GM and Hertz Going Steady, Lithium Launches, Interest Rates v. Purchasing Power

September 21, 2022
Welcome to Wednesday as we’re covering an announcement by GM and Hertz to move some serious EV volume through rental fleets. We also talk about what the lithium supply is looking like as well as the effects of rising interest rates on Dealers and home owners alike.
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Welcome to Wednesday as we’re covering an announcement by GM and Hertz to move some serious EV volume through rental fleets. We also talk about what the lithium supply is looking like as well as the effects of rising interest rates on Dealers and home owners alike.

  • GM and Hertz announced a joint agreement for the automaker to  provide 175k EVs to Hertz rental fleet through 2027
  • Order will include Chevrolet, Buick, GMC, Cadillac and BrightDrop EVs through 2027
  • Deliveries are set to begin in Q1 2023 with the Chevy Bolt
  • Hertz is investing to create the largest rental fleet of EVs in North America, with tens of thousands of EVs available for rent at 500 Hertz locations across 38 states. The company’s current goal is for one-quarter of its fleet to be electric by the end of 2024.
  • “It’s exciting that two iconic American companies that have shaped the evolution of transportation for more than a century are coming together to redefine the future of mobility in the 21st century,” said Stephen Scherr, Hertz CEO.
  • Many of the EVs are expected to be deployed in LA and SF due to fast approaching restrictions on ICE vehicles
  • In 2021 Hertz ordered 100k Teslas which are nearing fulfillment

  • EV Demand and supply SNAFUs have pushed prices of the critical component in EV batteries, Lithium, to an all time high
  • Lithium carbonate prices in China, the benchmark in the fast-growing market, hit $71,000 a metric ton, according to price-assessment firm Benchmark Mineral Intelligence. This is about four times as high as a year ago
  • Prices are basically following the Chinese EV market which is exploding
  • Major US automakers have struck deals with lithium producers to secure supply
  • Over 80% of lithium-ion batteries are used for EVs, said Daisy Jennings-Gray, senior analyst at Benchmark Mineral Intelligence. That will increase to 90% in 2030, Benchmark forecasts, up from 40% in 2015.
  • Refining is and will continue to be a major bottleneck in the production of battery grade lithium
  • “I would like once again to urge entrepreneurs to enter the lithium refining business,” Tesla Chief Executive Elon Musk told analysts in July. “There’s lithium pretty much everywhere, but you have to refine the lithium into battery-grade lithium carbonate and lithium hydroxide, which has extremely high purity. So it is basically like minting money right now.”
  • Rising interest rates are seriously affecting real estate purchases, home equity, and wealth building. And remember, most Dealers have variable rate loans.
  • Every 1% point rise in interest rates equates to 10% less purchasing power
  • Rates are double what they were this time last year meaning
  • 2.9 a year ago  vs 6.1 now. 2.1% delta = 21% less purchasing power
  • $400k home last year is now only $316k with the same mo payment
  • Home prices remain up however the correction is happening

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Kyle Mountsier, Paul Daly

Paul Daly  00:32

What does it take to be a creative in retail automotive? Well, this November 13 through 15th. My friends and I are going to show you how we hope you can join us at the modern retail conferences we put on the industry's first ever creative track for creatives, practitioners, marketers, if you're creative in retail auto or if you have creatives on your team that you've just been looking for somewhere to send them to get them energized, motivated and learn some of the tips and tricks that other people are deploying at scale. You need to send them to spend a few days with us we're talking Kyle mounsey or Darren don't ally pinion is that a hair flip, and Nathaniel Breck lick some of the best, most innovative and open handed creatives I know, and we're all getting together to spend a few days with a small group to actually workshop creative ideas. We're going to learn about tools, we're going to learn about live deployment, we're going to learn about best practices and we're actually going to make things this isn't theory this is actually practice. So we hope to see you at the modern retail conferences, creative track November 13 through 15th in beautiful Palm Beach. We hope you will come spend some time with us Yeah, I like starting the day off with a Darren King drum solo. What do you think? So good. So sweet. We got some news to talk about today. Gianna hertz going steady, lithium prices are launching and interest rates versus purchasing power. We're feeling that you're feeling that

Kyle Mountsier  02:08

purchasing power,

Paul Daly  02:10

we should we we should we should do a piece where you're doing the drum solo like with your mouth. That would totally work. It would work well. You don't have dare I kick on the drums to lithium launches. Oh, here we go. Drop the beat. So that piece that you just heard or just saw was a little a little spot, edited by our good boy Darren Doan, who is going to be part of the instructor crew at the modern retail Conference, which used to be triple A S It's Brian patches annual event. And they asked if we would run a creative track. So we're pumped because we've never seen a creative track in retail automotive ever. I've never seen when I was I was like, I don't think it's ever happened. No,

Kyle Mountsier  02:53

I haven't seen it because like typically everything goes to tech or sales. And that's just where the industry goes from a conversation perspective. And, like we are what we have seen is that great content wins, it drives and drives brand and I think there are more and more people learning that hiring people that maybe don't have a completely straight line to ROI, actually drive success for for a dealership for a brand for whatever. And so I'm excited to see what comes of this because I think there's gonna be some, like, I was thinking about this, I was like, Brian paths just did, he just played the perfect move. He was like, we're gonna put a bunch of content creators around our event, arm them with the arming them with the ability to create content, create content, we're gonna get all that content and then let's go

Paul Daly  03:46

to brilliant play. But hey, we got to have like kind of a small cohort of a class that goes through so myself Kyle Darren don't who you know from a soda con and from other places as well like scuttling a billion views on the videos, he's directed at the opinion of Nathan, Nathaniel direct Lik, gosh, talk about a legend in content creation in automotive, the four of us, the five of us, there's five of us, we are going to be the instructors through the three day event, we hope if you're a content creator, or if you have a content creator, that you just don't know how to resource them, we hear that all the time. All across the country at dealers, they're like I don't know what to do with my creatives. Like I don't know how to instruct them. I'm not a creative send them to hang out with us for three days. We're gonna go through a bunch of strategies tactics, we're going to actually have them making things we promise they will come back energized enthusiastic and making more content that moves your trajectory forward and is worth the investment you can go to a so backslash or forward slash m R c modern retail conference, a soda forward slash M AR C. You get $100 off as you register through that link and we want to we want to sew into the creative environment in retail automotive so much stuff going on. We'll just give you a little list. Right? So that's November 13 through 15th in Palm Beach going everywhere. We are going to be some places next month in October. What is it fifth through seventh. Kyle and I are going to be hosting a panel around the future of retail automotive, with Alex Vetter, CEO of cars. Perry Watson, partner in Marysville, Toyota and the one and only Alex Flores, who is always rockin and rollin down there in Texas. We're gonna have a panel there, we're going to be at the event for three days in Miami. So if you're a name and member or you're registered, where you can register to go I don't actually I don't know if they have tickets left.

Kyle Mountsier  05:37

In a if you want to go DM us, we might be able to find Yes, we might

Paul Daly  05:41

know a guy. We might know a guy. But we're excited to hang out with the name Ed crew because let me tell you I was there last year and it is an amazing conference that is like the best kept secret automotives cats know how to throw down, I know how to throw it for real for real. We got some news to talk about. But first, there was a quote that I came across today, every once in a while I bring across the Simon Sinek quote and this just seemed to be so synergistic to what we've been talking about to loving people more than you love cars, to having tough conversations right at the expense sometimes of your own success, or to maybe throw an event that has a different vibe and a style may be at your own success with the intention of activating and serving more people. Here's the quote, It is a luxury to put our interests first, but it's an honor to put the interests of others before our own.

Kyle Mountsier  06:29

You know, when I think about that, like you think that you you would as as a society or as a person, you would desire the luxury. And what's really cool is like when you desire the luxury, there's a lot of self service that happens there. And there's some energy for a little while. Right? You get that little feels good. When you have luxury think about like, I think about going you know the difference between going to Florida on a beach vacation, or Haiti on a service on a mission, right? And like, you get that high hit of energy from a luxury thing. But when, but when but when you have a sense of honor, it's much more long lasting serving others, right, it changes your life, it changes the perspective that you have everything. And so when you put those interests of others before your own, when you are service minded, especially within an organization, the honor that comes with that, and the long lasting adrenaline and engagement that I like, wow, that quote, that's immediately what I went to that that like fleeting level of luxury, and the joy and constant pursuit that honor the word honor brings with

Paul Daly  07:41

it. Yeah, that's deep. Let's we don't use the word. We don't use the word honor enough in that context. These days, right, we like talking about well, we'll honor our commitments, but doing things with a sense of honor. Imagine, you know, imagine greeting customers into your showroom with a sense of honor, or serving them in the service line with a sense of honor, or serving your teammates with a sense of honor, right. Like, I want people to see me as an honorable man. Right. Like that, that context. So to wake up and approach it with that. I mean, there are a lot of people that do that, that maybe don't say it like that. But yeah, more than,

Kyle Mountsier  08:16

you know, that's interesting is like, many people would say, I want others to see me as an honorable person. And I think that having honor, like the way that Simon has put this Simon Sinek has put this is actually like, because he said putting the interests of others before our own actually, where you receive or feel honor is is actually seeing others be honored and respected and loved and cared for. And then that comes back in a feeling of honor, a feeling of good pride. Right. And and I think that as as we pursue that as we pursue others as as as as lifted up as engaged as cared for it comes back tenfold. So

Paul Daly  09:06

it sounds a lot like loving people more than you love cars sounds a ton like that. Tell me you love people more than you love cars without telling me. I kind of honored the antidote for that. Let's talk about some news today. So here we go. Here's a big one, GM and Hertz announced a joint agreement for the automaker provide 175,000 EVs to hertz through the year 2027. The order will be clear. Haven't heard that year and a hot minute, you know, they're getting a little more confident, right? Like the close to the deadline gets

Kyle Mountsier  09:37

I owe this in for it's not 2025 It's not 2030. We're going to 2027

Paul Daly  09:42

I think there's an interesting play that I'll tie back in at the end of the story, but or the order is going to include Chevy's Buick GMC is Cadillacs even bright drop Eevee. So that's kind of cool. I haven't heard much about bright drop and in quite a while. The deliveries are actually set to begin in q1 of 2023. So not too long from now it could be within six months. hertz is investing. They say to create the largest rental fleet of EVs in North America with 10s of 1000s of EVs available for rent at 500 hertz location. So hertz is kind of coming back with it with a new thing they did

Kyle Mountsier  10:12

legitimately little rough who hurt their shins to hertz locations in the city that I live in that had closed down. The they went under there. And they've actually come in the last three weeks, they both re they've both reopened in the same location. Pretty wild. Yeah, yeah.

Paul Daly  10:29

So we got a couple of quotes here. From Steve. Sure, the Hertz CEO, he says it's exciting that two iconic American companies that have shaped the evolution of transportation for more than a century are coming together to redefine the future of mobility for the 21st century. That's a very well crafted statement.

Kyle Mountsier  10:46

Well, I think well, here's I think it's actually it's not too bold, redefining the future of mobility, because rental cars was like, have you heard how many people have you heard, say, I rented one, and then I bought one doesn't matter if it's an ICER Evie vehicle, it's a it's a trend. It's like, I got in this car, got a little bit more tea really liked it. Right drive, I liked it. And I moved over here and purchased it. And so they could actually shape like you think about this 2027 having all those vehicles and rental fleets, all of a sudden moving forward to this desire of 2020 33 years after people getting in these rental cars, having experience with them getting their getting their feet wet, and then being able to move into a purchasing an ownership experience. I think it's a really smart play for GM.

Paul Daly  11:31

Yeah, I mean, it's it this is actually it's Well, what I wanted to tie back is this is a really familiar conversation, because we've had it before. Similarly, when Tesla and Hertz had an agreement that Tesla would provide them 100,000. Tesla's for their rental fleet, actually, that 100,000 is nearing fulfillment. So it's actually supposed to be fulfilled by the end of this year. So the fact that and then it was like, hey, like, we're talking toward mass Evie adoption, and like, hey, the best way to get Evie adoption is to get people have a low stakes interaction with one, right. And that's like, I rented it. I tried it. Most of these vehicles will be rolled out through through like San Francisco, LA, California, obviously, the regulations are speeding up much faster. So we'll see what happens with charging infrastructure. And you know, that's the next question, right? You know, the, if I rent an Eevee, like I want to be, I want to be sure that I can charge it or the nice thing about rentals, you're like, Yeah, I'm probably not going to put 200 miles on it. So I don't have to charge it. Right. That's, I can, I can bring it in. I can bring it back. And I'm sure there's some kind of charging fee, but they'll probably be flexible on that. But yeah, so Tesla did 100,000 by this year. So I think like rolling out like 175,000 is kind of a way to be like oh look, it was a lot more than them. But we do. Well, we have a few years to do it. But I appreciate it. Mary Barra, CEO of GM and chair says our work with hertz is a huge step forward for emissions reduction and Evie adoption that will help create 1000s of new EB customers for GM. There's to your point, Kyle, right. Bolt. I liked it. Saw it. Well speaking of Eevee demand segue had a little had a little strategic delay before I hit the button because when I said it kind of expected it to hit do it did that no pregnant pause. Alright, so Evie demand and supply snafu is have pushed prices of the critical component in evey batteries. As we all know, lithium to an all time high lithium carbonate prices in China, the benchmark for the fast growing market hit $71,000 per metric ton. According to the price assessment firm benchmark mineral intelligence four times as high as a year ago. I look back like two years ago. And it was like 10,000. Wow. Yeah, that's those four times last year. But it was like $10,000, like two years ago? Well, this is interesting, because you think of you think of Evie as a technology platform, right? That like that's where everybody goes. They're like, Oh, this is tech. So as tech gets better over time, we reduce the cost of tech. But when raw minerals are involved, there's actually there's actually a premium because of having to mined for these minerals. Yeah, it's a tangible consumable resource. Is that right? Exactly. Yeah. And so like, basically the the price is as it goes, so I can't remember the numbers but you know, this refined battery grade lithium is like, you know, highly processed, you know, so it takes a lot more you know, Brian benstock said a lot you have to strip mine an acre of land to get enough lithium to generate one evey battery. So you think of an acre, you've refined, refined, refined, you get enough material that you can actually putting the battery but basically the prices are following the Evie adoption curve in the Chinese market. Like that's how fast it's going in China. And as more EVs are being adopted that literally is like a one to one almost track where the prices of lithium, you know, all the major EU, US automakers have struck deals with suppliers to secure, you know, I think up to 80% of their supply are there. So they say, and you know, it's just going to become a major bottleneck. You know, in the article, they mentioned that refining the refining process is like the next bottleneck, right? We get the materials getting good at getting the materials and Jen just like okay, now we got to get it into battery grade lithium. interesting quote from Elon Musk around the topic, he says, I would like to once again urge entrepreneurs to enter the lithium refining business. There's lithium pretty much everywhere. I didn't know this. There's lithium pretty much everywhere, right? But you have to refine it into battery grade lithium carbonate and lithium hydroxide, which is extremely high purity. So it's basically like minting money right now.

Kyle Mountsier  15:52

So you're like, so you like Tic Tac famous? Or I could get on the blockchain stuff and start coding or, you know, like, I don't mind me,

Paul Daly  16:01

I don't want to. I don't know, if you've lined up all the types of entrepreneurs in the world. But tick tock. Mining wasn't Yeah. That's a different crew all together. Yeah. Well, that would be a really interesting journey. I feel like Darren Don't be the one that tracks them. Like a tick tock, I got tracking a lithium mining entrepreneurs journey. Right. Stones name all

Kyle Mountsier  16:24

over it, actually, you know, actually, well, yeah. I mean, you think about what he's doing with the recycling, manufacturing or recycling process in the US. It's very, very similar, because it's a manufacturing process, actually. And I think it's one of those things where we just kind of expect it to happen. Now that we've got batteries and all this stuff happening, but it's a whole new ecosystem that we've never tapped. As an as, like, any sort of manufacturing, it's just a whole new wide open space.

Paul Daly  16:53

That's how do we do it?

Kyle Mountsier  16:54

Do it refine the process? Hone the identity, like create a brand around? I mean, who wouldn't want to be, you know, aligned with the most green, most eco friendly savviest entrepreneurial bass lash

Paul Daly  17:09

most profitable, most profitable, right? Those things aren't usually in the same sentence. Right. But

Kyle Mountsier  17:16

it's like a full brand play that you could that company should be on Tiktok and Instagram, and all those places, because everyone would eat it

Paul Daly  17:24

up. You know, that's it. Kyle, we should do this. To lithium.

Kyle Mountsier  17:29

He's urging entrepreneurs, Paul, that's us.

Paul Daly  17:34

Talking to us right now. So um, yeah, interesting. And another quote, actually, I got my 80% figure wrong from earlier, it's 80% of lithium ion batteries produced are for EVs now. And that numbers, that numbers set to increase to 90% by the year 2030 90% of all lithium batteries are gonna be EVs because I think of all the things that I have that have a lithium battery in it. And it's, it's a lot. I mean, granted, the batteries are a lot smaller. Right? Yes. Very, very, very, very, very small. Speaking of things that

Kyle Mountsier  18:10

are not getting smaller.

Paul Daly  18:11

Okay. We'll talk about that. Small talk about that. So we had a conversation yesterday with a dealer who said to us, why is nobody talking about interest rates right now on real estate? And unreleased in particular? Yeah, exactly. Yes. And he said, Yes, exactly. And he said, Most dealers have variable rate loans on their properties and rates, which started out as you know, 4% on a commercial real estate loan are now like seven or 8%, while rising interest rates are seriously affecting real estate purchases, home equity and wealth building. Right. And as usual, like we just said, dealers have variable rate loans. So check this out. For every one point, that interest rates rise, purchasing power on a 30 year loan goes down by 10%. Oh, absolutely. That's crazy. I mean, it makes sense. But like putting it in, like thinking of all the interest rate hikes that we've seen, like every time, the Fed says we're raising rates by half a point, right, there it goes. 5% of your purchasing. point seven five basis points, right. Point seven 5%. There goes another seven rates

Kyle Mountsier  19:25

to go up again today. Today's the day Yeah, exactly. They're thinking could

Paul Daly  19:29

be another, it couldn't be another half point or more or three. So basically, so basically, rates a year ago, I checked, I double check this, I linked it up in the notes 2.9% A year ago, like almost to the day they are 6.1% On average now, which is a 2.1% Delta meaning 2.1% equals 21% less purchasing power. That means if you have the same job, and the same income status and the same credit score and you're getting pre approved for a $400,000 loan last year. Now it's only $316,000. You think of what that does to what type of house you can buy type of neighborhood, you can buy it in, and on and on and on. And then you're like,

Kyle Mountsier  20:11

and if you're in any sort of Metro that's growing, you're seeing retail prices of homes still still grow. It's leveling off a little bit like it is. So I kind of watch it, it's leveling off a little bit, but it's still like it's growing. So you're seeing interest rates growing, you're seeing pricing growing, we're seeing the same thing in automotive. And so it doesn't matter whether it's real estate, commercial, you know, residential, commercial, real estate, or auto loans, like watching this as a trend for affordability, and even profitability on the commercial side is a really interesting trend to watch. You know, as we start to see, like vehicle prices level off on used cars, even new cars come back to a to a regulatory to a regular level, like at an interest rates rising, you're seeing profit margins squeezed. And so we're gonna see, again, we're gonna see like the most savvy, best operators figure out how to manage profitability in this tenuous situation.

Paul Daly  21:06

I think that it is one of those things that like, we're just not talking about a lot. I thought after that dealer said that to us, and like, why aren't we talking about this? It's a major, it's a major issue. It's like, well, profits are so high right now. It doesn't matter. Right? It doesn't matter. I mean, it does matter in the grand scheme of things, but it's not. It's not a place where people are looking at like to pinch. And if you you know, all hope is not lost, by the way. Right. Now, historically speaking, I think my first home loan was like 6%, you know, it was probably 20 years ago. Now. It's probably in that five to 6% range. I'm so happy because I went through the painful, painstaking process of refinancing my home. And if you don't know this, if you're an entrepreneur that has like business interest, it's really hard to get financed, believe it or not, you could have a great credit score, you could have cash in the bank, you could put 40% down, guess what they're like, Well, I don't know if you worked at like Bob's hardware. If you worked at Bob's hardware, and you had a W two, we would somehow we would say Bob's hardware

Kyle Mountsier  22:01

is still barely making it by but because you're

Paul Daly  22:05

about to close, you have no control over what Bob's hardware is doing. Right. But you're like, here's a track record of business and profitability. And this and this are like new, I don't know, trust you entrepreneurs. So either way, I went through the process, and I locked in it like I don't know, it's like to point something stupid to qualify them. And now I'm like, it was worth because I was so done with the process, then I was like, This is the worst, but you gotta have enough guess this in 1980s. Guess what the housing I think like the 80s was 20 years ago, but actually it was 40 years. It was in the teens, wasn't it? 16% 16. Yeah. So think about what that does to purchasing power and home prices. Yep. Got so little perspective for you. And so. Right, right, but I mean, think all things all things equal, you know, it'd be inflation, et cetera, et cetera, et cetera. Yeah, so all things being equal, like today's a great day to go out there. And like be honorable to go out there and serve somebody else go out there. And well, you can even start a lithium mining and Refining Company if you want, but whatever it is, we'll see here tomorrow

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