Ford’s Farley Predicts Consolidation, Sandberg Says ‘Goodbye’, Used Cars Get Softer

SPEAKERS

Kyle Mountsier, Paul Daly, YouTube Video

YouTube Video  00:01

This guy. Hey, Rachel. Hey Good. How are you? He's not getting that car in there. No, sir. Look at these two troublemakers. Hey, Johnny Elia. We can chat was that no, yeah, just Sanada let me pack it. Oh, you're not putting your car in there. Chris. Stop being a smarty pants. All right. Look who's got SmartPak snack pack. She said the clicker kind of packs itself. It's smart. It's wicked. And I can pack it anyway. How about your chest? FoxPro. Doctor, thank God. So I guess this one's got the habit. Are you kidding me? I packed it. And then unpacked you want pocket kit? Game Changer. That's not I ain't got no driver. That's all right. He's got SmartBuy back there. He's got snack pack.

Kyle Mountsier  00:50

Kyle's in Boston. And this was the soundtrack from outside of his hotel this morning. We got a lot of transition to talk about today. That's the theme. Today, we're talking about a little bit of transition. Let's go.

Paul Daly  01:07

That was good. Because Kyle's Boston accent

Kyle Mountsier  01:10

basically I go, I go to

Paul Daly  01:11

Australia,

Kyle Mountsier  01:12

and then all of a sudden, I'm in an Australian accent, you know, cooking shrimp on the barbie in Boston.

Paul Daly  01:19

Oh, boy. So many passed, and so many people get offended right now.

Kyle Mountsier  01:23

Terrible, bad, I shouldn't do accents. I shouldn't.

Paul Daly  01:26

It's okay, there's only one Kyle mounts your accent. And I don't know what that is. Except for that you say data and I said data. But that's not that's not a phenomenon. Today, we are talking about all kinds of transition. That is the theme for today's show. And it's not that we just pulled it out of nowhere, we actually just pulled it out of the news this morning. A lot of things are changing. And that is really the daily breakfast cereal of the retail automotive industry these days.

Kyle Mountsier  01:55

We're gonna make a meme, it's gonna be like daily breakfast cereal in and then all the words are gonna spell change in it. Right? So whoever all of our social media team is listening right now. And they're like, I got this I'm in. But no, it really is. It's like, okay, what's the flavor of the new popsicle today that I get to eat because yesterday's was different than the days before. And we're, it's almost like the new normal is change, which is really exciting for me. Because, you know, whether you're in the automotive industry or any other industry, you you're getting this capacity to look at changes opportunity every single day to shift just managed IT people differently all of that. And, and I think people are taking a new approach to change, not this like, oh, no, here it comes fear based mentality.

Paul Daly  02:42

Well, there's there's courage that comes along with being around other people who also embrace change, because we know like the natural biological chemical reaction in the human body, when something changes is actually fear, right. It's survival instinct. And so in order to counteract that and get over it, right, you have to take some really substantial and intentional action to reorient and rewire your brain. And a lot of that is being around other people who, you know, make, make accepting change, normal, you know, and that's, that's kind of what we do around here. That's kind of what we do. So

Kyle Mountsier  03:18

absolutely, yeah. And that's, that's actually what the asotu community is. So built on, right back to the original live streams. You know, when you think about what those meant, it was how are we approaching this change? How are we engaging with our minds and our mentalities around how to how to, you know, perceive and tackle this pandemic mentality of business? And so it's really actually built on Gosh, that structure, which is really wild, and I think that even thinking about, you know, we've been having a lot of conversations around us, so do Khan and just what we're doing for the fall, that whole mentality is how do we approach collaboration, change it with new perspective, even now, even having gone through so many changes in the last couple years? We want to build on that because there's new technology. There's new business processes, there's new disruptors, there's EVs, there's web three technology, you can't rest on your laurels. And this time, no throw

Paul Daly  04:23

on top of that. The socio economic changes the political changes, right, right. The rules of the game changes basically, I'm on top of that, and bottom line, yo, we need each other auto industry like we need each other troublemakers real bad.

Kyle Mountsier  04:39

Everybody's like, you could end the show right there. I got something to do. But we got stories to talk about this morning, y'all.

Paul Daly  04:46

We're gonna start out with a session that Jim Farley, CEO of Ford spoke at the Bernstein strategic decisions conference. We weren't invited to that one. I don't think There's so many things that we're not invited to. And that's one of them. I don't even know what that is. But it sounds far above my paygrade. And at the conference finally predicted, reading from an automotive news article farther predicted dealership groups, suppliers, Evie startups and traditional automakers could merge fall out of market or form new joint ventures as the transition to EVs changes the industry. So he's saying like, we have a massive consolidation at the top. That's startups, manufacturers, right parts suppliers, we have a major consolidation coming. And he's saying that the smaller automakers just aren't going to be able to make it he says, because they've just disproportionately invested money to the size of the market. So they've invested so much, he said, and that the future size of the market just doesn't, doesn't justify the investment,

Kyle Mountsier  05:49

you got to look at, like their burn rates, I mean, rivian was dealing with it's, it's like burning so much capital, as, as opposed to the market demand and the ability to deliver these vehicles at scales, like there's no built in retail delivery network, like legacy OEMs have, I mean, Tesla has done the best at this, but it was a slow grow, and some of these newer manufacturers, that they're going to have to scale up a lot differently and a lot quicker in order to, you know, in order to overcome what the major OEMs now are bleeding into. So I think this consolidation matrix OEMs, recognizing that they have invested a lot of technology a lot into the technology, the smaller manufacturers, and bringing along that technology in a consolidation perspective, may actually be the best case scenario, you know, you you see, your it was mentioned, like rib board having pulled out of rivian. You know, you wonder if if they would have just said, Hey, look, we're just going to take that technology, we're gonna build on the work that you've done, and actually take that platform to the next level, there might have been more, you know, stickiness, to rivian from moral perspective,

Paul Daly  07:00

I think for sure, you know, Farley Farley, said, He predicts more mergers than partnerships. He says partnerships are, quote, very hard. You know, Ford has a current joint venture with VW that he didn't talk about, but obviously, like you just mentioned, Kyle, they pulled out of the rivian partnership, as well as potential partnership with Mahindra. And so, you know, what they say,

Kyle Mountsier  07:23

Kyle, you know, what's interesting is like, he said, partnerships are hard. And we were at Digital dealer, and we had a whole session on partnerships, as even as the retail automotive industry and our scale is a lot different, you know, dealer to industry partner than OEM to OEM. But it is not easy. It's not easy to have a partnership that that practice has humility. In both the technology or the plot, or the hardware that you're utilizing, or the people management strategy. Partnerships are hard work. And for for, for us, it's worth the work. The work that dealers and industry partners have the capacity to show an extreme level of collaboration is worth the work in our opinion, because it is the unique selling proposition of the retail automotive industry, as compared to what OEMs especially new Eevee automakers have the capacity to

Paul Daly  08:23

do all their vertical integrations. actly, right. So without a doubt, right, like you can look at it as a liability in retail auto we look at the the partnership nature, and the growing open handedness between industry partners, developing technology, and dealer groups trying to do something. There is a growing collaboration, and a spirit of collaboration that is for real, which is one of the reasons we're so passionate about. So too, which is why the reason we're throwing a solo con is to supercharge this, because this is our competitive advantage. Everybody,

Kyle Mountsier  08:54

literally it wouldn't make me no happier, then for everyone to come to us so to con and we're going to do this. We're dreaming up this dealers, pitching vendors, you know the problems that they need to solve that they don't, it would make me no happier than to watch seven different industry partners. Hear whatever is happening, stand up and be like, we can't do it alone. But those other six if we all come together, we get six that yes that that would be the pen ultimate success.

Paul Daly  09:26

I'm about to predict right now that that session specifically at a soda con where the dealers get to pitch their problems to vendors that get to think through and work on solutions in real time. I'm going to predict that that is going to be a synthesis moment for something substantial in our industry. I'm just going to say it right now. And if you have if you don't know about a soda con, September 11 through 13th is going to be in Philly, you can go to a so to conduct calm right now. Fill out the quick form so that you will be the first to know when we released everything. We are going to have limited seats right we can't have everybody but five to 700 People are going to be there. You should be one of them. All right, moving on transition, transition to a transition. 14 years ce o of meta Sheryl Sandberg, formerly Facebook is stepping down from her CEO role. I saw this come come through the line last night. I was like, we have to talk about this today. You know, she started, which means she started in 2008, when Zuck was only 23 years old, right, Ali, she was like, there needs to be an adult in this room somewhere. And I think that's my

Kyle Mountsier  10:33

man, you guys have been doing this all wrong, you know, you're supposed to make money,

Paul Daly  10:37

you know, businesses, right? Well, but she really is credited with building out like the company's business platform, the ad platform, like everything we think is normal. Now, that's that started, you know, really in her tenure. I mean, you think of the impact that made not not just the Facebook's main on, you know, pop culture and society, but the impact is made on the advertising world is like, it cannot be overstated. You couldn't overstate it enough.

Kyle Mountsier  11:05

Yeah, absolutely. I love the quote that she said to as she's heading out. And this is probably, you know, when other business leaders are looking at her as a business leader, whether you love Facebook or not, whether you're on the platform, whether you appreciate the advertising business model, it doesn't matter, the growth that they've experienced, and the ability to scale across the world is not understated. And her quote was this, I really feel like the next generation of leaders are ready. It's been a long and great partnership with Mark, I really believe in the company, and I'm staying on the board. But it's probably time for me to have more flexibility and more ability to do more things with my time. And I want to zero in on that first pieces that I've really feel like the next generation of leaders are ready. And just having the wherewithal and the mindset to say, hey, look, I've taken it as far as I can. And the next generation who she no doubt has had a part in a major part in grooming, and building and scaling, are ready to take this and run it to the next level probably into this web three. Oh, Metaverse technology. And we were talking earlier how so many of those people, you know that the 18 to 25 year olds that are probably coming up in leadership in the company right now. Literally have had a screen in their hand, or at least been like in a screen culture. Yeah, since birth, essentially total native. And that's completely different than than where she's at. And, you know, so you've got to have that mentor capacity, her staying on the board. Great job. But you know, Wow, incredible leadership in that statement alone, at least whether it is just a statement or whether it's actually practice, you know, yet yet to be seen as far as what happens to Facebook over the next couple of years. But love the perspective there

Paul Daly  12:57

for real. So you know, she's leaving, she says because she wants to focus more time on her foundation, on women's issues. And she said, I need some time to think about what the next phase of my life looks like. And that's just not possible with a job of this scope. You think it's got to be all encompassing. She's 52 years old. And she received 31 point 35 point 1 million in compensation and 2021. So she got a little walking around money to go find herself at 52. She's gone on vacation, she's got what to get this 1.6 million Facebook shares. So her net worth is a cool quarter of a billion. So best of luck to her in her new endeavors. And new ventures. Mark Zuckerberg says he doesn't have any plans to replace her or that role. He said no one could fill it like she did. But he intends to have his product and business teams be much more integrated. Which makes a lot of sense, right? We're thinking about collaboration. It's almost like a partnership inside a vertical business. You know what I mean? Facebook is so big that even approaching this like merging the product and business teams is much more in the spirit of partnership than it is, you know, a merger. Right? Because we actually

Kyle Mountsier  14:08

haven't even talked a lot about like, the partnerships between in service sales parts of counting. Do right. Yeah, the last

Paul Daly  14:15

couple of days. That's we've been in the middle of that. Right? Yeah. When when you're you're working with a large organization or even a small organization. Right. Think of it as the thinking of it. That's good. That's really good insight, Kyle, thinking of that as a partnership mentality, like how can we work together to solve the real problem, right, which is customer experience? Yes,

Kyle Mountsier  14:33

man. All right, put me and go on for days we got a show to finish.

Paul Daly  14:39

Our final story today comes from our friends at TrueCar. Their recent report indicates softening demand and lower prices for us cars. Because basically they're watching your price adjustments in real time use car prices being adjusted. And basically they're their lead analyst Nick Willard said this month are continuing to see a struggle for Supply. But they're also starting to see signs of demand adjusting higher interest rates combined with higher fuel prices present a headwind to demand cooling off, which explains why the average list prices are decreasing down 1.6%. In May versus April.

Kyle Mountsier  15:15

Yeah, so the data looks like this. And I'm just gonna pump it out real quick. And then we'll kind of talk about it. But, you know, sales year over year in May down 17%, month over month, April to make up 10%, adjusted for the same number of selling days, average transaction price still up 14% from a year ago, wild

Paul Daly  15:36

cooling off, right, so it's cooling off and not cold by

Kyle Mountsier  15:40

all right, and use vehicle sales 3.1 million, down 19% from a year ago and down 8% From April. So there's the cooling off. But the average interest rate this is on is unused cars is up to 8%. For a time, I mean, it's been I mean, at least since the 2000, the 2000, since we've seen interest rates at that on pre owned vehicle from an average perspective. And then the loan term, going all the way up to 71 months, I can remember still being in the industry, people freaking out about it being 63 months, man like Oh, my goodness, average terms are up to 63 months, we're dying as an industry, right? Yeah,

Paul Daly  16:30

if you don't, if you don't, if you're kind of like new to the finance side, in automotive, like the term of the loan usually gets stretched out to create an affordability, right, because the longer you stretch out the loan, the cheaper the payment gets. But that doesn't put you in a better position long term in the use car, right? That actually means that you are going to your equity in that car is going to grow much more slowly. And at a time when used car prices are so high, chances are the value of that car dropping substantially in the next three years are very high. So it'll be it'll be something to see what happens with the overall used car situation are people going to be upside down and payments, etc. In the next three years or so, you know, this is if you've been around the industry for a while you realize like this is just like rolling, like rolling waves, right? It goes up and the pendulum goes down. And the pendulum moves up. And it goes, the pendulum swings left and right waves go up and down. But you know, mixing metaphors, but yeah,

Kyle Mountsier  17:22

well, and I think, you know, the real attention has to be, you know, over the past nine months, it's just like, get the inventory. If you have the inventory, you sell the inventory. So there's got to be a new attention to the right inventory, you know, buying Right, right, buying it right selling it, right. All of that has to it's like a reinvigorated approach to inventory management and not just inventory acquisition for the sake of acquisition, not that that's ever gone away. But it has to be a lot more intentional. Now as the market starts to compress. And interest rates and terms start to start to grow. You know, I'll just plug all things use

Paul Daly  18:03

Carvanha. Let's just do that. Speaking of a great used car strategy, segue. I don't think we've ever done a segue to a plug but go for a segue to

Kyle Mountsier  18:15

a plug is all things use cars on clubhouse? And look, it's I know, it might sound like a social media thing or you know, just a, you know, another app that you've got to download. But if you only download it for the end, think of it as a business strategy meeting. This is not this is not social media for influencers sake or for anything like that. But you get economists and operators in the same room talking about real strategies, real takeaways, not thoughts. Not imaginary in real time, not 2030. What should we do? It's like, what's happening this week right now? Should we do practitioners? And that room tomorrow is specifically on you know, what should we be paying for us cars? How much is too much? What should we be pricing us cars that all of that practical tactical things are happening tomorrow? It's 9am. Eastern. I would argue that if you don't have someone in your dealership, a used car manager and operator finance on that call, yeah. Then you are missing a massive opportunity for understanding what's happening in the market right now and what you should be doing at your dealership, especially from a used car perspective, which is really what we can control in this current market without

Paul Daly  19:30

a doubt. So if you don't get our daily email, go to a so to.com to get it. The link to that room will be in tomorrow morning's email. But until then lean into the transition, figure out how you can work together with one another. Because remember, as retail auto it's our biggest competitive advantage.

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