Hacked Teslas, Home Depot Sees Fewer Shoppers, & Dealer Consolidation

May 17, 2022
Tuesday’s are for Troublemakers as we talk about the revealing of a new Tesla hack with broader implications, Home Depot is seeing fewer customers but higher revenue, and the great Dealer consolidation marches on.
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Research firm Escalent finds consumers prefer dealerships

  • The majority of respondents prefer to rely on dealerships for financing (60%), delivery (85%) and repairs and services (79%). Almost half of the respondents (45%) prefer to have dealership staff educate them about various models.
  • “What we found, pretty overwhelmingly, is that consumers prefer to buy their vehicles from dealerships,” K.C. Boyce, vice president of Escalent, tells Wards. “They want to do test drives, to touch and feel and see vehicles. When we look at the macro picture, the idea that (car buying) is going to move entirely online is fundamentally flawed.”

Hacker reveals a method to gain entry and start certain Teslas

  • “A hack effective on the Tesla Model 3 and Y cars would allow a thief to unlock a vehicle, start it and speed away, according to Sultan Qasim Khan, principal security consultant at the Manchester, UK-based security firm NCC Group”
  • Hack was made known to Tesla, no response at this time
  • Similar hacks exist for any smart lock using BLE (Bluetooth Low Energy) tech to make the device think the owner is in proximity
  • Hardware costs about $50

Home Depot reports fewer transactions but higher transaction amounts

  • number of transactions declined 8.2%
  • average amount spent per transaction rose 11.4%
  • “The retailer was a major beneficiary during much of the pandemic. At one point during the last two years, Home Depot posted four straight quarters of comparable sales growth above 20% as the public-health crisis’s social disruptions left people spending more time in their houses.”
  • Dealership consolidation keeps rolling in 2022
  • The trend decision seems to be ‘get bigger or sell out’

“Dealership consolidator Gregg Ciocca, who wants to double his store count to 50 within five years, says acquisition opportunities are "coming fast and furious" in today's robust buy-sell market. Ciocca, CEO of Ciocca Dealerships in Quakertown, Pa., which last year acquired the country's highest-volume Chevrolet Corvette dealership, has signed multiple dealership purchase agreements that he expects will close this year.

  • 2021 arguably the biggest acquisition year in Auto history
  • 640 stores over previous high of 463 in 2015
  • Top states: Texas, California, New York, Colorado and Florida

Paul Daly  0:24  

Tuesday's are for troublemakers. That's why we are glad you're here. We're ready to make some trouble, talking about hacks. Tesla's Home Depot seeing fewer customers and people prefer buying cars at a dealership. Don't want to hide Kyle. They stopped this day when they see me. No need to re watch 14 get deep on a Tuesday.

Kyle Mountsier  0:47  

Yeah, I look, today's today's layers of stories across the news verse have me really excited. Intrigued? I think there's there's some things to draw out of it that are

Paul Daly  1:04  

complex, a little bit. The little perplex Yes. All the data as well. Just throw into there. No.

Kyle Mountsier  1:13  

Oh, man. Let's get to it. Guys. Hey, look, Paul, I don't want to get into this too much, because I'm gonna have some jealousy here. Okay, you're going to V con this week. And I know that we've kind of glanced over this over the last few days and weeks, and you talked about it a while back and you're like, I'm going to vi con i got one of the original NF T's. In, right. But explain what you're excited about what you're going to see, hopefully this week to the people that may not understand what this whole outside of automotive realm of, like conference life looks like?

Paul Daly  1:50  

Yeah, I'm so excited for this on multiple levels. If you don't know, I've been following Gary Vaynerchuk, the entrepreneur and I don't even know how to even label him. And he's a force of nature was in the Vayner mentors program. So really close relationships with that organization. Well, Gary launched his NFT project to say I'm going to show everyone how you build community through NF TS really educated me on NF Ts, and crypto as a result, having a conference called V con ve ce o n.io or.co. If you want to look it up. And this is the culmination of this community building in the first stage, if you bought an NF t, you got a ticket to V con for three years. And that's how we got people over the hump to say like, Hey, if you buy this NFT, and trust me with this, you at least get three years at this conference that you trust I'm gonna put on and if you go down the speaker list, your thumb is gonna get sore because he's got everybody from Snoop Dogg, right from Snoop Dogg too, to like, Congressman, really, we have that broad scope and popular culture. So I'm going to be on the ground there from Thursday to Sunday, and just really soaking in what the utility of NF T's in the community around NF T's and looking at one of the most cutting edge conferences that exists. So I'm going to be soaking it all up to you know, as we do, we're bringing that back to Otto you know it?

Kyle Mountsier  3:07  

And I'm back. That's right. Yeah, we're we may or may not be planning something for mid September, that will probably take a few cues from from what Gary Vee is doing out there.

Paul Daly  3:17  

Just a few already, I've taken a few cues. So excited about that. I'll try to post on my social channels and try to get some stuff back to so asoto social channels too, because I'm sure there's going to be automotive application there. Because there's retail application there. So we're going to do that. Don't want to take too much time on that. But yeah, we're excited to be part of that. Just bring that into automotive? Because that's what we do. Yeah, so I don't think we can do a segue in the intro host notes. I almost did one. But um, we could I guess we can do what we want. So our show Automotive News want to give some props, and thanks to automotive news, they were named the 2021 magazine of the Year by the American Society of business publication editors, right? It sounds like one of those organizations where like people really know what they're doing. And they do know what they're doing. And they said, basically, automotive news was one of the what was the best they gave them an award for, we have a quote from the article award was given in the category of publications that produce 12 or more issues per year. So it's a print publication award. They say entrants are judged based on quality of writing, reporting, editing, value of usefulness to the reader editorial organization and interaction with readers as well as layout and design, I think for all of us who rely on automotive news on a regular basis to keep us informed and read the print version can really appreciate why they got the award. So thanks to Casey crane and our friends at automotive news for just doing a stellar job of keeping us all together.

Kyle Mountsier  4:43  

Yeah, exactly. I mean, we just I mean, if you know our everything that we do, there's so much that we just we watch and listen and they're providing some of that first tech news, and that we get to give context and bring to our readership the podcasts all that so kudos to that crew.

Paul Daly  5:01  

Yeah, for sure. All right, let's get in this first story, Kyle. Yeah, this was the lead in our email today. And if you don't get our email, we have an email that we send out every day Monday through Friday. Eight. aso tu.com subscribe to the email, you won't be disappointed. It is, it might be the best read you have every day in just a few minutes, you can get a good, a good smattering of automotive news, culture news, retail news, and some really well curated gifs and memes. I might add. That is that is

Kyle Mountsier  5:31  

absolutely the biggest reason to get it. Half the people only get it because they love the gifts. That's it. They won't even read the words.

Paul Daly  5:38  

We'll take it we'll take it they don't we always know what the mean, was

Kyle Mountsier  5:43  

that a research firm? Escalent ? Who does market research for a bunch of different verticals? did a research study that showed that consumers actually prefer dealerships? Which it was like for me, it was like,

Paul Daly  6:01  

wait, what do another one? Right three stopper?

Kyle Mountsier  6:05  

Well, and this is what was cool is a lot of the research that was done was they were intentional about finding customers that didn't already have experience purchasing from like a brand like from Tesla or from a direct to consumer purchasing.

Paul Daly  6:24  

Basically, what you're saying is they weeded out the people who are just enthusiasts exactly which

Kyle Mountsier  6:29  

if you think about it, a direct to consumer purchase model is still a very early adopter purchase model, right? And so you are going to be going after a very segmented portion of the market. And so they they intentionally surveyed 80% of people that weren't in that bucket. And I think that's really important, because what you're saying is like, Okay, this is more of what consumers are experiencing. And the Vice President of eskelinen said this, what we found pretty overwhelmingly, is that consumers prefer to buy the vehicles from dealerships. They want to do test drives, to touch and feel and see vehicles and get the macro picture, quote, ready. But better like canceling, write it down. Rewind, he said, we're on to continue engaging and enhancing and, and purifying that purchase and ownership

Paul Daly  7:21  

experience. Yeah, keep to keep doing that work. This is a great shot in the arm. For everyone who is on the ground and knows this to be true already. And might be constantly frustrated with that rhetoric that you hear everyone wants to buy online, everything I just want to buy it just like I buy a pair of headphones on Amazon like that's just not true.

Kyle Mountsier  7:39  

Right? Exactly. It's just well and look at companies like Amazon, we have to phone, Amazon, Apple, Verizon, all of those companies know that there is a value in brick and mortar research and purchasing. And so that's why they're leaning back into them in different ways. Some are succeeding, some are failing. But dealerships have a prime opportunity to continue to succeed in that customer relationship.

Paul Daly  8:04  

It's like we need to make it easy enough to purchase like that if you want to, but know that it's not going to go that way. Right? It's like you can still pursue that ease of use, because that's just one less thing that's in the way of a great experience. And speaking of things that are in the way segway you know, there used to be this thing in the way of you just getting in someone else's car and driving away called a physical key. But a hacker revealed a good natured hacker will say, a method to gain entry and start certain Tesla models, specifically model threes and certain model wise. Basically, this hack would allow a thief to unlock the vehicle start at speed away. According to Sultan Kazeem con principal security consultant in Manchester, UK security firm NCC group. by redirecting communications between a car owners mobile phone or key fob and the car. Outsiders can fool the system into thinking the owner is located physically near the car says the Bloomberg news story. Hack known to Tesla, right, like all good hackers are like, Hey, we found this out you need to fix it. Tesla hasn't responded yet. But you know, so at first, right first responses, like I knew it, I knew it. It's going to be like a scene out of like, you know, like a spy thriller where you just go up and do car unlocks. You get in and drive away. But it turns out the technology is is low Bluetooth Low Energy Mode BLE that's called BLE. And it basically fools the vehicle to think the owners in the proximity. And it's kind of a problem on just about everything that uses that same technology.

Kyle Mountsier  9:45  

Right? Yeah. So it's not a unique problem. And we've anytime you introduce new technology, and to be clear, this is still fairly new technology, you're gonna run into issues with access, right? And I mean, we're We're seeing this across any technologies, we're starting to see that, you know, NF T's and blockchain actually have people getting in and starting to mess with, you know, private information and things like that. And so it's just, I think it's a, it's a good gap that that we're learning from and that others will need to learn from. And manufacturers have to realize that they are not just, you know, vehicle manufacturers, that data companies, and if they recognize that have a really, really strong Information Technology arm, that that's, it's just important, like you have to be not just a vehicle manufacturer anymore, you have to be a sound technology company that understands data, understands technology, understands the connected world, and understands everything that a hacker might desire to do with a massive piece of software that's Wi Fi connected at all times. I mean, it's just, it's just a whole new world.

Paul Daly  10:55  

You know, now that I'm thinking about a little bit more like it's like, oh, they hack the car, right? It's a little bit shocking news in the beginning, but like, well think back in the day, like with old steering columns, and it used to just be really simple. It was like a crowbar and a screwdriver.

Kyle Mountsier  11:07  

Right? Yep. I mean, look like you're a normal person isn't walking around, like out packed into a Tesla, right? This is still a security consultant. At a security firm right?

Paul Daly  11:21  

out  of the gate, your Tesla, they're gonna get your Tesla, right? At least I don't know where it is. And I'm sure the Tesla people can just shut it down. Right, like lock your iPhone. Sure, you can lock the Tesla. So yeah, you would think so actually, they don't want to talk about that, either. You mean, you could just kill the Tesla, like, wherever it is? Or yeah, and pretty much every other car right now too, by the way. Let's move into some more retail retail news. Home Depot, released their q1, q1 News, and they said they actually had fewer transactions 8.2% Less transactions. But consumers were spending 11.4% more per ticket, mainly citing rising costs in inflation. So what does this mean for us, Kyle?

Kyle Mountsier  12:10  

Yeah, this, this means that this means that everybody is selling less things for more money, and like, buying less things. Yes, consumers are buying less things. And I think that we're seeing this in the automotive industry. I don't think anybody is kidding themselves that they're crushing record volume numbers right now, especially. Right revenue numbers, exactly. But we're continuing to see this question mark about how that's impacting inflation, how that's impacting consumer sentiment, initially, but when you when you think about everything that Home Depot is, which is, for the most part at Home Depot is people doing extra things above and beyond what they typically would. It's not like, like, you don't go to Home Depot to get your groceries, like the regular everyday stuff, you're doing projects doing, you know, additional things. So it means that people are still, you know, consuming those additional entertainment or luxury items. And so recognizing that in the market from a retail mindset that people are still engaged in that type of purchase behavior, but also recognizing that consumer sentiment is continuing to dwindle when high prices are the reality for anything outside of, you know, the normal everyday purchase items.

Paul Daly  13:28  

Yeah, I mean, it there there will be a balanced I still fully haven't reconciled it in my head with with the revenue growth still gets people excited about seeing revenue growth, like Home Depot stocks were I mean, your shares were like up 4% on the news. I still, and maybe just because I'm not as savvy enough economist, but I still don't see how that's exciting news. Right, less people are walking in the door, they're spending more money, but 11% You know, like, whatever, you know, you want to agree with the inflation number is it's around that. Right? Especially if you've tried to buy a piece of plywood, you know, it's a lot more than eight point whatever percent is that. So it's like, I still don't know how this is going to fall out. But you know, we've been we've been beating this drum a little bit over the last couple of weeks talking about affordability becoming a front and center issue. And it is you know, we're just kind of get a pass right now because of supply, but really paying attention to what that is and looking for more ways to save your consumers money, maybe even through partnerships with other local businesses because this is what the retail indicators are all telling us. So we got one more story and this is a fun one because it's about a dear friend. So Automotive News featured. A good friend of mine has been a friend for a long time and a friend of a asotu Greg Ciocca . Senior the Ciocca  automotive or Ciocca dealerships in Lehigh Valley, Pennsylvania, upstate Pennsylvania, New Jersey, and talking about acquisitions and dealer consolidation, keep rolling dealership consolidator. Greg Ciocca  wants to Double his store count to 50 within five years, and he says acquisition opportunities are coming fast and furious in today's Buy Sell market, I can validate that there hasn't been a time where I've been in his office where he hasn't been like, like, I'm getting calls every day with people saying, Hey, would you buy my stores? He just purchased the country's largest highest volume Corvette dealership, I think it's in Atlantic City. And, yeah, and, you know, has multiple purchase agreements in, in inaction. And really the the story behind this story is just one example. Just saying that 2021 was an insane year for acquisitions of the Saudi news article accounted 640 stores over the previous high of 463,

Kyle Mountsier  15:45  

in 2015. That's, yeah, and we knew that and obviously not now, like, everything's kind of falling out and shaking out. But I think we're still seeing that. Most dealers that I talked to, that have over three or four stores, right, are interested in acquisitions. And we know that companies like Lithia, and Asbury, and the and the, and the majors are, are continuing to press into that they've they've stated, it made it known that they're at after consolidation, and after acquisition, but these, you know, these mid level, I mean, you've got, you know, these 2025 30 store groups that are looking to get that 50 to 70 group size, because they recognize the advantage in having a regional impact, you know, creating a brand across the region, and, you know, doing things like what Lithia is doing, and Asbury are doing with these, with these, you know, national brands regionally. And so I think we're just going to continue to see that advance. And, you know, it's interesting, because last year, a lot of the acquisitions were extremely high purchase prices, because all of the sellers were excited about being in a seller's market, right, where, where they were getting all the money for their stores, and I think the money is still going to return still gonna be there long term. But there's a potential during any sort of, you know, this, this, like potential recession that we're, we're headed into in the next six to 12 months, you know, actually lowering the value of these and it being a buyers market. And these buyers that are looking to acquire stores actually acquiring source quicker, because of, you know, an easier access to funds. As the recession hits, interest rates drop again, and all of a sudden you see another wave of this. So I don't think this is going away in the next three to five years, I think we're going to continue to see an acceleration of consolidation. That's a lot of big words in one sentence

Paul Daly  17:36  

and that to say that the article basically says it there's a little map I don't know if we have to throw up if we've already put it up top states, the acquisition, Texas, California, New York, Colorado and Florida in that order the top ones but you can see there's a lot of green on this map. The green is is kind of like third so like you have the Reds most acquisitions, the yellow second most of the green third most so it's pretty spread out across the country. The Publix we didn't have this in the notes, but I think was like nine point something billion that the big Publix spent on consolidation. And the trend seems to be continue continuing and the trend is this. It's get bigger or get out. Yep, most of the acquisitions were actually single store acquisitions, the majority of them which doesn't, right, it's not a surprise. So I mean, if you're, if you're in this mode, like you already know this, right, you have to be bigger and savvier to compete at a broader scale. And, hey, there's a lot of resources and people around you wink wink that will help you do that.

Kyle Mountsier  18:38  

Here's, here's my encouragement is to all of those, especially like mid, mid, you know, small to mid size groups, as you grow, intentionally focus on support at a corporate level in order to drive home the relationship at a local level. And I think that if if those dealership groups those, you know, 15 to 50 store groups can really understand how to how to leverage the support at a at a group level that a group you know, a group with, with scale can do, but leverage it to impact locally and keep that local feel. Those will be the groups that went in the end. It's every my view the

Paul Daly  19:19  

bumper sticker, Kyle, think globally, act locally. It really, it really is it Well, that's it for Tuesday, as if there wasn't enough trouble to be made already. Thanks for spending minutes with us center for the email, asotu.com And check us out all our social media platforms now are kind of on fire.

Transcribed by https://otter.ai