Cars Driving Inflation, Top 100 Used Car Dealers, Tesla Off The Hook Description:

April 24, 2023
Welcome to another amazing week in the world of Retail Auto as we talk about a new report tying new car Dealers to inflation. We also review the Automotive News top 100 Used Car Dealers list, as well as the recent verdict in the Tesla Autopilot case
Listen On
Apple Podcasts IconSpotify IconGoogle Podcasts Icon

A WSJ article highlights a recent study showing that car dealer markups significantly contributed to the 16% increase in the consumer-price index over the past few years. 

  • Study was written by Michael Havlin, who previously worked for the US Bureau of Labor and Statistics but wrote the paper on his own accord
  • Compared the Producer Price Index (wholesale price) to the Consumer index
  • New car inflation contributed a full point to the overall number
  • A recent study published by the Federal Reserve Bank of Kansas City argues that markups across industries accounted for more than half of inflation in 2021, with firms raising prices in anticipation of costs increasing later. (McKelvey!)
  • “It is “absurd” to argue that dealers contributed substantially, or even at all, to inflation”, an NADA spokesperson said. “By that logic, every consumer who sold or traded in a used vehicle for more than its Kelley Blue Book value profiteered off that sale and thus bears responsibility for contributing to consumer inflation.”
  • Heather Bernikoff and David Raboy were told by their local dealership that the Ford F-150 Lightning they ordered for their cattle ranch would have a $10,000 markup due to its high demand and limited supply. They ended up getting one from a dealer 2.5 hrs away that didn’t have one
  • They recently joined advocacy efforts to pass a bill in the California legislature that would prohibit dealerships from marking up EVs
  • The study also compared results against earnings reports of the publics and showed AutoNation markups were 15% on average and Lithia was 16%

The AN list of the top used car dealers in the country has been released and Lithia has claimed the top spot with over 311k used vehicles sold. #2 is AutoNation with over 299k, followed by Penske with 261k

  • Noted that Carmax is no longer on the list since they sold their only franchised dealership and the list is exclusive to franchised dealers. Carmax sold 810k used vehicles and wholesaled 590k
  • Del Grande Dealer Group jumped the most spots (27) from 86 to 59
  • Garber Management Group had the highest used to new ratio at 2.8

Tesla scored a significant legal victory in a California state court, as a jury ruled that the company's Autopilot feature did NOT fail in a crash while the software was engaged.

  • The plaintiff was seeking over $3 million in damages, alleging defects in Autopilot and airbag design, but the jury awarded zero damages.
  • The jury decided that Tesla did not fail to disclose facts about Autopilot’s limitations as the company continues to emphasize that Autopilot and Full Self-Driving systems do not make cars autonomous and drivers must be prepared to take control
  • Experts say that although this decision doesn’t have legal authority over other similar cases, it will significantly inform the outcomes
  • Others are drawing attention to the fact that the limitations of Tesla’s autonomous features are still far from being fully autonomous

SPEAKERS

Kyle Mountsier, Paul Daly


Paul Daly  00:31

Welcome to another week in retail automotive Kyle today. We were all fired up ready for a great week we're talking about cars driving inflation, top 100 us car dealers and Tesla. Getting off the hook. Now people really want to know for now everything everything's up for now these days


Kyle Mountsier  00:52

that Yeah, yeah. For today


Paul Daly  00:56

for this new cycle, morning for lunch, we realize readership is down and we'll put a question mark at the end of that line. Like, oh, did something change, something change? Hey, how was your weekend? How was your weekend? What'd you do?


Kyle Mountsier  01:14

Oh, man, we had a nice nice regular ol relaxing weekend. I got a good run in when saw soccer game.


Paul Daly  01:21

So like a great weekend.


Kyle Mountsier  01:23

What do you get news is just a relaxing, wonderful Nashville style weekend. It was nice outside. Good. Take a walk. So how are you? How was your weekend?


Paul Daly  01:32

It was good. It was kind of like a good April normal kind of week, I cut my lawn for the first time. It's Hey, I have changed an oil change mower and my backup generator. I love that I don't have that great real Zen about changing oil. For me just feeling like this sense of accomplishment only cost like 25 bucks. You know, it's a good combination of things of what we're gearing up because like, next week, we're gonna be in Tampa with all of our people. And the digital dealer conference, rolling the tradeshow floor. But we also have a premiere of our show more than cars that we're so excited about.


Kyle Mountsier  02:11

Yeah, if you're listening, and you're just, I just need to, I don't know the words to describe the feeling that I have when I watched the show and just the vibe and the people and the way that like it's just real smiles, what it smiles Yes, you just smile. It's just like a big smile. And you're just gonna smile for 30 minutes.


Paul Daly  02:31

So we hope you join us. We rented out the whole Tampa theater. And we're gonna have the red carpet and the step and repeat and swag bags, which are just right for the event concessions popcorns that all that stuff is open and free if you have a ticket, so you can go to a so two x.com and get a ticket. They're not expensive. And if you're a dealer, going to digital dealer, we worked out a little collaboration with our friends over there to make sure all the dealers, a digital dealer, get into this premiere event for free. So good evening, Tuesday night may 2, make sure this is the place that you're at. We have room for quite a bit of people, but our last couple of events did sell out and this one is way more accessible and cheaper than the other ones. But I think it's gonna be way more fun.


Kyle Mountsier  03:13

It's gonna be way more fun. All right,


Paul Daly  03:15

we got to talk about some news today. Monday morning. Here we go. Okay, okay. Okay. So the Wall Street Journal over the weekend highlighted a recent study showing that car dealer markups that's, you know, paying more than sticker price significantly contributed to the 16% increase in the consumer price index or inflation. Over the past few years. The study was actually written by a gentleman named Michael Havilland, who previously worked just get this. He previously worked for the US Bureau of Labor and Statistics. But he wrote the paper on his


Kyle Mountsier  03:46

own. Like, this is my nightly reading. He's like, Yeah, so


Paul Daly  03:50

he was like, just took it upon himself to write this paper. And he compared basically the Producer Price Index, which is wholesale prices to the Consumer Index, which is what people are actually paying. And he says that new car inflation contributed a full point to inflation, which is pretty sizable. If you think about the entire


Kyle Mountsier  04:07

gratulations congratulations to one of 16 of the whole US price index. Let's go.


Paul Daly  04:15

So this and then in a separate study published by get this the Kansas City Federal Reserve Bank, which by the way, we know a guy the chairman happens to be our speaker at a soda Con last year, Jim McKelvey, they said they had pointed out that markups in all industries not just auto accumulated for more than half of all the inflation we saw so people pricing products according to demand, funny thing about that, and Ida had something to say about it in a comment they said it is absurd to argue the dealers contributed substantially or even at all to inflation, like blaming it just on dealers not the industry by pointing your fingers at the dealers. He says By that logic, every consumer who sold or traded a vehicle for more than its Kelly The Blue Book value a couple of those things happen. Profit teared from the sale and thus bears responsibility for inflation. So he's like, Look, you cannot point the finger at dealers and say is you dealers that did this, he goes, anybody that sold a car for more than Kelley Blue Book price actually mark the vehicle up. That's a really, it's a solid point. So there's a little release


Kyle Mountsier  05:20

solid. Last thing that we're thinking about how many people saw the vehicles private party probably didn't check that


Paul Daly  05:28

all out. I turned in my lease, and I gotta check bigger than the Kelley Blue Book value for mine. So all day helped inflation go up? Did you


Kyle Mountsier  05:38

do it? Me too. I did it.


Paul Daly  05:42

Are you in there, though, I think this is kind of one of the ways that we can tie this to the ground one, there's a story of a couple, Heather and David who were told by their local Ford dealership that the f150 Lightning they ordered, they ordered it, it will be $10,000 more than the price, you know, off the order because of demand and limited supply. And they ended up getting one from two and a half hours away, they found the dealer who would let them order it and not mark the price up $10,000. And they because of their experience, joined advocacy efforts for to get a bill passed in the California legislature that would prohibit dealers from marking up EVs at all. So this is all kinds of things tying together,


Kyle Mountsier  06:22

right? It's not it's just all bunches of stuff. Here's the thing. Couple of things. One couple testers target the Ford lightning right now, I'm hearing and our good friend car dealership guy has recently mentioned and then a few people also commented that the Ford lightning interest is waning across the country. So check that out. Second, come on, if pricing can't meet demand, where it's at supply and demand things break free.


Paul Daly  06:53

You're saying free market economics actually, you


Kyle Mountsier  06:55

know, something like that. Also, I do agree with the Nada. It's like, hey, look, everything was up. And, you know, like, let's look at the housing market and what it did as a percentage of increase to the consumer pricing index over the pandemic because it was nuts. I mean, 10s of 1000s of dollars over market value is what is what houses were bringing in all major metros. So it's it's another one of those like we treat them, we think it's tragic that the auto industry continues to get like all the stones thrown. Because, hey, look, we're just meeting we were meeting supply and demand where it was at with consumer pricing that truth,


Paul Daly  07:37

the truth is gonna come out more and more. And we're trying to do our best to make that happen. Because I mean, the bottom line is, look, you don't have to buy an F 150 Lightning. You don't you don't, you don't but if you want one look at dealers have different strategies, some mark things up, some didn't mark things up, guess what, guess who will decide whether or not that worked against them or for them? The consumer gets to decide, right? They made enough people angry, they won't shop there, their sales will go down and they'll have to change their tune. That's how it works. That's how it works. What Hey, this is Wall Street Journal like front page weekend news. So like we thought we talked about it, prepare you a little bit to talk about it. Speaking you're talking about the things that are happening in dealers this this is good luck. Good luck. List your friends at Automotive News. Their list of top used car dealers in the country has been released and Lithia has claimed the top spot hashtag big surprise with over 311,000 us vehicles sold. Number two is auto nation with over 299,000 sold followed by Penske with around 261,000. They did note in the article that the the formation of the list is substantively changed this year since Carmax sold their only franchise store which was a Toyota store if I remember correctly, yes, they sold this store so they are no longer a new car dealer at all. So they are no longer on the list because it consists of just new car franchise dealers, so they aren't on the list anymore. Just as a note though, they did sell 810,000 us vehicles last year they wholesaled 590,000


Kyle Mountsier  09:09

That's the number that blows my mind. It's like hey wholesaled as many as the top two public dealer groups sold.


Paul Daly  09:16

They they're just they're just killing our half they're killing it to watch you hi know, what are they doing? What can we borrow? A couple of friends showed up on the list, which is always funny. Del Grande dealer group jumped the most spots on the list. They jumped 27 spots from number 86 and number 59. And our friends at Garber also had the highest used to new ratio selling 2.8 Used Cars for every one new car.


Kyle Mountsier  09:43

We know a couple of the marketers those Nathan Hollenbeck and Ryan Everson and their teams are teams to pay attention to to what they're doing in digital spaces for sure. And it makes a ton of sense that they own Used Car sales volumes. So,


Paul Daly  10:02

yeah, what did what did they call that a locus of points, right? plotting out things on a map. And I'm just, I'm gonna, like selfishly say, Okay, this is the Associate friend circle and there happens to be a locus of points in the middle of that little thing of all the people are these, let's just say, Yep. And what are the get on the email list? If you're not on the email list? Because a lot of these people are in the email every day, just say, I'm not saying it's the reason why Kyle just doesn't want to hang out, hang out with the winners,


Kyle Mountsier  10:31

though. For real hang out with the winners. Let's go hang out the winners. All right, we got one more for you. Today. We got one more. This is a good one. There's no segue into it. But Tesla scored a significant legal victory and a California state court, as a jury ruled that the company's autopilot feature did not fail in a crash while the software was engaged, the plaintiff was essentially seeking a $3 million suit in for damages, alleging defects and autopilots airbag design, but the jury awarded zero damages, they decided that Tesla didn't federal disclose facts about auto pilots limitations as the company continues to emphasize the autopilot. And full self driving systems do not make cars autonomous and drivers must be prepared to take control that you got. That's that is like a word smithing when for Tesla, but it also makes a ton of sense because it's like, hey, look, we have these autonomous features, but it doesn't make the actual vehicle autonomous, meaning the driver still has to stay aware and intact to the vehicle and all those types of things. So it's an it's an interesting outcome. And like, kind of I you know, the the note in the article said that it doesn't like put a precedent on a bunch of other legal or like other headings, zooming. But I think that that that, like there's no way it can't, and some way start to start to like tune people to


Paul Daly  12:02

well becomes a case precedent, at least Exactly. Right. And it's the first case precedent, you know, and this scenario specifically was one where a like a lot of the other cases where autopilot was activated in a city environment in a non highway environment, which is explicitly saying, like, hey, like, you shouldn't do that, it'll be interesting to see if something happens with a crash in the highway environment. Right. But either way, I mean, this, this is definitely one of those things. Tesla's stock reacted positively to it, as well. But one of the things that it does kind of like raise the flag on is, you know, Elon Musk, just as recently as last week, was putting a lot of focus on the fact that hey, we can sell cars for less profit, because we're gonna read profit in the future when autonomy comes in. And this this case really does still gets all the details out there and highlights how far from autonomy they actually are.


Kyle Mountsier  12:51

Yeah, basically, he was saying we can sell the vehicles at zero profit while maintaining maintaining our profit margins through software sales and autonomous vehicle like the big one ology sales. So it's interesting because like, they've been saying for four or five years now, like, hey, autonomous is right around the corner, it's right around the corner. It's right around the corner. And it's quite clear that it's still a far way off. And even litigation is saying, hey, look, that's definitely not where autonomous vehicles are living. It's not So hey, thanks.


Paul Daly  13:23

Oh, we got charged up on a Monday if that a reason to just get going into your day. That's what we all know what it comes back to. People are gonna walk into your stores call you email you you have a chance to serve them. However you can.

Get the daily email that makes reading the news actually enjoyable. Stay informed and entertained, for free.