Slasher Honda, Mini-Lambo, AI Power Grid Probs

March 25, 2024
It’s the last week in March as we head toward our 5th Friday and 5th Saturday. On our way, we’re covering Honda’s unilateral cut to Dealer profit margins plus BYD's 10k ‘Mini Lambo”, as well as another impending anchor on the power grid. 
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Show Notes with links:

In a move in their shift towards electric vehicles, Honda is cutting dealer profit margins in both the U.S. and Canada, triggering significant industry backlash. some text

  • Honda announced they will reduce dealership profit margins on new vehicles in the U.S. by 0.5 percent and up to 44 percent in Canada as part of a broader adjustment strategy affecting marketing, advertising, and service payments.
  • The decision has stirred pushback among Honda dealers. U.S. dealers describe the margin cut as "inappropriate but not surprising," reflecting the hefty investments required for the EV transition. 
  • Canadian dealers, facing more severe cuts, label the move a "blatant money grab," anticipating a shift of financial burden onto consumers.
  • The reduction is expected to impact dealerships' bottom lines, with U.S. dealers particularly worried about smaller operations. Brian Kanyan, chair of the Honda National Dealer Advisory Board, emphasized the need for dealers to adapt, expressing hope for Honda's support in adjustment efforts.
  • As dealers brace for reduced profits, there's speculation about potential price hikes for consumers. In Canada, dealers are reportedly considering charging additional administrative fees to offset losses, a move that could provoke legal challenges based on franchise laws.

BYD is launching the Seagull EV, dubbed the "Lamborghini mini," which features  BYD’s Blade batteries and offers a range of up to 252 miles,  that is priced under $10,000, raising concerns among American car manufacturers about their ability to compete on price and innovation.some text

  • Ford and GM are adjusting their strategies towards more affordable EVs. Ford is focusing on compact electric pickups and SUVs, and GM is planning to introduce a next-gen Chevy Bolt EV.
  • BYD’s aggressive pricing and integrated manufacturing approach are underscoring a broader industry trend towards lower-cost EVs, compelling American manufacturers to innovate or risk losing significant market share.
  • Ford CEO, Jim Farley called the vehicle “pretty damn good” and continued, “If we fail to keep up with Chinese automakers, like BYD, then 20% to 30% of your revenue is at risk... As the CEO of a company that had trouble competing with the Japanese and the South Koreans, we have to fix this problem.”

The rapid expansion of AI data centers across the United States is triggering concerns that the national power grid may not withstand the surge in electricity demand. some text

  • AI data centers are requiring exponentially more power than their predecessors
  • States like Oregon’s Portland General Electric has  doubled their demand forecast for the next 5 years and and Georgia is looking at a 17x increase in their industrial power forecast
  • Beyond AI data centers, the U.S. is seeing an increase in factory investments and crypto mining operations, all contributing to the strain on an already aging power grid.
  • The quest for cheap and abundant electricity by tech giants is raising alarms about potential setbacks in achieving climate change goals, prompting states to consider new gas-fired power plants as a temporary solution.
  • Bill Gates at a recent energy conference, pointed out that finding adequate power sources for data centers is the top constraint to AI development.

Paul J Daly: 0:17

Good morning. It is Monday March 25. We still have our fifth Friday and fifth Saturday ahead of us. Today we're talking about slasher Hyundai. Oh, slash your Honda a mini Lambo AI power grid problems that mess up my whole flow. good about it. I

Kyle Mountsier: 0:38

think you expected the word slasher and Hyundai to be together. Yeah, yeah. More.

Paul J Daly: 0:43

Yeah. You know, so

Kyle Mountsier: 0:46

it'll be okay. You'll be

Paul J Daly: 0:47

that's sometimes I think about what it takes to be this enthusiastic all the time.

Kyle Mountsier: 0:53

You know what it takes it takes that drum beat on the intro that most of the podcast people don't ever actually get to listen to because it's our little countdown for our live but it's like yeah, tick Attack, attack, attack attack attack. And yeah,

Paul J Daly: 1:05

you know, we've had we've definitely had a lot of comments on the countdowns like, whenever we do our webinars, like a lot of times like our partners on the Webinars are like you guys really like go hard on you go hard on countdowns, we need it. We need it because it's Monday or it's a webinar and we need to get in the right mind space, but also kind of like really being passionate about what you do helps about helps about that a little bit. Yep, exactly. Paul,

Kyle Mountsier: 1:27

listen to this. I realized this. You wrote it all in the show notes. I don't know if you saw this. It's a week where there's a fifth Friday, a fifth Saturday, and there's 50 days. left till ASOTU CON. But the fives talking about today. Yes. 555.

Paul J Daly: 1:50

Strangely enough, number five is Gary Vaynerchuk. Favorite number. Well, we're going to be at the VaynerMedia headquarters tomorrow. Me you our Nathan, we're going to be at Vayner HQ. Maybe we'll run into Gary. But we are going to be interviewing we'll get Dara New York Times bestselling author of unreasonable hospitality is our keynote speaker at a soda concert. We're going there. We're gonna sit down. We're gonna do a podcast we're gonna talk about hospitality in I don't know, we're gonna ask him yet. But I'm sure we'll ask about automotive, he never know

Kyle Mountsier: 2:19

what we're going to ask him. But I can tell you this. This is one of those like, I've kind of like deja ramped in my mind, like how the conversation is gonna go, I think it's just gonna be a really, really good conversation. Not like we're not preparing anything. This is a heart of ours. And it's a heart of his and so I think we're just gonna meet somewhere and just be some guys hanging out talking about what it means to do this in the auto industry and across other verticals.

Paul J Daly: 2:44

Well, if we're imagining how the interview is gonna go, I imagine at the end, he's like, You know what, guys? Why don't we just go to 11 Madison Park ah this we're imagining, we're imagining. So I don't know if we noticed this we did. at the Javits Center, just nine minute walk away from where we're gonna be at the VaynerMedia headquarters in Hudson Yards is a little thing called the New York Auto Show, going on the JD Power event. So we'll probably make our way over there either before or after the interview on bringing a little bit of content from there as well. What else we got, I mean, a soda con look, soda con presented by Reynolds and Gugu. It look if you haven't gotten your tickets, or you haven't looked at the the site yet. And the speaker list, you have to go to ASOTU Look at the speaker list. We're going to have all the sessions up really, really soon. But there's some stuff up if you go into the detailed agenda, agenda. We really want you to be there with us. It is going to be a significant event in automotive. And I think one of the most meaningful places where conversations have happened anywhere. Bar none. I'm just going to put it out there. It's true. Agree. It's true. I think we have what else and if you want to show we got a show. Let's talk about a show. I hope I can't. We rambled so much, though. But Wednesday, we have our more than cars premiere of Episode Three, get it?

Kyle Mountsier: 4:06

We have to say that Yeah. Listen, this

Paul J Daly: 4:08

is the show where Colin I go across the country telling inspiring stories from real car dealerships. We spent some time at the West heart, her group in Buffalo, New York, they're also in Rochester and Syracuse, but we spend time in Buffalo. There's a LinkedIn event. So if you go to asoto, on LinkedIn, there's an event there, we can see it. We're gonna livestream we're going to be in the comments and it is so much fun and very insightful to see how this really large auto group operates on I feel like a really like person to person level. Absolutely. I really need to take All right, time for some news. Oh, this was getting sporty out here now. We had a call Brian. Last week too. He's got a couple of comments on this. He's probably going to launch into soda con because he's going to be a keynote. But in a moment their shift toward electric vehicles Honda is cutting dealer profit margins in both the US and Canada, triggering a signal To get backlash in the industry, HUD announced they will reduce dealership profit margins on new vehicles in the US by 2.5%. And get this 44% in Canada hit it. I mean, if you think about Canada, it is the 10 to one rule kind of in effect there.

Kyle Mountsier: 5:17

Honestly, like 44%. And point five is basically the exchange rate right after

Paul J Daly: 5:21

taxes. The decision has basically started a ton of pushback amongst Honda dealers, especially in the US as they describe the margin cut as inappropriate, but not surprising. You know, talking about the hefty investments needed to move forward in the Evie manufacturing, Canadian dealership facing the more severe cuts. Not everyone that commented on every dealer was anonymous. So that just goes to show a little bit about the relationships there. But they call it a blatant money grab, you know, one more, little more direct when you're anonymous, I guess, is basically going to impact dealers bottom lines, honda says they are working on an offset in Canada, though, what that actually means is like they might allow dealers to charge like admin fees, which means you're gonna lose money, but we'll get customers don't worry, as dealers brace for the reduced profits, you know, franchise laws, all these conversations are in full effect. Right now.

Kyle Mountsier: 6:15

This this is the wild one to me, that I don't think we have really seen coming we you know, I remember what it was a year and a half ago. Damon Lester sends us the invoice to the first aria that he was getting just saying while we were not expecting MSRP and invoice to be basically the same. And, you know, we're, we've seen these shrunk margins, we've seen OEMs looking at dealers going you've gotten all this profit margin over the last three years from from consumers either charging MSRP or charging over MSRP. were even a little bit of a piece of that pie and also utilizing the quote, Evie shift as the impetus for this change. Ooh, slippery slope. Slippery slope.

Paul J Daly: 7:02

I know. I mean, maybe we'll get Brian Ben stuck on the cover comment on it. But he also mentioned something. I mean, we weren't caught on a call about this. We were just on a call. And, you know, Brian did bring up the major cut in advertising expenses. That yeah, just it just didn't even in the New York market, and just millions and millions of dollars less on advertising, which is also like compounds the challenge of trying to get people to adopt a new platform, a new vehicle with the prologue, cutting ads, ad expense, ads expenditure, which is what you need to get the new thing out there and make it the thing. So it seems like everybody's just trying to figure out how to make this thing work. That's it. I'll tell you who's not trying to figure out how to make it work and say,

Kyle Mountsier: 7:45

straight up making them. There's no forcing.

Paul J Daly: 7:48

I know BYD is launching the seagull, Evie, which is being dubbed Lamborghini Mini, which features their blade batteries and offers a range of up to 252 miles on the max the other one is like 190. But here's the deal. The vehicles priced under $10,000. raising concerns obviously across American manufacturers so Ford and GM have been adjusting their strategies toward more affordable EVs. We know Ford has the skunk labs going on, they're going to release a new platform. GM is planning on introducing a next gen. Chevy Bolt not under 10,000 No. BYD is aggressive pricing, and integrated manufacturing. I heard they make every single part for this vehicle except for the tires in the class. Wow. Yeah, on that. Yeah, exactly. So obviously, this is a big threat. US Evie makers, you know, can look at losing a lot of market share. If all this makes its way obviously a lot of things in the way of that but Ford CEO Jim Farley called the vehicle pretty damn good. And continued. If we fail to keep up with Chinese automakers like BYD than 20 to 30% of the revenue is at risk. As a CEO of a company that had trouble competing with the Japanese and the South Koreans, we have to fix this problem.

Kyle Mountsier: 8:58

I mean, here's there's two big stories to this to me, one that I didn't recognize is how vertical their manufacturing processes. I didn't either until I read that. It is it is literally like if you go back to what the mattress business saw with companies like purple that like created this, not like they just create and market and sell everything. The cost savings that they get out of that is insane. Yeah. The other story that wasn't actually in this story that I saw last week. I think Steve Greenfield posts it was the story of their of BYD entrance entrance into the Australian market and in just a year have obtained 14% market share on EVs in that market. They when they go into a market they do not mess around and a 252 mile range under$10,000 vehicle even if taxed at 100% still me massively undercuts the US market get

Paul J Daly: 10:02

you under 20 grand on a 100% tariff, we got some things to figure out. But I believe, I believe we can do it. These

Kyle Mountsier: 10:12

are the things that we got to figure out oh, segway. This is a wild story heating up. But the rapid expansion of AI data centers across the United States is triggering concerns that the National proud power grid may not withstand the surge in electricity demand. Essentially, AI data centers run on almost double, sometimes triple the power of their predecessors data centers that don't require AI. And this is being met at the same time with the with the necessity for more blockchain processing, which is still a thing out there in the world. So you have aI blockchain data centers growing at a rapid pace. States like Oregon's Portland General Electric has doubled their demand forecast for the next five years. And Georgia is looking at a 17x increase in that and how do you even power for comprehend that? That's not? Well, I mean, you look at all the manufacturing also coming to Georgia. So when you go any fracturing plus ai plus blockchain was you all one area, plus EVs as they have a massive I

Paul J Daly: 11:23

mean, that wasn't even mentioned in the article. Yeah, like, and we've been talking about kindling grid handle just the transits just easier. That's why this this article kind of hit me sideways. Bill Gates, at a recent conference pointed out that finding adequate power for data sources for data centers is that the very top of the list for constraints to AI development, so all of a sudden, actual developers or actual code, it is just the data, the pot No, just the power, the power to get to power that make, it's not the graphics cards, it's not the chipset, it's none of that. It's the power. And I remember just, you know, two, three years ago as blockchain and you know, Bitcoin, and crypto as a whole was really ramping up. And they were saying all these things are energy hogs, there's a big, there's a big problem with this. Now, all of a sudden, it's the AI development that no one was even talking about back then. And then you overlay this narrative of Evie transition onto there. Like, I don't know, man, it feels like our infrastructure is so old. We haven't seen any power demands like this in decades and decades and decades, as far as increase going. Like it puts us in a kind of a vulnerable spot. I feel absolutely,

Kyle Mountsier: 12:30

yeah. I mean, they were talking about different types of power sources and how that comes. I mean, this, these merging conversations are things that if I had to guess, your senators, House of Representatives, local representatives, state representatives that need to hear from your ABA or from you, as a dealer, in particular, a point are important to talk about, like, if everybody's talking only about AI and blockchain when it comes to data centers or an empower, they're not talking about the Evie conversation, then get that into the lawmakers hands so they can understand what the necessity on the power grid is in our vertical.

Paul J Daly: 13:08

I think that what you just said, I think it just builds a more and more rational case for a measured transition to more EVs, more EVs on the road. And it also pushes the case for hybrids, hydrogen.

Kyle Mountsier: 13:23

We didn't even talk about we didn't even talk about Toyota coming out with their Oh, no, no, no. You know, we'll get to that later.

Paul J Daly: 13:31

But all the Toyota stories every single day, you know, one thing we got to give them, give them a day break. Hey, look, it's just Monday so we know everybody's rolling up firing up ready to go. But we hope you join us this week more than cars premiere Wednesday, go to LinkedIn searches, so do more than cars event. We hope to see you there. We'll be in New York tomorrow, though.

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