How Retail Did, Credit Unions Crushing Auto, Bowls Full of Chips In Time for CES

December 27, 2022
The ASOTU team is saddled up and ready to ride as we talk about the retail scorecard from Christmas. We also get into auto loan rates, a chip surplus, and all the buzz around this week’s CES in Vegas.
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  • According to Mastercard data, Retail sales increased by 7.6% during the holiday season from November 1 to Christmas Eve
  • Clothing sales rose by 4.4%, while in-store sales increased by 6.8% and online sales increased by 10.6%.
  • Electronic and jewelry sales fell by 5.3% and 5.4%, respectively. The 7.6% increase in sales marked a slower pace than the 8.5% increase in 2021, but was higher than MasterCard's expected 7.1% rate.
  • Restaurant spending increased by 15.1% over the same time period in 2021
  • "This holiday retail season looked different than years past," Steve Sadove, a senior adviser at Mastercard and former CEO of Saks Incorporated, said in a statement. "Retailers discounted heavily but consumers diversified their holiday spending to accommodate rising prices and an appetite for experiences and festive gatherings post-pandemic."

  • Credit unions are crushing conventional auto lenders by almost 2.5% points on average for used cars and over 1.5% points on new according to Q3 data (8.36 to 5.94% /used  and 4.43%, versus banks’ 6.06% / new)
  • Decrease in mortgage lending have made them more aggressive on auto
  • Now occupy 28% of auto lending market up from 20% last year (Experian)
  • Tend to hold the notes rather than sell as bonds which could lead to trouble if defaults see an increase next year

  • Do you see all those stocked electronics? One reason is that chip inventories are swelling as  Semiconductor companies are reducing production plans due to weak demand for electronic gadgets.
  • Highest levels in over a decade
  • “Well above our target level,” said Sanjay Mehrotra, said chief executive of memory maker Micron Technology Inc., on Thursday  as they missed Wall Street earnings projections, gave a subdued outlook and said it would cut about 10% of its workforce.
  • Chipmakers expect the situation to normalize around the middle of next year depending on the next upturn

  • CES in Las Vegas starts on Thursday and will be heavily focused on mobility which includes lots of EV’s
  • Organizers are expecting over 100k attendees
  • Will feature approximately 275 mobility-related companies are expected to attend CES as of December 15, and they have booked around 400,000 square feet of event space, which is 20% of the total space available at the show
  • BMW and Stellantis will unveil EV concepts and that Bosch will bring e-bikes, while aviation companies Ryse Aero Technologies and Aska

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Paul Daly: 0:22Holy schnikeys What happened? December 27. Y'all Tuesday, there's not a lot of traffic on the roads. We have a lot to talk about retail credit unions, chips, CES and the best Christmas presents we've ever gotten. The people really assert their true and true form. Kyle, you and I got matching Christmas presents that that may top. I mean, they met probably on my top 10 All Time list.

Kyle Mountsier: 0:51

It's unbelievable. These are these are the greatest these are the girl hold

Paul Daly: 0:55

up the one side so I'm gonna hold up those the word side you hold that the favorite side. So so there we go. Kyle's is a picture of the front of it. You can't see because my autofocus but it says I was in automotive news. And on the back of it. My ring is the picture. On the back of it is a picture of Eugene fields, the new president of named mad and flanking him. To the left to the right, are the back three quarter profile of Kyle and myself. And so at the front of it, I was on automotive news. I'm gonna keep this mug my knee was in automotive news. You were in automotive news TWICE, TWICE. back your head. Next year, you're gonna get your elbow in. It's gonna be nuts. Let me let me give. Let's give you a little a little peek into the mind of a soda world Automotive News. If we were you. We would make these mugs that say I was in automotive news. And then on the back every time someone's in automotive news, a little graphic. And he would like do you want to buy this mug that you were in automotive news? That's how we would do that. And if you don't do it, we will

Kyle Mountsier: 2:00

we actually we actually going to do it for you. We're going to everyone that's in automotive news. We're going to make them a mug saying automotive.

Paul Daly: 2:09

Yeah. Everybody knows you weren't on Sodor because it's the only other point. We hope you had an amazing break. For us. It was definitely an unusual time where we pre recorded a show or two and we were just saying we haven't heard that intro music in like three or four days. Five days. I don't know it feels really weird. And I feel distanced. Just good to be back.

Kyle Mountsier: 2:29

It feels weird. Like Amanda yesterday, she was at like 10 o'clock in the morning. She was like, are you okay? I was like What do you mean? She goes, You didn't do a pod this morning.

Paul Daly: 2:39

And it's Monday. And it's even. Actually,

Kyle Mountsier: 2:42

yesterday was the first week day since we started this podcast that we did not run a pod is that wild as the first weekday because last year, we pre recorded Christmas Eve which was on a Friday. Yep. Saturday was Christmas. And so by Monday we're back in it back and hitting it pretty wild. Well, that won't happen again for seven years.

Paul Daly: 3:05

But but apparently a lot of news kept going on while we were gone. Yeah, like

Kyle Mountsier: 3:10

four stories today. And we there's like five that I was like, oh you cover that we cover that we'd cover that we just

Paul Daly: 3:16

Yeah, but that's alright. It's good that the news keeps happening. But there wasn't anything like crazy or monumental. We did have a blast in Nashville the year and extravaganza we're going to rerun that show. Um, if you haven't seen it, it was literally Sara's. I think you went I was like It exceeded my expectations and that's hard to do. That is hard to do. But I mean if you want to watch a just an incredibly fun show. It's under two hours and it's like Jimmy Fallon show tonight show we have a live band. We have all these guests. We have a game show that is just outrageous where we get like Liza Borges and Daymond les or Alex Vetter. Scott Simon's up there, Kyle and I lead a team. It's like when loser draw Pictionary, Michael Cirillo hosted? And do you want to see the best drawings that you've ever seen in your life?

Kyle Mountsier: 4:00

Here sarcastically because like, we had a ton of fun, and there was entertainment and enjoyment and games, but I had a friend pull me over afterwards that lives in Nashville, that's an automotive and he goes, You know, this is crazy. Like that was a ton of fun. But I got a ton out of it. Like the actual insights, the conversations that were had the little Fast Five to seven minute conversations are actually super insightful and actually lead to real business results. So we mixed

Paul Daly: 4:27

it all together. My wife was inspired afterwards by one because she was there in the live studio audience with with a probably about 50 other people. And some of the people and some of those interviews. She was really inspired about the way they care about their folks like Scott Simon's and they're mentoring it like she was just inspired by it. So we talked about some real information, some real plans, had some real fun, had really great band had a real monologue and yeah, you should check it out. The best way to check it out. I don't know is it up on the website? If you go to YouTube or YouTube channel?

Kyle Mountsier: 4:56

Yeah, if you go actually to the website, scroll down a little bit and hit that it'll take you to the page where you can rewatch it right on YouTube. Yeah, dog, high res version,

Paul Daly: 5:04

high res version. Got a lot of stuff coming up nada asoto X events are starting to shape up. But let's talk about news because been going on this long enough. Speaking of the news, alright, we'll just stop right there. According How did Christmas go? That's the question, right? According to MasterCard data, retail sales increased by 7.6%. During the holiday season from November 1 to Christmas Eve. Well, here's a couple of Asterix, right? So put a pin in that right, like, sales are up by 7.6%. We know inflation is up too. So like, is it really an increase, but let's break it down a little bit. clothing sales rose by four and a half percent right. So that's less than pacing inflation, while in store sales increased by 6.8%. And online sales increased by 10%. So more online than in store, electronic and jewelry sales actually fell by 5.3 and 5.4%, respectively. Yeah, so less electronics, less jewelry. So here's the here's the kicker restaurant spending up by 15.1%. Over the same time period, in 2021, we have a quote, and then we'll break it down. The holiday retail season looked different than years past Steve said. So Adobe, a senior advisor, MasterCard, and former CEO of Saks Incorporated, so he's got something to say about it, retailers discounted heavily, but consumers diversified their holiday spending to accommodate rising prices, and an appetite for experiences and festive gatherings post pandemic,

Kyle Mountsier: 6:25

you know, 100% I think, you know, the fact that restaurants are up the fat, you know, because you just think about it, like, last year, automotive was was all back and ready to go and like wasn't what but from a retail perspective, from a from just like an overall pandemic feeling. 2021 still had a lot of that going on, right? I mean, I remember. I mean, January of this year, there was a height, you know, a heightened COVID awareness. And so like, you know, you just think like that last year, people were still not gathering still not going out to restaurants like they were in the past. And so this was kind of the first year where I think it was just through and through, everybody was like, Let's get together. Let's be together. So that experiential nature. I mean, just a couple of things. I was running, reading the news this morning, a lot of people saying, hey, look, all the weather combined couldn't impact our travel, there was still a ton of travel, even though there were a ton of shutdown flights over there worse. Even Even I saw a stat where the the spending, outpaced in the inflation percentage by about a point and a half. So even though you know, spending is up due to inflation due to cost of goods, it's still outpaced in actual inflation increased by about a point and a half. So there's just a lot I just see consumer behavior, outside of homes outside of homes, still continuing to drive and have a ton of demand in the market. And a lot of these numbers prove that and prove it toward experience.

Paul Daly: 8:00

You know, I have a little bit of a different take on, on where that's heading. I have my my guts telling me this is kind of that last hurrah, spinning, just like like you know, you're going on a diet next week. What are you doing? I'm eating pizza and cheeseburgers every night. But we'll see what happens. So we got a few more retail oriented things that we were in the electronic stores, I got a little anecdotal story I was in Best Buy. And we were returning some headphones that were they just were broken, right? We exchanged it for a different pair. And my wife was like, you want to go to return these today? And I'm like, oh, man, it's gonna be a madhouse, right, the day after Christmas is when everybody goes and gets the stuff they actually wanted. Right? Let me turn the stuff that they actually got. And it wasn't crazy. We went in Best Buy. We were in and out of the return line in like, three minutes. Wow. And I've never seen that in my life. Right. And so like, you know, this is just kind of, we're gonna go out of order in the stories for a second the way they are in the show notes. But you know, I also noticed some very, very stark differences in what I saw last year. One of those is the Sonos. The Sonos, like speakers, right? The Home Entertainment speakers and holy dude, they were stocked like crazy. There's like 20, subwoofers, and all these units, and I was trying to buy some Sonos stuff last year, and it was all backordered. And you couldn't get it because of, you know, Chip shortage and everything. So speaking of chip shortages,

Kyle Mountsier: 9:24

or lack thereof, or lack thereof,

Paul Daly: 9:26

did you see all the stacked electronics I did? One of the reasons is that chip inventories are swelling as semiconductor companies are reducing production plans due to weak demand for electronic gadgets. All these stories dropped at the same time. So like the retail data shows that buying less stuff, Chip chip manufacturers like hey, we got piles of chips, all of a sudden, they're at the highest supply levels at over a decade. I was like, what kind of world are we living in?

Kyle Mountsier: 9:51

Yeah, I just like it. And still I drive past Kentucky and we got cars on cars on cars, so I don't know where to go. On I mean, chips chips historically, like they have been focused on consumer electronics. Oh, yeah. Right. So that's, that's where they came back first. That's where they put the into so they wasn't focused on automotive. So I get it. But man, I still wish I had Bose speakers in my Mazda CX 30.

Paul Daly: 10:17

Well, they're according to Sanjay, homeboy, Mei Mei Rhoda Morona Sanjay Mehrotra, they are well above the target level, he's the chief executive of the Memory Maker micron technologies who we covered is building this huge manufacturing plant here in Syracuse, where I'm at, you know, they missed their Wall Street earnings. And he said, they're gonna be cutting 10% of their workforce, they expect the situation maybe to regulate mid next year, but they have to see where demand goes. So talk about that crazy ebb and flow of microchips. Hopefully they get into the vehicles. The store we have linked up also talks about like Nvidia and graphics cards and even rolling slow rolling new technology so that they can burn through some of the chip supply they have. So it's crazy to watch things ebb and flow and go back and forth. Speaking of ebbing and flowing though. All right. This is like specifically related to auto in a very real and tangible way. Credit unions are crushing conventional auto loans by a huge margin, almost two and a half percent, better rates on used cars and a point and a half better on new car. So like the average US car rate right now is 8.36%. Credit Union rates only 5.94. So I mean, this, this is going to be a thing, right? Like dealers leaning into credit. It's

Kyle Mountsier: 11:39

a big thing I'm hearing like I have I've actually talked to over the past couple weeks a couple of dealers, they're basically they're going to their their captive lender, you know, so they're whoever their captive lender is meaning the lender that supplies the vehicles right Toyota Financial, you know, Mazda financial, what Ford Ford Motor Credit. Yeah, so all of those are kind of like the primary and then the secondary is, is these credit unions just because they're keeping rates low. And the reason being is because there's decreased mortgage lending. So they're going all in and more and more aggressive on auto money, they need to lend it, they gotta lend it. And because they they hold these notes, instead of selling us instead of selling them as bonds, they can keep control of the interest rates, because they're not playing in the market as much they're playing with kind of like, it's not house money, but it's it's the the house money, right? So they're not selling these loans off, or selling them as bonds. But that also presents a problem if for some reason, there's defaults over the next year how you know, but in the same breath, for better or worse, right in the same breath, like credit unions are slower to lend. And they typically lend to more of a prime or near prime buyer. And that's, that's a lot of times why you see the lower rates there as as an average anyways. But it does occupied 28% of auto lending up from 20%. Last year. So there's obviously an increased focus on credit union lending, probably both from dealers and consumers at this

Paul Daly: 13:06

point. So what is kind of when, when a dealer, when do dealers have relationships directly with credit unions where they sign people up, because here's the difference. If you're not aware of this credit union, you have to be a member of the credit union in order to borrow from it. So you have to have an account, open checking savings account, whatever, because a credit union is is a not for profit, basically, it's owned by the members. So there's not profit at the end of the year, they really distribute any what would be profits back in the form of lower rates. So which is why the rates are low, there is no profit and no federal income tax. Right. So they pass all that savings back. So is it easier, Kyle harder? You've worked in f&i Like is it easier or harder to do business with a credit union or about the same?

Kyle Mountsier: 13:49

So it's a little tougher, a lot of times because credit unions have like specific lending guidelines like where you can live, where you can work where you can, you know, where you can go to church kind of are the the main three, or who you've worked for in the past. So like USAA, or Penn fed being a credit union, but mostly credit unions either have direct lending relationships, so they actually are in route one or Dealertrack. Simply like, for instance, a seven federal credit union is a local credit union in Tennessee. And all that would happen was was that the the, the customer would take $25 for the down payment, and start their their checking account or their membership with the credit union, they could just let that sit forever, and then they'd be a credit union member and be able to lend from that credit union. Across the country. A lot of especially in the South. Credit unions use a service called kudle.

Paul Daly: 14:43

Because I don't like CUDD le zu de l.

Kyle Mountsier: 14:48

So essentially, like the route one or dealer tracks to the lending service, the middle person, between the dealer and like hundreds of credit unions, where you can go in submit get everything proved all of your all of your lending final decisions as well as all your billing decisions and and deal flow go right through there. So, yeah, there's a ton of direct lending relationships with with those banks in there they more come on board all the time. So there you go. I mean, always looking for the angles. That's a real and present thing. Interest rates, affordability,

Paul Daly: 15:23

credit unions. What's better community, the credit union, right? Well, your friends and neighbors borrow the same money from each other. Probably even better, even better from each other as long as you as long as you don't default, because then it gets, then they can't get right out. I would say speaking of getting kicked out, but I would love to, but you know, except the story on fact, fun automotive fact. Yeah, we're talking about Consumer Electronics Show in Las Vegas that starts this Thursday. 100,000 people descend on the convention center that we in automotive, know and love very much because it's where exact same place we have the na da show. But the reason we don't have the NADA show there at the same time, every month, is because CES has it every year. So there's a little bit of a like they get first dibs, which is why we have to move at some time if you didn't know that. It's the truth. But either way, it's starting this Thursday, in Las Vegas, 100,000 people there and get this. They're featuring 275 Mobility related companies. And they booked 400,000 square feet of convention space between those two interns will be five companies. It's actually 20% of the entire show.

Kyle Mountsier: 16:35

I thought that's a big deal.

Paul Daly: 16:37

It's CES, the biggest show in Vegas. Like I think that I would think it would be I think it is. So this is like the biggest conference of the place that has the biggest conferences, and 20% of the overall spaces dedicated

Kyle Mountsier: 16:49

on mobility related. You know, I asked the question last week of Steve Greenfield like, why is he covering so much alternate mobility, mobility, and just the reality that he stayed in and I think that a lot of auto dealers are paying attention to is hey, look, if if mobility has looked like auto for so long, is what what does future mobility look like? And are Am I aware of those spaces? Is there a franchise opportunity there? Is there a retailing opportunity there? And so paying attention to this type of stuff and I mean suit, there's a ton of OEMs that show up to places like this I mean, BMW and stay Atlantis are unveiling Evie concepts. You got E bikes out there. Vertical TakeOff and Landing. I

Paul Daly: 17:31

want to see one of those so bad dude, I want to see I wish I wish one of those companies would come to nada and just, I just want to see things just take off and land. Like, you know, that would be the hotness of that happened. We'll get there soon. Just just that, uh, I really didn't see what it'll

Kyle Mountsier: 17:46

happen. It'll happen. It'll be fun. And ADA. Someday we'll be we'll have we'll have all the fun stuff. But until then you can get

Paul Daly: 17:52

some stuff. Yeah, you have some other fun stuff. I will say, You know what, it's funny talking about mobility and CES. bringing me back to my Best Buy trip yesterday. They had a full rack of E bikes, like the cool Wally like the Super 73 by sports. The ones I've only seen like on Instagram, if look it up super 73 it is ridiculous. ebike it's like a little motorcycle, big fat tires. You know they had so they had like two and $3,000 e bikes lined up on a rack. I had never seen them all it only seen on TV. But Best Buy because this really speaks to how electrification is bringing automotive into pop culture in a way. That hasn't been the case since like the 70s. So lots of opportunity. I think a lot of opportunity for dealers and automotive like you just said kind of like let's start thinking around mobility a little bit more. There's probably some retail opportunity. I gotta say, Man, those bikes were freaking amazing. So if if bison dealership i

Kyle Mountsier: 18:50

Why can't we let's go.

Paul Daly: 18:52

That's right. That's right. Hey, on the fringes of the CES, a Dutch company that makes a solar powered Evie right like why can't we power it with the sun? Well, in upstate New York, we understand why we can't because there is none three months out of the year. But they're gonna showcase their second generation vehicle. This company is called lightyear and says they can have 500 mile range in a solar powered Evie. In a car that costs less than $40,000 My guess is you can only fit like one or two people in please don't

Kyle Mountsier: 19:18

batteries and solar panels. Ally that thing's gotta be 8000 pounds unbelievable.

Paul Daly: 19:28

Either way, it is good to be back with you today. Got a lot of work to do in this final week of the year. Yes Here we go. And by the way if you need us a gift idea for Kyle and I the I was in automotive news mug is a big hit. We'll see you tomorrow

Unknown: 19:53


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