EV Tax Credits, Meet the New Walmart Shopper, GM Goes Luxury

August 17, 2022
Welcome to Wednesday as we take a look at Walmarts earnings report which indicates a new type of clientele at its stores. We also cover GM welcoming a luxury brand member to its board, as well as an candid EV review we think every Dealership employee should read.
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Credits for 70% of previously eligible EV models ended with a stroke of Joe Biden's Pen

  • The Inflation Reduction Act has substantially changed the game for EV tax credits now requiring EVs to be assembled in North America
  • There is a full list of eligible EVs in the AutoNews article here
  • All Toyota, Hyundai, Porsche, Kia EVs are no longer eligible
  • According to the IRS "if a customer has made a non-refundable deposit or down payment of 5 percent of the total contract price, it is an indication of a binding contract."
  • GM and Tesla who have burned through their 200k allocated EV credits will again be eligible for the credit on Jan 1
  • Starting in 2024, the credit can transfer credits directly to Dealers at the point of sale

GM welcomes Lux brand CEO of Tapestry Inc, Joanne Crevoiserat, to its board

  • Tapestry holds brands Coach, Kate Spade and Stuart Weitzman
  • From her bio on the Tapestry site: Joanne has deep industry, financial, and operations expertise having spent over 30 years in a variety of retail companies. She has held a variety of leadership positions in multi-brand, global companies with a focus on helping organizations successfully transform.
  • From the Tapestry mission: By bringing together different people and ideas under one roof and giving them a place to grow, we stretch what's possible for our brands, our consumers, our industry, and society.
  • Mary Barra commented: "As we accelerate our transformation, we have an incredible opportunity to drive loyalty for our iconic brands and attract new customers, which is exactly what Joanne has done at Tapestry."
  • From Crevoiserat: "This is an exciting time to join the GM Board. The company is innovating across every part of the business to drive growth. I look forward to serving the Board and GM's shareholders through this transformation."

Walmart beat sales expectations in its Q2 earnings report as trend of retail consumers trading down continues

  • Sales up 8% with much credit going to higher income individuals shopping for groceries
  • Grocery sales to 100k plus earners grew 75% in the quarter
  • “Trading down” trend is when consumers trade high priced items for cheaper alternatives and has happened before in 2009-2011 and then rebounded when the economy was stronger
  • Other areas we see the trend are with Applebees and iHop as their value proposition is more attractive to those typically splurging on more exotic meals
  • Spending on those restaurants has decreased among families earning less than 50k
  • This is also a reason discount stores like Dollar General do well in tough economies

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SPEAKERS

Kyle Mountsier, Paul Daly


Paul Daly  00:24

Yo rolling in to Wednesday like we mean it today. Look, there's a lot going on with the Eevee tax credits. We got a new law or laws. We're gonna talk about Walmart shopping and a new luxury brand GM board member.


Kyle Mountsier  00:38

The people really want to know. I'm impressed. I'm just impressed at how how smoothly that seemed to flow off off. That's always good. We never thought things we never thought would happen. Talking about Walmart two times in one week.


Paul Daly  00:56

I know. I know. It's valid though. It's and GM,


Kyle Mountsier  01:03

and GM coming in. Let's


Paul Daly  01:05

go. Hey, news makers are making news. That's all we can say. Like we don't pick the news. We don't make the news. We just report it. We report it


Kyle Mountsier  01:13

just hanging out with it. Actually, I think we give it a little side hug and bring it on. Because like if it was a full embrace, it just wouldn't work. I haven't seen Yeah, a couple of years side hug at the family reunion with all the news.


Paul Daly  01:31

Like of acknowledging some level of affiliation, but keeping my distance. That's pretty much what we do. Side hugging the news for 240.


Kyle Mountsier  01:42

Subtitles side hugging the news.


Paul Daly  01:46

That is the best explanation of what we actually do we side hug. Sometimes strokes of brilliance happen on with that. That's it, I think we're done. If we could just send the show and go home and be like, I think we accomplished what we need to do today. Well, we can't do that we have a lot of work to do. Hey, the asoto con, Minnesota con auto collabs. The podcast sessions are awesome. They're going so well. And people are really diving in to these longer form conversations we're having with some really amazing people that just happened to become more amazing, the more we get to know about them. So those are an auto you can search auto collabs on your favorite podcast platform. Or we actually have the video versions of these on YouTube. On our YouTube channel. It's a so tube as Oh t u dot B E so tube and all the auto collabs are up there too. Or if you just search auto collabs Today's episode is with Glenn Pash and man Glenn is a great interviewer. And he's a great interviewee because he understands how to have great conversation and we learned a few other things talk about the restaurant business, we talked about what that actually means for customer experience and fun enough, we always try to talk about how someone got into the auto industry. Yes. And can we do a segue in the intro and speaking of blend, Pash Can we do that?


Kyle Mountsier  03:08

A little bit little.


Paul Daly  03:09

That works. Is my mic still there?


Kyle Mountsier  03:11

Yeah, I don't know. Things just got real. Gone. It's okay. So weird.


Paul Daly  03:16

I don't even I can't hear myself. I can't hear you. I have to reset my Chromecast so you can carry the show for a minute.


Kyle Mountsier  03:20

Well hey, so speaking of Glen Pass, he actually did a did us a favor interviewed us gave us the opportunity to share with his audience he's got a podcast called you're in charge. Now what which is a lot about leadership. And, and the best title ever. He literally it's like another speaking assessor speaking of side hugging the news. He he titled it What the hell are they doing over there? Which is very appropriate? It's a good question. And a lot of people are asking it and actually his line of questioning gave us the ability to really explain in a fresh and really dialed in way exactly what a soda is all about. So if you've ever thought man, I haven't listened to the podcast, I've been reading the emails watching on social media, and I don't really understand what they're doing. We're just going to point you over to you're in charge now what today because that's that's the place where we feel like we succinctly said, what we're actually going


Paul Daly  04:11

over it is I think I wake up every morning and I asked myself that question that he asked what I do it over here. What am I what are we actually doing over here? I don't know. No, we were very clear on what we're doing. And Glenn helped us get a lot clearer. what else what else what else what else we're gonna we're gonna


Kyle Mountsier  04:25

early tomorrow. Which is so much fun, because we get to hang out with with the crew at the hotel and the crew at we got the audio people and video people and signage, people in the signage people coming to the event space to check that out. And then we got Michael Cirilo flying in from Jay Haas. And we're gonna have a whole bunch of fun. We're record some pod. We


Paul Daly  04:48

actually have a new asoto team member also flying in from teh house, we'll talk about we'll introduce you to her. Maybe tomorrow, maybe the next day. So, Ben, it's a new it's like a whole new gear. We're about to shift into it soon. Don't world hey, people are also if you didn't get your Soto con tickets. So two con.com dealers are signing up. And yesterday we had our first big group of people from dealerships, dealership employees rank and file, sign up for the Monday night party, which got us all excited at the end of the day. Yeah. So where can people sign up for


Kyle Mountsier  05:21

that? So you can go to the soda con website, find the agenda? Or if you search party with the industry on on Eventbrite, it actually comes right out. Yeah,


Paul Daly  05:32

we'll try and get that maybe a little bit more central on the website. That way people can find it real quick, get some of their team members to it. But yeah, it's available in a couple of spaces. If you look, if you go to Monday, scroll all the way to the bottom at the agenda. You can find places to get your tickets and learn more about it. Right? Yes. So if you're a dealer that's in the greater Philadelphia area, and you can't make it to the whole event, but you can come out Monday night come out, we're covering all costs, it's free to come out. And if you're still hungry, you can buy food and drinks if you want. Or if you're an industry partner, and you have dealers who are in the greater Philadelphia area, you can be the cool one, you can be the one that's like, Hey, there's this party. And I'll make sure you get in for free. Okay, just, you know, follow this link and get your clients to come to the party, because they'll thank you for it. Trust us. All right. Do we have anything else before we get into some new stories? So


Kyle Mountsier  06:21

let's get into it. All right. Go ahead. Go you should first. Okay. So everybody's been talking about a very, very large bill that's being signed in and yesterday, with the stroke of a pen, Joe Biden initiated the inflation Reduction Act. So it's has a whole bunch


Paul Daly  06:43

of we're gonna side hug that once.


Kyle Mountsier  06:48

We have the inflation Reduction Act, which has a ton of Evie, tax credit, verbiage in it. So how they pull that off? I have no clue but it happened. So just a couple of the key points that are happening in there, there are a full list of EVs that they've got Automotive News actually did a great job at listing out which ones have tax credits still available. But looks like Toyota, Hyundai, Porsche, Kia EVs, no longer are eligible for his tax credit. Ouch.


Paul Daly  07:21

But imagine just be cutting out like that. Was it was it what is that it's the assembly requirement, right? It's got to be assembled to


Kyle Mountsier  07:28

be assembled in North America. And so and then what's crazy is GM and Tesla, who have already gone through their 200,000, Evie tax credits, because they're assembling the majority of their vehicles in North America will be eligible again, for the tax credit starting on January 1. And then, and then interesting, this is a really, really wild piece is that in 2024, these tax credits, as opposed to just going to the consumer, actually have the ability to go directly to the dealer at the point of sale, which is an interesting piece, which changes how those tax credits are associated with the actual purchase. So they act more like a rebate, once you get to 2024. That goes direct to the dealer at the point of sale instead of going just on tax credits to


Paul Daly  08:18

the because then it's almost like a rebate. I mean, because think about what it actually looks like. Let's say it's, you know, I don't know, April, May, and you buy an Eevee, you're not going to see that tax credit for like, so what do you do you finance the full price of the vehicle, and then you just get cash. You just get cash, when it's tax time, you can decide what to do with that. Just think of how much easier it's going to be to finance it when you have 7500 down payment. Because it's transferable to the dealer.


Kyle Mountsier  08:44

Yeah, I wonder I wonder if it if it acts as down payment? Or it's gotta it's I mean, should? Yeah, cuz one day find that out? Yeah. But I think it's always commonly the way we didn't read it and research it enough. But here's what we have to say is that these are these are rules that customers are paying attention to trying to decide whether or not to get in the Eevee space and whether or not to acquire a new Evie vehicle instead of staying eisert internal combustion engine. So educating your people, especially honestly, if you're a Toyota, Hyundai, Porsche or Kia dealer, educating your people on how to overcome the objection of like, oh, but this manufacturer over here is going to get me a tax credit and you can't, how to navigate those waters with consumers is going to be really important, especially heading into this new year. Yeah.


Paul Daly  09:33

And so there's there's a lot more as much longer article, Automotive News did like a combo with Reuters and Bloomberg. And there's a great article, we'll link it up in the show notes. But obviously, these are the rules. They're here for now. Who knows what will happen in the future, but like Automotive is so good at, we're gonna figure it out.


Kyle Mountsier  09:51

We're gonna figure it out


Paul Daly  09:52

because we always figure it out. So speaking of figuring it out, segue I got I got you pulled it down. Have we talked about automotive dealers and OEMs being retailers or a bunch that one however, I think GM is figuring out what it is to actually build a retail brand or present a retail brand as they welcome the luxury brands CEO of taper street inc or tapestry tapestry is that data data


Kyle Mountsier  10:19

thing stated data Yeah,


Paul Daly  10:20

for Joanne. Okay. That's not great data. Great voice Surat Krivoy strat and it sounds very exotic to its Board of 12 people so tapestry holds brands like Coach Kate Spade, Stuart Weitzman, who I didn't know of but coaching Kate Spade obviously bigger bigger one so she's on the board now. And from her bio on the site says Joanne has deep industry financial operations experience having spent over 30 years in a variety of retail companies she has held a variety of leadership positions in multi brand global companies with a focus on helping organizations successfully transform and her company that she's the CEO of tapestry the mission is bringing together different people and ideas under one roof giving them a place to grow to stretch what's possible for brands consumers industry and society. So we got some luxury brand influence going on inside GM right now which I think is really cool thing


Kyle Mountsier  11:16

which is really cool. However, I'm interested to see how that you know what the Connect obviously it's one of 12 people on a board and there's going to be some fresh and new energy there. You know, I struggle with this just a little bit you know, because with with Mary Barra her comment was as we accelerate our transformation, we have an incredible opportunity to drive loyalty for our iconic brands and attract new customers which is exactly what Joan has done at tapestry now when you think about an iconic brand and and realizing that brand enough to attract new customers like the EVPs is definitely an opportunity to find new market share but you know you look at you look at you know, especially like a coach or a Kate Spade or or any legacy brands that transition is not easy to have definitely not a straight line it's not a straight line and there is there's a whole like I even just think about for me what what I associate with the logo of GM for sure like what my brain immediately runs to is not progressive is not Evie is not even like brand. It's very just like Yep, there's a car that I need and now I have it you don't think along the lines of like,


Paul Daly  12:38

like General Mills right it's thinking Lucky Charms has a brand General Mills is like rats on the box.


Kyle Mountsier  12:44

Right? Exactly. So you know I applaud it it's kind of like Apple hiring the Lamborghini guy like I applaud this kind of you know, this this like there's a straighter there's a much straighter line right around there but I applaud this stretch to you know innovative practices or large brands and bring that that space in there but man I


Paul Daly  13:09

think for brands like for like Cadillac let's take Cadillac as an example. Okay, right. A lot of she's got a lot of insight into that luxury brand because Cadillac luxury brand, right and luxury brands are basically fashion statements right they say something about you. I agree GM is very kind of vanilla when it comes to that you know, even like the some of the sub brands they had like Pontiac and Saturn like those actually said a little bit more about the person then then just GM and you know, maybe try the badge everything GM and they're doing that like to try to bring it together? I don't know. I think they're they're, they're approaching things in a new way, which is beneficial. They realize that Evie is a great opportunity to shake things up bringing in luxury brands, it'll be interesting, but for sure and luxury brand folks understand loyalty really, really well. Because they're good at building some level of intangible value. That is the stickiness and is the willingness of people to pay a premium price or keep coming back so here's here's one, this


Kyle Mountsier  14:09

is what they should do. This is what they should do love it. GM should have should work with tapestry tree to Create a Coach bag called the Escalade.


Paul Daly  14:23

Right, like that idea.


Kyle Mountsier  14:24

I like that idea. And then like attach retail and brand like go the other way premium to GM. Yeah.


Paul Daly  14:33

See, that'll be good to have to tie it back to GM though. All right. I love it. I think people would buy it. That's a great idea. People would buy a bag the Escalade would be like, yes, and then you need a truck to match the bag. Right. Instead of a bag to match the truck. Yes, yes. All right. Yeah. We got that was for free. That was free. Either way, we want to just shout out a warm industry. Welcome to Joanne saying Welcome to retail automotive, we embrace you with more than we embrace the news, right? Welcome to the industry we started, we fully embrace anyone who's willing to throw automotive industry, people,


Kyle Mountsier  15:15

splaying of luxury. There is a trend away from luxury brands, it seems because Walmart is exploding, beating sales expectations, citing a move away from luxury brands and trading down to more more consumer level value brands, value brands, even from high level owners. So interesting is grocery sales at Walmart, from 100,000 Plus earners grew 75% in q2.


Paul Daly  15:57

Yeah, so that means people may close my mind. Yeah, so the demographic that is shopping at Walmart for groceries is substantially shifting, substantially shifting and you just think of the behavior change, right? If these folks are typically going to maybe like a more of an upscale grocery store, like Publix, or foods, or maybe maybe even like Target, which is kind of like a different experience of being in a Walmart, right, they're willing to change that behavior and engage a new place and a new shopping experience to save some money. Right. And they they're calling it trading down. It's not it's not a trend that we haven't seen before. Back in oh nine through 11. Right after the 2008 bubble burst. We saw the trend and then it started coming back around 2015 is when they said it started to come. So it is it is like a repeat. And it is an identifiable trend.


Kyle Mountsier  16:47

Yeah. Now here's here's my only question, especially when it comes to grocery now, there's definite there's, it seemed like there was also a like brands piece, not just a grocery piece. But we've only done my wife and I've only done Walmart pickup and delivery a couple of times. But I will say that the app experience the pickup the delivery, even the shopping experience, while they're shopping is really really clean. Like it's it's a good shame user experience. And so there could just be a stickiness to oh, people find out about that. And all of a sudden they're willing to do the groceries there. What's crazy to me is, you know, my wife has celiac and the gluten free as well as I eat keto, the majority of the time, the the available gluten free and keto items at Walmart, the stock is actually much more wide event Wow option set than any other grocery store. So like when we want to go find that thing that we can't get anywhere else. We know it typically exists at Walmart. So those are things that's


Paul Daly  17:53

a really great nuance, because the higher you go up the income level, the more diet specific people because you write more keto, more specialty diets, more sensitivities that are catered to. And so that's a good play by Walmart, Cory Marshall just made a comment, I put it up, I'll put it back up. He says wonder how much of that has to do with delivery or curbside. And Kyle's point, I think just makes that right delivery and curbside change the whole dynamic of what it is to shop somewhere. Because if the app is clean, and it's easy to order, and it's easy to pick up or get delivered, then what does it matter? Really, what doesn't matter? I mean, all these stores are in the same vicinity of each other anyway. Yep. Yeah. Oh, yeah, they normally are. So I mean, some other areas. Where this is showing up is also in dining out, folks in that income bracket 100,000 Plus trading out, maybe more fancy or exotic dinners for dinners at more value driven places like Applebee's, I have traded for some pancakes. There's nothing like breakfast dinner. breakfast or dinner is always a good thing. I know I have sells burgers, right? It was I have their little marketing campaign. So we're seeing we're seeing this go across and also spending at restaurants in below $50,000 income range is actually decreasing. So we really are seeing evidence of the entire market being pushed down by the cost of inflation. We're talking about food here, which is makes a lot of sense, right? It's something that people buy as a primary thing that we buy, right? We buy food or we dine out. So what's


Kyle Mountsier  19:23

crazy, I think I read I can't remember the exact but I think it was 80 cents per meal is the increase that Chipotle had in like the first half of this year. So they like even just going to Chipotle costs a family of four or five like another five bucks, right in just north just right there. Boom done just because they increase those prices. So you know, like five bucks on a fast casual meal is is not a


Paul Daly  19:52

joke. decent percentage. Yeah, exactly. decent percentage. I mean, look, the bottom line is this this is going on. We tell these stories, so that you can be aware of what's actually happened in these macro trends, just so you have a little bit of knowledge of it. So you know, like, what the psyche is of the customers that are coming in, but also, your team and your employees, these things are trends that are happening, your team is not excluded, your customers are not excluded, they're actually included. These are broad trends. So this is a good time to think in terms of how can I provide some of the quote unquote affordable luxuries? How can I give someone a nice dinner out? How can I help somebody with these, you know, with a grocery purchase because people are valuing these things and making these decisions on a regular basis. So anything you can do to help ease those put you in a better position to serve the other people? We hope you have a great Wednesday plan. We hope you're gonna get out there and move everything forward. We certainly are. We will see you here bright and shiny tomorrow.