Dealer Sentiment Shift, Mixed Emotions On Carvana, Apple Encryption, and a Lego EV

December 8, 2022
Thursday is all the rage as we talk about the results of the Q3 Cox Dealer Sentiment Survey. We also talk about Carvana’s current spot, Apple putting data recovery in user’s hands, and the Lego indicator we’ve all been waiting for.
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The quarterly Cox Automotive dealer sentiment survey of 1000 franchised and independent dealers communicates that profits remain strong however concerns are rising over interest rates and the overall economy

  • Since mid 2021, lack of inventory had been the top concern
  • The survey focuses on what Dealers think will be the case 3 months from now based on current conditions
  • Affordability remains a top issue
  • New vehicle prices holding, pressure to incentivize is rising, the need for sales responsiveness is growing
  • Earl Stewart from EST is expanding training sessions for sales staff, pushing them to respond to customers quickly and ranking them in comparison to their peers. “I’m disturbed because my salespeople have become order takers”

Carvana stock price is reeling after a pact made from lead investment firms

  • The investment groups are now forced to negotiate with Carvana for debt restructuring together for the next 3 months instead of separately
  • “In the case of Carvana, its bonds are all unsecured. But the company could borrow against assets like real estate, effectively putting existing creditors further back in line to collect money if the company were to file for bankruptcy.”
  • One concern is a looming liquidation of inventory, potentially driving a lower wholesale market, which is already down 14.6%, for used vehicles than expected over the next 3-6 months
  • End to end encryption is coming to Apple’s iCloud backup for their device suite.

Apple says it will be available to the public in the US by the end of 2022 and will come to the rest of the world in early 2023.

  • Recovering any data will now be solely the responsibility of the user, similar to backup codes used in crypto

Lego has gone EV with their ‘Electric Sports Car’ Set. Now we’re official.

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Kyle Mountsier, Paul Daly, Isaac Donath

Paul Daly  00:00

Oh yo, what is up everybody? It's Thursday, December 8. I gotta clear my throat because I got in last night from hanging out with a bunch of dealers. But we got dealer sentiment Carvana Apple encryption Lego to talk about today.

Kyle Mountsier  00:37

How's that for a mix all over? It, they stopped in somehow it all gets back to auto and you know, doesn't everything get back to auto though? You know really?

Paul Daly  00:48

I'll take it. I'll take it. I think you and I could tie just about everything back to auto in one way, shape or form. Not everything but just

Kyle Mountsier  00:55

about it. Maybe not like Ukraine, Russia? I mean, we probably could get fine, fine.

Paul Daly  01:04

We literally tie that back to Oh, man, my flight got in so late last night. I hate taking the last flight of the day anywhere. Because, you know, like the domino effects happened. And that last flight is always the one that's kind of be late. But it was super cool.

Kyle Mountsier  01:18

I got it in the northeast, you're done. I mean, I was like, man, he always gets I told my wife last night. I was like he always gets delayed on his late flight time. And she was like, yeah, oh, in North Syracuse.

Paul Daly  01:30

It's actually it has to do with Savannah, Georgia is why the flight was delayed. Is it really? Yeah, the flight got delayed in Georgia, which is why it was late to Newark. You know, covenant it's so strangely like not the Northeast right now.

Kyle Mountsier  01:42

It's like 50 degrees. And like, it's just a weird time about the weather. I'm gonna have to mow my lawn again. Next week. It's been 60 degrees. And oh, it's unbelievable.

Paul Daly  01:54

See, the nice thing about the Northeast is like, at some point, the snow just covers it flattens at all? And it's like, even if you didn't get that last moment, like you don't really care about it until the

Kyle Mountsier  02:01

spring, right. You don't get that we don't get that springs coming in February. Welcome to it. Yeah,

Paul Daly  02:06

right. Exactly. Exactly. Well, I was I was able to spend some time on the ground yesterday with one of the regions the West region of siopa dealerships, which is now 40 stores. And they had this, it was like a fixed ops celebration that dinner, they do it once a quarter, they used to try to do it all together. But now they're kind of spread out too far to make it plausible to have everybody come in at the end of the day. And you know, fixed ops, isn't that like a breakfast? That's a sales thing. You imagine getting the fix ups? Together? Up at breakfast during the turning wrenches, right? Yeah, there'd be there'd be mass hysteria at the door people like Yeah, where are you at? So but it was really interesting, because they gave away about cumulatively, there's probably like 150 people there, maybe 250 to 200. And they gave away about 35 to $40,000 worth of awards and prizes, based on like top performers with arrows, but they had not they had tax advisers BDC, they had the recruiting team, they're like they really did, like they wrap their arms around the whole thing. It was really amazing to watch and a really interesting dynamic in an area when dealers are all consolidating, right, there's a lot of acquisition going on, like two thirds of that room are kind of newly acquired stores. And so like that's, that's an

Kyle Mountsier  03:21

interesting feeling. Because like when you're acquiring that fast, just like assuming the culture and then also bringing in that new culture feel is a that's a that's a powerful thing. It's a it's a hard thing to

Paul Daly  03:32

do for sure. Especially in fixed ops. I don't know how much time to fix up, folks. I know it's been a lot, but they tend to be the more skeptical type.

Kyle Mountsier  03:40

Like who's Yeah, who's around?

Paul Daly  03:43

There's a lot of the Crossed arms, like leaning back, like, show me Don't tell me, right. Like, so it was really interesting getting to speak to that crowd. And like, I didn't know that was the case going in. And the moment I realized it was like mid talk, when I was like, you know, it's talking about Mr. Coe and how odd it is to have, like someone who is so in the dirt on a group this size. And you know, during COVID, he called every single one of his employees every single one to see if they were okay to see if they needed anything. I'm like, raise your hand if you got a call from Mr. C. Right? Like 20 people out of the room went up and I was like, well, either you don't want to raise your hand or he lied to me. I said, That's what I realized that that's what it was all new people. Right. Yeah. Cool part is, is that when you see these great groups, like acquiring, like these other stores, you know, like they're about to find out how good it's been for them and how good it's going to be for their future. So, you know, we've got some interviews we're going to share with you I think I interviewed our first ever parts director on a soda content. I can't think of another one. So we're gonna bring that to you and it was just you know, when we can be in the dirt you were in the dirt they before I was in the dirt yesterday. We got a lot of new content coming in. due date. All right, enough of like little some of you know why we got what we

Kyle Mountsier  05:05

got to get into some stuff.

Paul Daly  05:08

All right, all right. All right, you're in extravaganza coming up, coming in real hot less than two weeks away. December 20, mark your calendar, two to 4pm. Eastern time we're doing a Jimmy Fallon style live stream live studio audience live guests, we're going to talk about 2020 to look ahead to 2023 have some giveaways. So make sure that you go to a so Click on the links, follow the event on LinkedIn, whatever, you want to be eligible for the giveaways because, you know, amongst other things, there's a PS five sitting right to my left here that we will be giving away, and we'll get it to you in time for Christmas. Maybe we'll even wrap it. So it's gotta be quick. Here we talk about some news in automotive, or today, the quarterly Cox automotive dealer Sentiment Survey of 1000. franchise and independent dealers, it's about like 600. Franchise 400 Independence communicates few things. Number one, profits remaining strong. However, concerns and sentiment are definitely changing. Specifically over interest rates and the overall economy. We've been talking about those two things for a long time. But now it's kind of getting to a point where it seems like sentiment is starting to be affected by it. Mid 2021, lack of inventory had been the top concern on the list. And now is no longer the top concern, which makes cently not everybody's like, okay,

Kyle Mountsier  06:24

hold on, hold on. Remember the whole thing where we were like concerned over lack of inventory, press that back a minute.

Paul Daly  06:30

Right. So affordability is still we've talked about affordability all year. But it's coming back to the forefront with a lot of momentum. I mean, no new new vehicle prices are holding but you know, incentives, pressure to incentivize a rising needs for sales responsiveness is growing. This is a conversation I had a lot yesterday and we've been having a lot with dealers, you know, like, Oh, we're gonna have to sell cars again.

Kyle Mountsier  06:55

Yeah, when, when seems like when when cars like ropes have have incentives, when people have 100 new cars sitting on the lot again, and multiple cars in multiple different areas. It's not every dealer, but I think that we're seeing more and more dealers, especially on the American made cars have inventory on ground. And it's just the idea of like, hey, look, we've got to do the work again, you know, Earl Stewart was, is kind of working on expanding training status sessions for sale staff, because they're recognizing, hey, a lot of the salespeople have either only been in during this inventory shortage or have kind of become order takers by nature of the way the business has gone. And not that salespeople have done anything wrong or bad. It's just the way the nature of the business has gone. And so it's just a refocus on the intention of, you know, being product professionals understanding moving someone through the through the road to the purchase, you know, all of those things are things that people are looking at, over these next 90 days, and really taking a focus to make sure that they're dialed in and processes and understanding their inventory and understanding what they have to do for pricing. It's just like, you know, we were talking yesterday, just about how even marketing and the intention on marketing and understanding age inventory is just shifting at with everyone that we're talking to. And this this study kind of shows that a lot more dealers are thinking about that.

Paul Daly  08:21

Yeah, without a doubt. I mean, how many times have we heard that? Just? No, have you ever like played basketball after not playing basketball for a really long time? Yeah, it's real bad, right? It's like muscle memory. Yeah, that dribble is rough man, it is rough. You're like bouncing it off your foot. And it kicks out about you know, all the all the things. And some some dealers, you know, we've talked to have been like, you know, I have salespeople that just never had to sell a car. They've only existed as a salesperson in the environment where it's like, if you don't buy it, I have three more people that are going to buy it. And they're just relieved when they call that the car still there. So they're like, put my name on it. Here's the deposit. So the the winds are definitely shifting and what the sentiment is amongst the savvy dealers is they know that leaning in and being savvy operators in these times are the ones that are going to gain the market share. So challenging times. dealers say challenging times ahead. But I think I think we're a little bit used to challenging times speak at a challenging time. Yeah.

Kyle Mountsier  09:21

I hesitated in putting the story in because I don't want to just be like, you know, tossing stones or any pile on the rabbit. Right. And I think we can kind of talk about this well in a way that serves the industry and serves the the point of the story. But Carvana stock price, if you haven't heard is completely reeling after a pack made from a few of their lead investment firms that hold about $4 billion of their debt. What they've essentially done is created a pact to only negotiate any level of restructuring of their debt for the next 90 days with each other so they're not individual Lee operating with Carvana and trying to restructure the debt and jockey for position and repayment or anything like that. Yesterday, the stock price closed at under $4 For the first time, and the and there are multiple sources that have put their target price at $1 at this point, which would essentially put them in a liquidity issue and almost forced to bankruptcy or complete restructuring or acquisition of new debt. So that's kind of the story as the way it goes. And the industry is looking at it in a few different ways, there are some kind of going hot or do so. Which is I don't think the best way to look at it. Right? Just from that's my opinionated piece of this news this morning. But what we do know is that this is going to have an impact on the auto industry and Carvanha Carvanha has had an impact on the way the auto industry has been operating over the last couple of years. So it's important to continue to pay attention to this story in the way that consumers perceive it, as well as the used car market.

Paul Daly  11:09

You know, there's when, when thinking about or, you know, I would encourage you to like along with Kyle's lines, like when you're commentating on this on LinkedIn talking to one another, I would encourage you to just think of like, how is what I'm saying and how I'm handling the situation actually serving us to move forward. Right? Because the ha, look what happen doesn't do that. It actually it actually kind of leaves us thinking in a different mind. Like in a different mindset. I saw one LinkedIn post, I was just working to pull it up here. While you're talking about that. Benjamin Jeffries of the Holman auto group said you know many dealers are rejoicing today as rumors of Carvanha is imminent bankruptcy swirl through showrooms across the country, says and while I too see a new market opportunity for our dealer group that's in a good position. You know, and and a little bit enjoy seeing someone who took cheap shots, you know, go down, they says I think it's worth taking a minute to remember the reasons Carvana was able to do well for so long. And he talks about the customer experience and like a lot of people enjoy that experience. And think of all the things that it showed us about what people want, and even got us to the point where how we do things today. So

Kyle Mountsier  12:18

yeah, like how many people in the auto industry is have said I want my I want my website to look like more more like Carvana we need to be thinking about online deliveries, we need to be thinking about a delivery network we need to have I mean, like have a trading process that actually is very fast and efficient, fast trading process, our industry has been affected and I believe for the good base. Now I saw also a LinkedIn post and then had a couple conversations with people that are saying hey look, if they are forced to liquidate their current assets, meaning their vehicles in order to repay some of their debt, it will have a massive impact on an already wrong market or a wholesale market. So just something to look out for. You know, even though you might be able to acquire some vehicles for for an inexpensive cost because of the liquidation of inventory from from a company like Carvana, watch how the used car market may shift, we already saw the market was down 14.6% And in wholesale do based on the Manheim index last month. So this could have another shift toward that over the next 90 days. And we can see a used car market that it looks completely different going into the spring. So just something to be eyeing that it's not just the impact because of their wide scale. And they're in there and their broad reaching kind of inventory holdings, it could have a larger impact on the on the used car industry as a whole.

Paul Daly  13:45

There you go. I wish I had a segue here because this is just, I don't have a segment just gonna go stop. There you go.

Kyle Mountsier  13:53

Next segment, let's just say this, we got a couple of fun ones to end the day, we've kind of been we've been all the

Paul Daly  13:59

last one's fun. The next one could be terrifying depending on how you are with passwords, end to end encryption is coming to Apple's iCloud backup for their device suite, meaning that the user will be responsible for data recovery, not the company. So my mother in law, I just have to tell her don't bother encryption, just take the hack. Well, because basically it's going to be much more like it is in crypto, where you have the key, the password, the pray the passphrase, whatever, whatever it's going to be so that if you lose that you lose your data. And what that does it make is makes it super secure. Because there is no recovery other than your responsibility to keep that thing safe. So some people are like Yes, finally my data will be safe. And

Kyle Mountsier  14:46

there are three modes of recovery just as a note Oh are they're utilized like what are they? Yeah, so I can't remember the third one but the other one that a lot of people will be using is kind of like a close contact. So if you have a spouse or or a family member, or really good friend, you can actually if they have an iPhone as well, you can put them as a backup recovery code assistant. So they would be able to use verify that you are you and all that zactly. So, you know, really, really what it does is it takes the onus now, it's not required, it's something that any user would have to turn on. But with I mean, shoot, our family utilizes iCloud for the majority of everything, you know, that that is on our apple devices. And, and when and when you think about that, like, the amount of storage even, especially over the next five years, as our kids start to get into, like having devices that are just telling you, it's gonna get ridiculous. Yep. Yeah, it's it's absolutely wild, how much data is gonna get stored in the cloud and being able to have that, that that kind of data locked down, I think is a really smart thing. And you know, it's a 28 key and Kip encryption code. And so, you know, hey, it's just the way that when, when you're operating with data at that type of scale, on a personal level, it's smart to have

Paul Daly  16:06

say that speaking of smart to have segway Hey, so this next story, Isaac, are you in the room still, Isaac is producing the show, Isaac, bring yourself on screen for because this story is for you. If you don't if you've never met Isaac, Isaac puts the show together every day and make sure Kyle and I you can see us and hear us and we put this story up just for him. Because he could see on his shirt. He's got his own YouTube channel about LEGO. He's got Lego all over his desk. So Lego has gone. Evie. Finally, Isaac, you're keeping up now with their electric sports car set. So now it's official. There's a picture of it. I walked in and Isaac had Lego on a screen. I was like, this one's just for you, baby. Isaac, what is your take on the Lego EV set? Are you gonna buy this thing?

Isaac Donath  16:53

Oh, no, not at all. It's a $10 sports car. I mean, there's much bigger ones that are cooler out there. But I will say it is very interesting that they went Evie with this because it's like you know, a lot of every car set they've done the past has been like this gas powered like sporty car. So as I was thinking about when I saw this was it's like is Lego trying to be like hey, the world is moving Evie when kids grow up they're gonna be like oh, I played with the Eevee car when I was younger maybe I want that when I grow up so I don't know that was a thought

Kyle Mountsier  17:25

you just you just made the absolute reason why up automakers should be investing in Lego co brands because you want influencing your purchase decision. Unbelievable.

Paul Daly  17:39

What a genie. Back free. Isaac is this this Lego have anything where there's like an electric solar panel that actually works like the powers of battery or motor?

Isaac Donath  17:52

I mean, like an actual electric and

Paul Daly  17:54

a real solar night you put it in the sunlight and it turns a little actuated Lego That one's for free too.

Isaac Donath  18:01

They have they have electric vehicles you can build like RC cars and stuff. But no, they've never made an electric.

Paul Daly  18:07

Yeah, they've been they've been electric. They don't even have a gas. Electric forever. Isaac what's your what's your YouTube channel where you talked about LEGO Bricking up brad. Bricking up brad. You're breaking up bread. Alright, thanks for jumping in there. Sorry to surprise you there but I'm pretty sure you're okay with it. Well, that's all we have today. Y'all. We got a lot of things to do. But the main thing is stay in touch with the people in your stores in your showrooms on your website. Every story ties back to that because everything ties back to automotive

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