only have 600 people there. And it looks like only 400 tickets based on all of our partnerships and people that are already engaged in it will actually be for sale. So that's not a lot when we're talking about a standalone conference. So especially


Paul Daly  03:12

if your industry partner, right? Yes, industry partner tickets, there'll be even a bigger limitation, we did decide in the beginning, we were talking about, can we even release industry partner tickets for sale at all? Right? And we were like, probably not. And then we were like, man, we have so many Oh, geez, asoto OGS, who just aren't in a place where their company can sponsor they're not attached with a company can sponsor. So we are going to release an allocation, because we got to give some love to the Oh, geez. And I'm gonna say this right now, we didn't talk about this. But if you have the poll app that we issued at the year end extravaganza, and you want to ticket you are definitely going to get one. Right, you have to buy it still. But you will definitely get an allocation. So if you have the pull out, which is the NFT we issued. So I mean, we're talking hardcore. Oh, geez. Right, right, if you have that will allocate one for you if you want it, but we're gonna have to put a time limit on it. So we'll let you know more about that soon. I don't know if you notice, Kyle, but people in the financial world are a little bit escalated at the moment.


Kyle  04:15

I think I got like, 20 messages yesterday that we're all kind of like, you know, like if you if it was like between dumpster fire and like the eye emojis that just look this way, right? It's like, oh, boy. That's kind of the mood that that hit yesterday from a markets in general perspective across the board. It was unbelievable. And so we want to break it down just a little bit. We're not going to get too in the weeds. Just know on the front end. Anything that we say or contribute right at this point is not financial advice. We are not financial advisors. But we want to talk a little bit about what happened in the market yesterday.


Paul Daly  04:54

Yeah. So let's start with crypto. Because we talk about crypto all the time, right you talk about how He's got to talk about it in the lows. You know, people are starting to call us. We're heading into a crypto winter. Right and there's a big question like will crypto be like a gold standard hedge against inflation about what we're seeing right now is that the crypto market is following the general customer set consumer sentiment around the general markets Bitcoin dropped to under $21,000, which is way below its two year high. Ethereum dropped under $1,100 for a short period is up a little bit back over 1200. But you know, remember Aetherium was capping out in the in the four to four to $5,000 range. So we're talking about major market lost the overall market crypto markets lost $300 billion


Kyle Mountsier  05:41

in value believe that that unloved on billions? Yeah, so one of the things that if you're not exactly aware, obviously, there was a large amount of sell off and and there was a withdrawal from cryptocurrencies, it was like, Okay, so there's an there's an issue here. So there became like this massive withdrawal from some of the large crypto exchanges. And then what happened that really triggered a basically you see this kind of like slow downturn during the day and then a drop off? Right around? I think it was like 10 or 11. Eastern. And one of the major holding companies, I think the name is Celsius Celsius. Yep. Locked down withdrawals, which,


Paul Daly  06:28

so basically, giving you little bits of Celsius is where you can deposit crypto, right? And then you can actually borrow against it. So if I have you know, $10,000 in crypto, I can put it in Celsius is thing, right? And then I can borrow against that crypto just like a home equity loan. Right? Decentralized bank, crypto is the asset. I'm borrowing against my own asset. But when the mechanism hit that Krypto drops so quickly, and so fast that Celsius is like we're pausing withdrawals, so you can't borrow against your own crypto, your own crypto is fine. But obviously, that doesn't necessarily invoke confidence. So the real question is, what is that going to do? You know, I mean, we often talk about like people investing in responsibly in cryptocurrency, because it's new and anything's new. It's like, hey, try not to invest anything, you can't lose. And if you can afford to lose it, then you can afford the ride out the winter. So I think we'll see what really we're gonna find out that people have confidence in crypto as a long term play, right? Just like when you bet in the stock market, you're betting in the long term play of the US economy. So crypto is different, but we'll see what happens talking about the general economy. So the general market has now entered bear market territory, which means it stayed below 20% From January session highs for a sustained period of time. So it's 20%, down over a sustained period official bear market, you know, the question is like, is this does this continue? Does it lead to recession? Which is close? has a different definition, right? Or? Or do we hold here and start to rebuild?


Kyle Mountsier  07:52

Well, and I think everybody is eyes up kind of the we linked up these three stories. Everyone is eyes on the Fed tomorrow. And the question is, originally they had talked about a 50 basis points. So half a percent interest rate hike. And now the the kind of like news in the air is it might be 75 basis points, which would be three quarter point three quarter point raise. And so you know, just interesting because there are there are actually a lot of people that are saying, hey, look, that the Fed actually could land this plane much more softly and not head into recession, if that balance in interest rates if and consumer demand all kind of match up. Actually, it was interesting specifically in Nashville today, the housing market is see saw a 47% increase in just the available inventory. Whoa. Which is a pretty big deal. Because in Nashville


Paul Daly  08:49

instead of one house now there's 1.4 houses available in Nashville.


Kyle Mountsier  08:53

Yes. Which is, which is a total deal. total inventory. Yeah. Which is a big deal. Yeah, that's actually which is a big deal. Because when you look at like consumer demand, and the ability to purchase it saying, like, hey, there's a lot, there's a little bit more inventory available, meaning you're gonna see that like supply and demand start to balance. And actually, the report was, hey, this is actually a good thing we're getting we're not It's not like it's like a market and 20% increase in inventory. It's just enough inventory to balance demand. And I think that we're going to see that in in multiple places. You know, we talked about like the targets and the Walmart's having this inventory on hand for certain consumer goods. Right. And I think that that like level balance, and so I'm interested to see what over the next three to four days the markets do in response to the interest rates. So just a heads up and the understanding just kind of like you don't have to be deep in the weeds on all this market stuff. But understanding what this does to consumer sentiment and the recognition of affordability or you know, like cash on hand. And for a lot of people, for sure, being consumer changes behavior mentality. Yes. You


Paul Daly  10:05

know, the Wall Street Journal article that we linked up in the show notes, quote from A to consumer surveys have also shown households expectations of future inflation have increased in recent days. And that data could alarm Fed officials, because they believe such expectations can be self fulfilling. So basically, consumer sentiment can actually make it happen. Right? It's really a perception thing. And once you start perceiving it, right, actually, your behaviors change in a way that actually make it happen, if that makes any sense. So I mean, our takeaway on this is very simple, right? It's affordability, we've been talking about it for the last six weeks, affordability, affordability, affordability, right having the right inventory, that your consumer is looking for the one that they can afford, that they're willing to drive, they're willing to pay for the people that have the right inventory, we're right back to that game, right, having the right inventory, it's not having any inventory, especially with us cars, having the right inventory is where we think focusing on that will be something you can control, because you can't control anything else that we just talked about today


Kyle Mountsier  11:07

and go, I would also say, I'm just gonna say this real quick, because anytime you see like, and this happened in the height of COVID happened in the Oh 809 type recession. Anytime you see these, like massive market swings, or massive things that are hitting the news, it is important with your team within your business, to be aware enough, yet not overwhelmed by the news. And so making sure that your team is also approaching the news. And the way that consumer sentiment is with a healthy appetite for knowledge without like going so deep, where it's just like it's enveloped with me, I get caught up in the drama, exactly aware of it, figure out how to work with your team, your leadership team, your frontline people to make sure that the news is an awareness level that's healthy for your business going forward.


Paul Daly  11:58

Absolutely. Absolutely. Well, let's talk about something else. So there was a letter signed by four major OEMs GF, Ford's to Lantis, and Toyota strongly urging Congress to lift the Evie tax credit that has been in place. So basically, they said to Congress, if you'd have been aware, like, the US offers a $4,500 incentive to anyone who purchases an Eevee. And they put a 200,000 unit cap on each manufacturer. So Tesla was the first one to hit it, right? They sold 200,000 claim for 200,040 $500 credits, and now they're done no credit for them. Right. And so as you know, as the manufacturers roll out EVs, you know, they're all in different places in the race on when that credit rolls out, which obviously renders a different competitive advantage. So these four manufacturers says, Hey, we're investing over $170 billion in the Evie market. So we're asking you to lift the credit to even up the playing field. So that the the investments are all kind of have a fair stake. And then give us a sunset date. Let us all know when the credit is going to end. This is really being propelled by the fact that, you know, people are looking at a potential Republican takeover of the House and the Senate meeting more conservative financial policy. You know, Representative Joe Manchin, you've heard his name before from Virginia, he said, hey, people are lining up to buy the product. So I don't know why you're we are incentivizing them to buy it already. Because they're already lined up


Kyle Mountsier  13:22

greed. Yeah, it's tough to just like rid rid the world of this policy, right? Read the you can't write you can't just do that right overnight. But like having a clear sunset date, so that we can, because here's the other piece is how can you measure really measure demand? When you are curbing demand with incentives in a in an environment where they're harming it, you're just messing with it? You're just straight messing with it when the rest of society is under a supply chain issue, which is completely dictated by demand? Yep. Not by incentive incentives. And so it is, it is a weird situation for EVs to be in. And like think about if you're investing that much money in something that is driven by incentive incentives instead of raw demand. Oh, question mark. Is is the demand for my investment?


Paul Daly  14:17

Let's not forget about the solar industry. See what happened there? What's happening there?


Kyle Mountsier  14:24

What didn't make her Tuesday's right,


Paul Daly  14:26

again, all macro financial policy today, Kyle? Don't we look like a couple of financial guys that


Kyle Mountsier  14:32

my suit I got to us today?


Paul Daly  14:35

Let me just say, so here's our takeaway for dealers, right? Don't count on the money. It's obvious, right? Don't count on the money. But I think the indicator that we pull away from this is that we can definitely count on the demand. Yes. All right. And so like this goes back to a lot of stuff we talked about. If you know the demand is there, you know, the demand is going to be part of the future. Start to build the ecosystem that educates consumers


Kyle Mountsier  14:58

when I would actually Take it past him, I would take it like one level deeper than demand, I would say count on interest. And that drives education, which then drives demand us. Yes. Very good. And so count on interest. It's there. Educate and do your part in driving demand so that these investments pay off.


Paul Daly  15:19

Ay ay. Ay, Ida was attention, interest, desire action, right? It is, oh, you're saying like, let's move up to interest. It's there. And, you know, if you're listening to Kyle, you're putting coffee shops and every one of your stores right now. Just he's just he just really, you're just making the play for when we do the US toward the soda us or the bus. He's got good. I'm like,


Kyle Mountsier  15:40

if you got a coffee shop, we're coming to you.


Paul Daly  15:43

Yep. Right. Second is a prereq. final story today, Amazon is finally getting into the drone delivery moving real packages through the air to consumers houses. Probably, you know, Jeff Bezos famously talked about this in a 60 minute interview almost 10 years ago, and now Amazon's ready to go. They've had some setbacks, right. They've had some crashes. They've had some issues where employees that said when they raise safety concerns, they were fired. But now it's like the final layer of approval, FAA approval, and they're going to start delivery in the town of loxford. California. I didn't look at where that is. Do you know or loxford? California has no clue. Hold on. I'm gonna look it up.


Kyle Mountsier  16:20

Right now. loxford, California. You know, it's naturally it's happening in California. It's probably a little bit off the grid, but that's okay. I do think that


Paul Daly  16:33

southside of San Francisco. Okay, so Oh, that's Stockton. It auto corrected me.


Kyle Mountsier  16:40

trouble typing there like this city know what? Yeah, like? Like, no


Paul Daly  16:45

one know, what can you imagine? So good. We're about the outcome. Now. It's an actual place.


Kyle Mountsier  16:54

It is. Let's see outside of San Francisco, Oakland, it is near Stockton, okay.


Paul Daly  16:59

Oh, okay. It was It got me close between kind of like a little bit between Sacramento and San Francisco, which makes sense. There's a little bit more green space around that one. All right. So they're gonna start delivering packages. They didn't say they said 1000s of packages will be available. They don't know what and they don't know how many. And they're not saying what types of things but I'm assuming is going to be small light things,


Kyle Mountsier  17:20

right. Yeah, I think I think it was, like 10 pounds or less or something like that was but I mean, yeah, you got to have that dialed in, because you drop a 10 pound basket from out of the sky. that'll that'll leave a mark. Right, wherever it is. So I'm intrigued. I think it's pushing the boundaries. And I I'm gonna say this, I think it's actually it may not be the end all be all solution. But I think it may open up like some innovation on the other side of it always. Oh, yeah, I think I don't know what that is. I'm just saying I think that like, hundreds of drones flying around the city probably isn't practical, but some level of you know, like, like, ability to deliver packages with more technology is going to be the output of the


Paul Daly  18:07

imagine you deploy here dream with me for a second Kyle. It's like a drone launching truck that drives into a neighborhood and then right.


Kyle Mountsier  18:18

Yeah, it takes the guy a solid 15 minutes to get all of the packages in that neighborhood.


Paul Daly  18:22

So do that. I'm gonna be upset because you heard it here. First, they're probably already building it. They already got it. But that would be awesome. Like, I drive the drone deployment truck. Well, that if there's ever an autonomous vehicle, just, let's let's just face it, it's going to it's going to be a thing. But I was thinking from an automotive standpoint, right? Like imagine, like those times when you're fixing your car. Well, when I was younger, I always tried to fix my own car and I didn't know how to do it. But there's all your like holding together, you need a part. And it was usually like where's that reflective muffler tape was usually the thing. Because that's how my cars were held together. But I'm even think like dealerships and stuff like, you know, different filters and key fobs and little pieces can be pretty handy if you can get that in under 30 minutes via drone. And if you have a dealership, you have the space to land it right. There's a little spot to land it. So I don't know, that's what we're talking about today. There's definitely a lot of trouble on this Tuesday. But the bottom line is, we're walking into a day where we get to decide to make our own trouble, whatever your environment is. Kyle said don't get into the drama. He's right. know about it. Don't get into it. Because there's a lot of innovation to be had. There's a lot of trouble to be made. There's a lot of people to serve. You watching this. We're live, we're awake. What else can we ask for? Let's go do it.