Big ASOTU Announcement, Used Cars Rise, CA Crowns Tesla, D2C reversal

February 9, 2023
It’s a great Thursday for Retail Auto as we make a milestone announcement (we think) for team-ASOTU. We also talk used car pricing, Tesla in California, and a notable shift happening in retail footwear.
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Michael Cirillo joining as CoS

  • Used car prices have seen their second straight month of increases as the Manheim Used Car Index bumped up another 2.5% from December to January indicating a higher than expected demand
  • Still down 11% YoY
  • This is an atypical change for January as values historically remain fairly level across the two months
  • There are even some indicators that hint at Spring. Maybe the groundhog was wrong?
  • Tesla’s Models 3 and Y are named the best selling vehicles in California unseating Toyota’s Rav 4 and Camry from their throne.
  • 1 in 5 cars in CA are electric and the state accounts for 40% of all electric vehicles sold in the US
  • Tesla’s market share in CA is 11.2% as opposed 3.5% in the rest of the country
  • Toyota still topped CA market share at 17.3%

  • Major footwear brands are showing signs of reversing course and turning back to wholesale after sharp moves in the direct to consumer space
  • Namely, Nike is loosening allocation to wholesale channels such as Foot Locker after several years of limiting volume through wholesale channels
  • They recently invited wholesalers to visit their campus for the first time in three years
  • Design partnerships with wholesale brands for exclusive offerings of its popular AF1 shoes are also on the rise
  • Since the shift began, startup shoe brands such as “On” and “Allbirds” have been seeing great success as they embrace traditional wholesale channels according to estimates by the Wall Street Journal

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Kyle Mountsier, Paul Daly, Michael Cirillo

Paul Daly  00:28

Yo, I feel so good to be back in the studio

Kyle Mountsier  00:32

for Thursday's show.

Paul Daly  00:33

I mean, we love travel, we're back, we have a big announcement talking about used cars and Tesla, and sneakers and this announcement.

Kyle Mountsier  00:44

Just gotta go straight and just like like, well, first of all, I'm so glad we're not by a pool or on a lawn. I'm like in my office and got the thing. And

Paul Daly  00:53

I agree with that statement.

Kyle Mountsier  00:54

You just made another like, bring it back to the pool. That was crazy. My wife texted me that morning, she goes, I think that was my favorite show ever. Really the pool? If you like, if you listen back and watch back to it, you're like, wow, they were they were definitely

Paul Daly  01:11

out of pool. Isaac was like, I was so waiting for you to just like wrap the show and just put the mic down and go jump in. We didn't have to, like get on a plane the next morning, we might involve that thing. Yeah, that would have been a good way to go. Good way to go. Well, it is Thursday, a great Thursday to be in retail automotive. We have a really big announcement to make. And it's big for the asoto team. And we think it's going to be really big for the future of the soda verse, you know, as any any startup, right? Think startup life for a second, we are about a year in to being an official like Corporation company about a year and not even actually. And you know, the fast growing life, the team has grown from like, zero or like one or two, to where we have, like 12. Now, somewhere in that 12 club and growing quickly, we have 14 at nada, there's a great post that just went out about that. And the the challenge of a startup is the fact that you're growing fast. Communication is always tough, because you're running flat out, right, try talking while you're running flat out in six different directions. And you know, as that goes, everyone's trying to do what they're doing. There's, you know, some communication breakdowns, there's, you know, people that need to be cared for. But at the same time, there's a lot of people that really are passionate about what they're doing. So it's like this whole ball of inertia, and emotions. And we got to a point where like, all right, like how are we going to care for this team best to talk?

Kyle Mountsier  02:37

Yeah, and so a lot a lot of people know that we like integrate others into this ecosystem that you've seen different personalities and people and, and this personality, this person alone is already started to care for our team and come alongside and been a part of vision casting and creating shows and things like that. So let's let's bring Michael Cirillo to the stage. Come on, bring him up in here, Isaac. Yeah, we actually have so So Michael, is joining us as our as our chief of staff, and he's gonna join the executive team with Paul and I and and team SOTU. And as already like, he's already started the integrated into that team. And we're really excited to have him like, help us cast vision and build things and dream about how we can serve the industry more be a part of content be a part of, you know, serving our team. And yeah, Michael, we're, like, pumped to have you, you're on the show, you've been on the show before, but

Michael Cirillo  03:39

say, Hey, man, I'm excited to be here. And there's, I mean, I love just working with people. And, you know, that's been one of the highlights working with my team at flex dealer, just just growing and, and working together with people and seeing the achievements and the potential, just unlock. So I'm excited to do that here with you guys at Team asoto. But also getting to examine the industry from a different angle, right? It's one thing to do it as a tech, you know, marketing entrepreneur, it's another thing to approach it from the angle that, that so two approaches are first of all, super excited to do that. And, and actually, you know, we've proven that the three of us can get stuff done together, that it's not smart.

Kyle Mountsier  04:27

It's not all fun. We're gonna put that on a shirt. It's not. We do to

Paul Daly  04:36

look at the I want to, I want to talk about two things and clear up some potential misconceptions and try to stave off as many texts and phone calls as you're gonna get today, Michael. So Michael is joining us as the Chief of Staff. This is a position that is growing in popularity amongst companies. You know, usually it's kind of reserved for like the political landscape, but you know, so we did a little bit of work to like to find And what we meant by Chief of Staff. And, you know, just this is really a people oriented, getting people in place, and making sure they're all facing the same direction. So there's like a people and a processes kind of mentality to to the position. And I'm going to ask you your perspective on that in a second Mike, on how you've been approaching it, because you've been in the role for a couple of weeks now. But I also want to clarify a really big thing. The things that Michael is doing with Flex dealer, and his dealer playbook podcast, which you have to check it out, are not changing. Right? Like, let's take this on, taking this on as an additional role not to replace anything else. So Michael, why don't you just like color in the lines there a little bit, and then, like, share, how you're approaching that the chief of staff position?

Michael Cirillo  05:47

Well, you know, despite popular belief, I think that gets adopted in our industry, it is possible to do some really cool stuff and serve dealers, in a way where your company grows, where your people are cared for, where you can be cared for, as an entrepreneur, without all of the massive fanfare, and lights and, and, you know, all of those sorts of things. And so, you know, we've been really, really blessed at flex dealer. And, and I'm at a position where I have some availability, where my team is growing the business, and we are doing incredible work for our clients. And so, you know, over the last year, I mean, people have probably wondered, like, what's the real deal with the Soto gang all the time, he's

Paul Daly  06:32

there, he's there, we were too early. We were wondering that to it.

Michael Cirillo  06:36

And that was like, you know, that was kind of for everybody a little behind the scenes. That was us exploring each other. That was the three of us here, getting to know one another in a, in a deeper way, seeing, you know, how much we really had in common, how our mindsets are aligned, not just in business in the industry, but how we approach our families and our views on fatherhood, and all those sorts of things. And so, you know, pulling back the curtain even further, a few months ago, Paul was kind of like so yeah, like, all these things, you and I have been talking about your company you've achieved and, and you've got some availability, and I'm like, I've got some availability. And, you know, you asked me point blank, you're like, so would you have any interest in looking at a soda with with more purpose with more intention? I'm like, let's talk. So you know, there's this. There's this old cartoon called Captain Planet. I don't know.

Paul Daly  07:36

I know, we're gonna we're gonna get rings, right? When I was

Kyle Mountsier  07:39

combined. Oh, you have a ring.

Michael Cirillo  07:41

Yeah, we got there. And it was like with all of these mindsets and weird fart jokes combined. You know, it was like, so it just made sense. So yes, you're right, flex continues, I continue to pursue my stewardship for my team and my client partners there, that that does not change. We have some amazing things that we're doing there and, and goals that we've set for our company this year. But with that availability, I see the opportunity to, to, like I said, just examine the industry from a different angle to work with the two of you in a more purposeful way and with the team and to have a boatload of fun, you know, and the older I get. I want to have, you're

Paul Daly  08:31

absolutely the oldest man in the company. Now. I don't know. Actually, I have no idea. I don't even know how old you are. But you're definitely the Oh, am I the oldest man? Yeah, experience. I'm the ripe old 43. Listen, I have zero problems with getting older. I'm looking forward to being a grandparent. I'm happy that I'm the age I'm at.

Kyle Mountsier  08:53

I'm still looking at y'all might be older, but I got the most gray in my beard. So that's

Michael Cirillo  08:58

the box kit. Do you do box kit to

Paul Daly  09:02

keep them I'm looking forward to going great. I actually wish my beard was grayer.

Kyle Mountsier  09:09

wiser than I am.

Paul Daly  09:10

That's exactly my point. That's exactly my point.

Michael Cirillo  09:13

He's got toenail clippers on his keychain

Paul Daly  09:18

that's never coming. That's when you know,

Kyle Mountsier  09:21

he wears sketch white Skechers.

Paul Daly  09:23

Oh, white New Balance white. Alright, so one more quick, what just want to get your perspective on the chief of staff position. And then we'll get into some news here. So what is your because I think this is a role that that frankly, like we've been in some dealerships with some leadership teams, and Kyle and I have actually suggested this position as a solution to some problems in some dealer groups, because you get in the mindset of like, well, I need a general manager and a sales manager and a service manager, meanwhile, like the synergy between departments usually falls on the lap of the GM And the GM is often ill equipped to do that and still keep up with the progressive nature of the moving industry. So Chief of Staff is actually something we think is, could potentially be an important role and important position in some of these growing dealer groups. And so, you know, which is one of the reasons we adopted it here. And so what is what is your mindset approaching chief of staff position, Michael, and even like framing up within automotive?

Michael Cirillo  10:23

Right, I think no matter what you do, as a leader, if you're a CEO, CEO, oh, dealer, Principal, GM, sales manager, you know, department manager, your focus can only go so far. And that's not a bad thing. So the, the way I see it is, is a delegation of focus. I know our industry wants to say words like authority, or, you know, power or whatever, I see, my favorite word and leadership is stewardship, because it reframes the the the internal narrative about what what does that mean? Well, stewardship, like a hen gathering her chickens under the wing is, is really the way I see it, it's how do we lift and empower embolden people so that they can do more with less, and really, truly realize their true their full potential and nature, and how powerful they actually inherently are, and how we we tend to discredit ourselves. So So I see this as a delegation of focus. Dealer, principals have things they must focus on things that they can only do, and it's not a replacement of that, that responsibility, the responsibility still rests on dealer principal shoulder for their people. But when you delegate the focus, now it allows, it allows that leadership team to really expand and conquer their mission. And so for me, this is this is a delegation of focus to make sure that day to day the team is is empowered, it's, you know, that that's where my focus is I'm focused on them. And so you will, in my estimation, and based on the experience I've had up to this point, you will never lose when you pay more attention to your people. Love that.

Paul Daly  12:19

They go put that on a t shirt. T shirt shipping a

Kyle Mountsier  12:23

good T shirts all morning. Yeah, yeah. All right, let's get into

Paul Daly  12:27

some new speaking of shipping things. Segway scratch to record time, double time. All right, not about all that's going on what's going on used car prices have seen their second straight month of increases as the Mannheim use car index bumped up another two and a half percent from December to January indicating a higher than expected demand. The number is still down 11% year over year. Right. But, you know, the analysts are saying this is very atypical, that prices would change this much between December and January. Typically, that's a really flat transition month. They're even saying they're seeing some indicators that hint that spring is here, meaning maybe the groundhog was wrong.

Kyle Mountsier  13:09

Here's here's here's what I see happening. And I was reading some some indicators on this yesterday, from from some other news sources like the the reality is, is that as used, car prices began to dip or still are dipped compared to the trajectory that they were on over the last year and a half, we see demand be able to pick up in different market segments. So lower price points, you know, potentially credit challenge or people that didn't have the access to the affordability in the higher price points. And so where were similar in like the new car market early on, you saw this like hold of pent up demand, and then availability of demand when when inventory started to come back. Now you've got that same thing happening in the used car pricing market where people just were sidelined from the market altogether, even though the demand was still there. And now they're coming just back to the market that that demand was still there for lower price points, lower affordability points. And so that's that's really what we're seeing happening really quickly here. And I think we are going to see spring come early and we're not going to be so dependent on like a tax time return because the market demand is already just sitting there sidelined.

Paul Daly  14:20

Michael feel free to jump in. You know how this goes. Just interrupt.

Michael Cirillo  14:24

I just move more metal. No, I'm interested. This is where I get my daily dose, guys. So I'm listening. Oh, yes.

Kyle Mountsier  14:32

Okay, so now that I'm on now,

Paul Daly  14:36

the news too, we don't make the news. We just report it. You know, the the element like the big conversation around us cars are like, has it bottomed out this is two months in a row of an increase, which was kind of unexpected, because everyone was saying, you know, the market actually had a big correction. But the fact that they're still heavy used car demand and that the market they supply is relatively low. I think it's like 40 days on the retail aside, it's just another another, you know, just trailing result of new car inventory and just showing like affordability is a major issue still used cars took, you know, took definitely a decent dive in in the last quarter the last three months. And so I think it just still shows that people are looking for the value more than not.

Michael Cirillo  15:20

I mean, where else in our, in our recent history being the last? I don't know, even 20 years? Have we all been left scratching our heads, right? Like our famed anonymous car dealer CEO on Twitter was reporting this just the other day he's like, I don't understand I'm scratching my head. But car used car prices at auction are at an all time high. They're like they've gone up by January. And it's like, how is that even comments? And it's like, How is this even possible? I can't think of a time that would you know, taking into consideration everything that's happening in the global economy that this is also one of those weird anomalies. So I think

Paul Daly  15:58

How is this even possible? It has kind of been like a mantra of the car business for the last few years as people are looking at. possible when we were out of inventory. What do you mean, the profit? How is this even possible? So probably more than speaking of things that we didn't really see as possible? Segue? Oh, yeah, so Tesla's model three and model Y vehicles are named the best selling vehicles in California, unseating Toyota rav4. And Camry, for the first time ever. So kit, this one and five, one in five vehicles in California are electric. And the state accounts for 40% of every Evie sold in California Ness.

Kyle Mountsier  16:42

I don't even understand how that works. Like I know that they have a massive population. But the fact that they've gone ahead and acquired 40% of like the electric vehicle market share is out of California is wild. And Tesla accounts for what 11.2% of that of that electric vehicle market share as opposed to 3.5% in the rest of the country. Now, that's that's a, that's a wild number. And I think that a lot? Well, it's interesting, because a lot of people are looking at California is like, let's head that way. We see a lot of states kind of starting to make rules that way. But the majority of like, even manufacturers go into California as the testing ground for there EVs a lot, right? I know Mazda very well, they put EVs there first, and then see if it's going to work in the rest of the country. And so because there's such early adoption on that, we see, like an even higher intent focus on getting the full, the full state adoption over there. But man to dethrone the rav4 and the Camry is that's a big, that's a big lift right there.

Michael Cirillo  17:51

I can't get out in an earthquake.

Kyle Mountsier  17:57

See now see, now he's coming for it this morning.

Michael Cirillo  18:00

But you know, hey, it's been fun. I mean, to keep things in line with the news, at least, you know, at least we know, we're gonna need gasoline for at least another decade, according to the State of the Union address the other night. So

Kyle Mountsier  18:12

yeah, there we go.

Paul Daly  18:14

That's true. We just make all our decisions based on the State of the Union address. We all know it's the most accurate information, no matter who's no matter. Oh, man, one day, we'll get back to consumers actually driving the decisions in demand one day, we'll get back there. But I mean, EVs are coming. They're here in California. It's still I mean, like, they obviously have the best charging infrastructure to, but I mean, I don't know, I don't even know what to do with that, except for just say, like, how could this happen? How could this be true?

Michael Cirillo  18:46

I mean, it's true, strictly speaking, it's like, the marketer in me says, Well, there's a what 110 100 and 15 million people in that state, there's a big enough data set to prove out whether or not something will work.

Kyle Mountsier  18:58

Right, you know, yeah, that's the other piece. Yep. Yeah, but also you don't have much rural you know, and so it's, you get the the ability to go the majority of these people are based in a market center, right, close to city close to electric grids. Like they aren't North Dakota, you know? Yeah.

Michael Cirillo  19:17

I mean, when we put this here in Dallas, the first thing I did was bringing the the electric scooter, I brought it inside. I'm like, I don't want to wreck the battery. So, Winnipeg, Canada, griping. Wow.

Paul Daly  19:30

Yeah. But when on the flip on the flip side of that argument, a lot of people in like very condensed population centers, there are also a lot of questions and concerns are how we're going to people going to charge their vehicles up if they live in apartments, or they have to park on street and it's not right in front of their house and all that. So obviously, they're figuring something out in order to solve that problem. So little this little that either way, we're gonna figure out what's gonna go but California and Tesla and Toyota its little, little battle going on. It's good for everybody. Thank you. good for everybody. I don't have a segment for this. I mean, things that are good for everybody this is a this is actually a story about sneakers, which is why this is actually a story about Paul's life, not just sneakers Air Force ones, which by the way, social media records indicate that I was on Air Force ones way before they were that popular. But either way, major footwear brands are showing signs of reversing course, and turning back to wholesaling. That's like selling through stores, like footlocker and stuff, as opposed to the major move they've made going direct to consumer in the last years. Namely, Nike is loosening its allocation to wholesale channels, such as footlocker after seven, several years of limiting volume, like only selling them so much, because they wanted to sell the majority of their shoes through their direct channel, like their website. And they also recently invited wholesalers back to their campus for the first time to court them, things like that. I'm also seeing design partnerships springing up to sell through wholesale channels, like an exclusive versions of the shoes through new designers. And one of the reasons like since that shift began, this is what happens. New brands have started to do really, really well through wholesale change brands such as the Swiss brand on and Allbirds, which is probably a little more well known there start they've been selling through wholesale channels. And I mean, that's just an indicator that people are still buying shoes through the whole subjects.

Kyle Mountsier  21:23

I mean, actually run applies to auto. Yeah, this actually applies to auto I'm an I'm a runner, and so I paid attention to the on story and then going into into stores over the last five years, right, because they they were just simply like you had to go to their website to go grab, you know, especially like fresh shoes, I think like you get that like secondary shoe pushed down to the to the wholesaler. And Nike does that a lot where like, they kind of have their second tier shoe, but they reserve their, their top to your shoe for their website. And so this is like opening that, opening that up to get into the retailers. And this is we're seeing this present the push back to wholesale, we are actually talking about mattress some of these like to direct to consumer mattress companies, right, I started to start to wholesale into your legacy mattress companies that are brick and mortar, because turns out people want to try it on before they buy it yo, and people are going into into these retailers. Again, the return to brick and mortar is constantly facing the you know, the product model. And so it's like, I'm interested to see what OEMs do look to major brands, do they pay attention to that? Or do they they're like, No, we're better than that we can make this happen. We can do direct to consumer, and we're gonna figure it out, or do they go Okay, so these major brands, the Nike, the Allbirds, the purple mattresses, all that, have they learned a little thing, learn a thing. And gone. Okay, we have to do both. Actually, I heard Audi talking about their digital ecosystem and recognizing like, Hey, we are going to provide access to direct to consumer sales. But we recognize that tier two and tier three are really, really viable places, and probably a larger percentage of all of our sales. And so we're going to make sure in mouth and those answers drive down. And they're going to say like, Hey, we're still going to have a central customer record. But we recognize that all of those spaces are places where customers want to do business. And we're not just going to go run at one thing. So can I

Michael Cirillo  23:13

here's my wacky interpretation of all of this, they realized that our human nature when pent up and cooped up in a house for long enough is that we naturally want to emerge out into the out into our habitat. And they're like, where do people wear shoes? Oh, outside, we need to get these people out. So why don't we bring them out to where they're going to wear their shoes? And it's the same thing. You know, you made me think of that. Kyle, as you were talking about the automakers, hey, automakers, where are people going to drive their car in their living room? No, they here are going to go out into the world. And so why don't we let them get this vehicle out into the place they naturally want to emerge to win. They've been inside for too long. You and

Paul Daly  23:57

Ben Hadley thinking along the same thread, as you're saying that there's a little bit of a delay. So you all are thinking the same way. He says this is also a reversion to mean as a response to how digital we went over the loud digital we went over the last few years because of COVID people want to get out exclamation point. And hey, that's why put the story here. Maybe automotive can learn a little something from retail because Automotive is retail. Thanks for staying with us today. We have a lot of amazing things going coming out. We're gonna have more announcements coming soon. Mr. Cirillo, welcome to the team. You've been on the team anyway. We're gonna get some on this Thursday.

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