What will Dealers do when Invoice and MSRP are identical?
Honda offering CPO warranty program for vehicles up to 100k miles
Airlines struggle to keep up with staffing and scheduling as the summer opens up
Get the ASOTU Daily Push Back email at https://www.asotu.com/
Listen to other episodes: https://www.asotu.com/media/podcasts
Read the most recent Daily Push Back email at: https://www.asotu.com/media/push-back-email
Share positive dealer stories: https://www.asotu.com/positivity
Paul Daly 0:23
Yo, it's Monday again. It is Monday, April 18. I hope everyone had a great Easter weekend. We got things firing up hardcore. We're gonna make some real trouble this week, Kyle, I have Real Trouble
Kyle Mountsier 0:39
I am. This is all I'm feeling right now is Vegas. When someone started the trouble, champ, I think it was right when kerri wise speaking it was like treble, treble, treble. And it's the best kind. And we're gonna get into some trouble some good trouble this week. So excited about that,
Paul Daly 1:01
for sure. You know, you and I actually had a conversation on Friday about how much trouble should we get in? We've never had this conversation before. I've never been in a position we're like, how far do we go into the trouble before it's, it's disruptive. It's too disruptive. Yeah. And so I think the next 90 days is going to be a little bit of an essence of that. But one thing is for sure, that trouble is upon us either way.
Kyle Mountsier 1:28
Either way, but okay. It's exciting. It's exciting. It's exciting.
Paul Daly 1:33
And hey, this is where this is where the players step up. So we may or may not have had an opportunity to see an invoice which we cannot verify, right? So we're not approaching this as like, this is 100% truth. But we think it's important to talk to you. So we saw a picture of an invoice from a manufacturer. And you know, like, you know, how invoices look for a particular vehicle, and it has the invoice price, and it has the much debated MSRP price on it. And there's a gap between the two. And then there's like, you know, all the questions that go in between what is the MSRP really mean, should dealer sell for over MSRP. But the interesting thing about this particular invoice is that it was for an Eevee and the MSRP. And the invoice number were the same. identical, the same as in identical. And, and we were like, if this is real? If this is real, okay, and impact cations
Kyle Mountsier 2:38
implications. Let's, let's see if we can list just a couple few. You're like,
Paul Daly 2:46
Hold on, let me get my long piece of paper over here. Yeah, now we're gonna need we're gonna need digital for this. Yeah.
Kyle Mountsier 2:53
We're gonna need any type in for a hot minute. major implications, obviously, its margins. What are the margins look like? Are we Is this a, you know, just a Smith type deal? Like you get you get something for selling the car? Right? Or? So? What are their margins? Is there a way to make margin? And is it more than just the salespersons? Commission? And then I think the second layer of that is, is like the question that everybody's asking, Are we just delivery centers?
Paul Daly 3:23
When we started to put the pieces together? And I can't remember how long ago it was. But I think it was Ford that came out. And they came out with saying, like, you can't sell over MSRP was it for the new Lightning?
Kyle Mountsier 3:36
Lightning? Yep. And yeah, that they were gonna take away your lightning allocation if you were caught.
Paul Daly 3:43
Right? So like elements of control to not sell over MSRP. Right. And then then you know, it, you know, the invoice we saw, actually, it wasn't forward. So I can tell you that. I don't know. Again, we don't even know if it was real or not, we're gonna find out but either way. Like, you start to see the squeeze going on. And you start to see the implications, like, from the dealer perspective, from a consumer perspective, from a consumer perspective, right? Consumers want to know what the vehicle cost. Consumers don't want the questioning, they don't want the wiggle room in there. Right. So the implication for the consumer, you have some very clear and direct pricing, right, which is why, you know, people have celebrated Tesla and Apple, right and Carvana This is the price even though that's a used car, but consumers are like, I want to know the price. And I don't want to feel like I'm being jerked around.
Kyle Mountsier 4:31
Yep. You know, I, this is this is always a struggle for me, wondering what consumers actually want out of the buying process. You know, and I think that sometimes we overstep that and we say consumers don't actually want the wiggle room. They don't want the in between they don't. What that says is they don't want market competition. And what's interesting to me is that, like, if you take apple which I know is a completely diff In sales model it is, you know, it's high trade cycle management and you know newness and freshness all the time. But I know, friends that literally every year or two years will switch providers completely, in order to get the free upgrade phone, because T Mobile is doing it, and then Verizon is doing it. And then target is running a $50 off. And so now and then, but I'm gonna go to Best Buy now, because 100 They're getting the gift card for the trading. Right? So like, I think that consumer sentiment is we want to feel like we win. Because the minute that we don't, it's like, the reason why Amazon puts on all of their Apple products MSRP scratch out and then the next line under is what they're selling it for, even though it's slightly higher than the Apple Store, is because there's an there's a mentality that says, like, there was some room for me to win there. Yeah. And so I think what really customers want is they just want, they want confidence that what they're buying when they're buying it is right priced. And I wonder if this actually loses the dealer's ability to localize that confidence, instead of like, being labeled under a global strategy for pricing. And I just don't know if consumer sentiment is going to actually enjoy that the way the OEMs believe it might.
Paul Daly 6:25
Well put it out there, we'll see. I mean, you know, from a consumer, you know, everyone's trying to pursue what the competitive landscape is, from a consumer pricing standpoint, from a brand experience standpoint, from a purchasing and buying process standpoint, right? Obviously, that's the OEMs best interest in play, to say like, Hey, how can we get our arms around more control EVs obviously a very rare portion in time, where you couple that with supply shortages, right? Where they have an inordinate amount of control right now. So you know, they're trying to make their move, and do what they can. The question is on the dealer side, so the question we're all asking is like, Where does the where does the margin come from? Where does the revenue come from? What do I have to do to get it? And what is the future look like? If, if the MSRP and invoice are going to be the same? If my inventory allocation is going to be controlled by the OEM? What if the vehicle is actually ordered on the OEMs? website? And then what does the delivery process look like? Like? Am I going to have inventory on my lot? Am I going to be the one deliver it? Are you going to be the one to deliver it? And all of a sudden, like thinking about what that means for the industry is going to be upon us, we have reason to believe and over the next 90 days, I'm there gonna be a slew of announcements that are going to, you know, who knows which way this one's gonna go?
Kyle Mountsier 7:40
Can you think of another I'm trying to wrack my brain? As you're speaking? Like, can you think of another vertical, that the wholesale and retail price are the same thing? I'm trying to think of another vertical, I can't think of a single other vertical where wholesale and retail are exactly the same. There's always margin for the end seller, it doesn't matter matter whether you're in rest of the restaurant business, the you know, technology business it, I can't I mean, the only thing lending business, everything.
Paul Daly 8:11
The only other industry, I think it could be, you know, particularly similar would be like mattresses, some furniture, right? Like giving, giving furniture away to, like, get financing. And you know what I mean? The manufacturer saying we'll give you money, I don't know, I'm just assuming, because that's a very similar business. Right? Think of things.
Kyle Mountsier 8:32
I mean, I mean, you got the warehouse direct to consumer model that's come up with things like purple. And, you know, it's yes, similar to a Tesla disrupter in that industry. So, okay, so that's maybe, you know, a similar industry that seen a direct to consumer model. But, you know, the, the the legacy OEMs in that, in that industry still have not switched over to that direct to consumer model. They're still going by the franchise, wholesaling model, although I don't know maybe that industry is starting to see that that same level of disruption to you know, Sleep Number kind of made all their sleep Sleep Number stores, so Yeah, interesting. Very interesting to say the least I just, I don't see another franchise model out there. That is following the same suit. So I just don't know
Paul Daly 9:17
more of the same, right, more of the same automotive not having something to look at to say, how is this gonna go? Thanks for dropping in? And he says, Man, it feels heavy. On this Monday morning. It does feel heavy. I think it feels a little too. For this Monday morning to I mean, like, look, we've been thinking about this and talking about it all weekend long. We want to kick it off. But look, that doesn't mean we don't want that to be misconstrued as its dire. The world is overviewing one thing Yeah, nothing I know about auto dealers. And one thing I know about the most successful people I know is that they don't spend a lot of time complaining about what's fair or not. And especially on tax day, right? Like you spent all the rules change this way. That's not fair. No, you know what they do? They actually assess the situation. They make their Next best move. And they keep going so quickly. And they talked about always
Kyle Mountsier 10:04
seem to win. We talked about last week of figuring out how to become you know, a recurring revenue model and figure out how to work work that for your dealership not just like lean on the OEMs recurring revenue model. But what what other places can you invest time and resources in figuring out new ways to find revenue?
Paul Daly 10:23
Yeah, I think one of those areas is pre owned inventory and pre owned inventory. I think we need a little MC Hammer on Monday morning. This this came out probably like a week or so ago but Honda offering a new service expanding their certified pre owned offering something called Honda true. It's funny when I searched Honda true 10 years, right? Because they're one of these things like this are 100,000 100,000 mile cars. Guess what the second result was that came up I can't remember exactly what I searched to duplicate. It was our friends at Mohawk Honda's website. High five for the SEO there it was organic second organic reach no one's advertising on it, by the way. So now Honda has expanded its CPO program, saying there are now three tiers in the hondatrue program. And they say like this is a market share and a brand loyalty plan. They say 53% of certified pre owned customers are new to the brand, right. So half more than half of the people who buy a certified pre owned Honda are new to Honda, and 42% of those buyers return to buy a new Honda. So in this program, Honda is now expanding cars up to 100,000 miles. And you know, Honda's like great reliability. They're saying there's good life in there. And they're giving some guarantees when you buy that car. Obviously, it's not like a massive warranty. But they're like you can drive away with confidence that nothing's gonna go wrong or break in this early period of your ownership. And I'm a big fan. Person. That's,
Kyle Mountsier 11:55
that's some nut stats. When you think about, you know, I had a lot of these conversations last fall when we started to see dramatic downturn in new car sales dramatic uptick in use car sales, and how are we how are we as dealers and manufacturers going to like operate in this new pre owned market in terms of retention and Honda saying, Hey, look over here, CPO drives retention to new cars. So when things like new car inventory start to come back, if you've done a good job selling into your certified pre owned pipeline, you have a real a lot higher chance of 42% Chance instead of a 3% chance on on pre owned vehicles that we're seeing into this year of retention happening. I'll take the almost 40% Bump,
Paul Daly 12:39
for sure. You know, I liked one quote from the article that he said, Really, it's this lifecycle marketing. It's this lifecycle brand strategy. He says we're trying to build a relationship this is Dan Rodriguez, who leads auto remarketing for American Honda says we're trying to build a relationship that lasts a lifetime we look at it this way to bring young buyers in through Honda true used, right. So like the lower price entry level vehicle, graduate them to a like a true certified pre owned, which is a little bit of a newer car, and then eventually move them into a new car. I think that is really smart usage and leverage of a warranty program on vehicles they know they can rely on and you know what this does, it keeps the inventory in the Honda dealer slot, right, it keeps it it incentivizes it to not get, you know, a buyer to not get it from Carvanha or a non OEM, you know, third party use car retailer like think is pretty smart play.
Kyle Mountsier 13:36
Yep, you know, so I'm really close, obviously to monster with my time there. And they, they they started the strategy but then laid off of it and I don't know why but they started like they had this whole segment analysis thing theme within there. And I'll say Subaru does this really well, but all of their creative across their segments was dedicated to graduating people into new model lines in the in the in the make, right so essentially they would start someone in and all of the creative was for a Mazda three was around like an entry level a young person and you know, graduating college student all of that type of stuff. And then the all of the creative lead through like the family to the midlife crisis to the to the holder. It was really a wild trend. And I think if they could have leaned into that for a longer time, they would have seen similar to what I'm seeing right now. But I do think that thinking about your segments in those in those and then like drawing CPOE up under that is really a useful tactic.
Paul Daly 14:40
You know, one of the things we've been talking about in strategy longterm even as we're talking about EVs, and we're just like, just be the authority in a space right be the authority in the Evie space and this CPO thing right? This is obviously going to take a little bit to translate into EVs, right because we don't have them yet. But now's the time to lay the ground. to work, now's the time to lay the groundwork understanding your Evie CPL game or just the US Evie game. Right? It's battery life not mileage. It's you know, technology driven, and not necessarily, you know, mechanically driven. So look, this is Honda Making Moves. I think they're they're seen over the horizon. I think this is a really smart play as a brand marketer, right? I think it's brilliant. How do you how do you serve people over the course of their lifecycle, and you know, what a dealer is going to do with I mean, you could still sell an aftermarket warranty if you're a Honda dealer, right? In my opinion is like lean all the way into this sucker. You got manufacturer working hard to give you a value added value proposition, do it. I wouldn't be surprised if we see some more manufacturers leaning into this, like you said some already are. But I mean, it kind of ties together with the Eevee game right? If you're going to kill the margins on a new car sale, right, what are you going to try to leverage your dealer network to do move CPOs Exactly. Musi FiOS
Kyle Mountsier 15:57
Hey, when I saw this this morning, and Steve greenfields, he has a weekly kind of update. But that their their fund has recently been a part of an investment round for a company called recurrent auto, all that. And so just I'm thinking along the Eevee lines in educating yourself and being able to educate your customers, but this company provides battery reports for pre owned Evie vehicles. So recurrent auto.com, you might want to check it out. If you're a dealer trying to lean into the Eevee market, especially on the pre owned side.
Paul Daly 16:28
People it's funny because this tool solves a really great problem. Because everyone is anyone who's ever bought a used iPhone or used device. Know, I want us or laptop. I want to see that screenshot that shows battery efficiency life, right? It's an apple metric built in that shows you like hey, this is about where the battery is in its overall health. So all coming together. It's all coming together. Kyle, we got one more story for you. I think with the kick off of summer travel season, and there are also a lot of auto conferences kicking off right. There's a lot of things going on. By the way. We're going to be in Tampa on May 9 We're going to be releasing tickets for our family reunion soon. We should have said that at the beginning we didn't but either way. Airlines are having a heck of a time keeping up with staffing and scheduling flights booked flights are way up JetBlue is actually reducing flights to keep up even after hiring 3000 workers
Kyle Mountsier 17:23
I can tell you this just a couple Google Flights searches last week on travel
Paul Daly 17:29
because we started looking like look do what thing it's Record scratch moment. Like how much for what that's that's that's the only flight I have available right like it's a
Kyle Mountsier 17:41
nonstop to Tampa from Nashville. Are you kidding me? Yeah, so it's real.
Paul Daly 17:45
It's right. And so like this is the time when people are doing a lot of strange things to try to like or not strange but a lot of unprecedented things to try to keep their staff engaged. JetBlue is offering flight attendants $1,000 to not call out. Wow. Like that. If you don't call out between now and May 31. We'll give you 1000 bucks.
Kyle Mountsier 18:05
There you go. Smart.
Paul Daly 18:08
Southwest is doing some stuff. They raised their starting wages to $17 an hour I wonder what they were because every sign around me is like Dunkin Donuts is 17 an hour. No law and no longer requires most airport workers that have a high school diploma 15 to 20% of new hires don't show up on their first day for some roles the airline exactly the same so wait a minute, so almost one out of five people you hire just don't show up. This is real
Kyle Mountsier 18:31
I remember that in dealership world Same exact thing. It's crazy. It's a whole new it's just like the last two years have been so weird for hiring so weird.
Paul Daly 18:39
Yep. Quote from Tim Donohue co founder of air ology a startup that works to predict flight disruption says the operation staffing will be on a razor's edge. And the razor's edge barely works when things go as scheduled. So if you're traveling this summer, just be prepared to be a little patient. But I think this is just again, indicative of the fact that the environment is upside down. It's like no, like it never was before. But I am encouraged. And I think we both are encouraged that people are back on planes, they're pushing hard. So it's like, that's the indicator that life is moving back toward normalcy even more, and I think that'll be good for everybody.
Kyle Mountsier 19:17
The world's still flipping so get in while the getting's good,
Paul Daly 19:20
that's good. So hey, sorry, if we started off a little slow for your money, but don't let it fool you. We're ready to rock and roll ready to throw punches, ready to make a little bit of trouble. And we will see you here tomorrow morning. But until then, we got a lot of stuff to put out. So let's go
Transcribed by https://otter.ai