Still A Seller’s Market, German EV Race, Will SXSW Ever Really Return?

SPEAKERS

Kyle Mountsier,Paul Daly

Paul Daly 00:24

Oh, Ipress the wrong button. What's gonna happen? It's gonna Oh, I don't know it'sgonna keep counting down. What happens right? Wrong in the wrong bank? Welcometo Monday. Welcome to Monday. I don't know, Kyle, is it too late to do themusic? I'm think it's too late to do music. It's never too late to do themusic. So this morning, it is Monday, Tuesday, March 22. I can't get my days,right, ever, ever, it's gonna be my calling card. But we have an ode to theservice departments coming out in just a second ago. People really want it,they stopped. Oh, man, I don't know what we're doing today. But here's thedeal. It's Tuesday. And we're like three miles down the road, before we evenstarted today. So we started off today's email, kyle, I'm gonna let you read itbecause you wrote it. And it made like, so when we put together the emails atthe end of the day, and depending on how the day plays out, you know, we may ormay not be a part of it, like, you know, some of us put articles. And so lastnight, Kyle's the one that kind of put the ball on it, and he wrote the lead.And I saw, I got to read it this morning, when I opened my email, and let metell you, it is exactly what I needed a former service writer, but it remindedme of, you know, kind of an element of what we're doing, as asotu an element oflike the keeping our finger on the pulse of what the real hearts of the storesare. And so going, I'm gonna let you read

Kyle Mountsier 01:51

it.Yeah, I'm going to give a little bit of context, because yesterday was a littlebit of a crazy day for us in the in the asoto. world, in just business, you hada lot of meetings, there was, you know, there was family stuff kind ofhappening in and out, it was my first day, kind of away from my family, my wifeat home with the baby. And there's just, there's a lot. So as I sat down lastnight, the word resilient kind of came in my head. And that's what I started towrite the lead with that. And then I thought about, just like the industry andwhat the word resilient meant. And then I went back to, you know, when someonereally encouraged me back early in my sales career, to make sure and say hi toevery service person every single day. And just kind of this toast came tomind. And so I'll read it. So it's, it's here's to the service teams, the onesthat get in before everyone else, the ones that pull a car in on a busySaturday, because the tire pressure was low on a car about to be test driven,the ones that meticulously break down an engine just away on the warrantyinspector to arrive. These are the unsung heroes we want to celebrate today.ASOTU family, we want to encourage you to say thanks, so the women and men inour service departments today, take a moment to step out of the office or theshowroom. And onto that incredible shop floor because it takes all of uspushing back and yeah, so that's the that's the all. It's not just you know,the glitz and glamour of the showroom. It's not it's not the salesperson thatmade their first sale that cut their tie that we see on LinkedIn. Actually, Iyou know, the the other thing that spurred this on was an I couldn't find it Iscrolled I tried to find it. I don't know who it was. But someone posted thatthey that they, their dealership wanted to do something special for theirservice department. And if anyone found this on linked, I don't even know whoit was. But if you can find it, I love this photo. But they got banners, bigold like championship banners that they put up in front of every service baywith the service technicians name, their nickname, what they do they it waslike a championship banner that they put up. And the picture is of that servicetechnician taking a photo of this banner, right knee and you know where he sentit. He's sending that to all his friends and families probably posting, forsure. And it was just this Wow, celebrating the those those women and men thatare in the shop or in the parts department that typically just kind of gounnoticed by customer by customers and by the photos that we see around thestore or the photos on the Google My Business or Google business place. That'sthat's celebrating the entire industry coming together, man.

Paul Daly 04:36

I lovethat so much. I mean, like I said, it's what I needed to hear this morningbecause it reminds me like the 1000s and 1000s of those people doing that rightnow. And on the West Coast right there. They're getting in right now. Right?It's it's just quarter after 6am in California. And David, you know at theHansel Auto Group, right someone's walking into one of David Long stores thathe manages and they're putting a lifts down, right? And they're in thepaperwork. And they're getting looking at their schedule for the day, right inthere making sure the water bottles are fixed like, man, that just goes a longway. Right? So like, how can how can we continue to do that? Well, if you'relistening, you can continue to do that right now. Right? Yes, it's not toolate. You can do it right now you can encourage those people. Man, what a greatway to start the show. I have some fun stuff to talk about today. Some funstuff, some business stuff. We'll get to the business stuff. First, let's getto business. Automotive News article from I think was yesterday, maybe two daysago, it was talking about the acquisition, climate in automotive being possiblyeven more favorable in 2022, than it was in 2021. Last year, last year, we hadlike Alan Hagen, and we were just talking about the people that were rushing toget their dealerships sold if they had been thinking about it, becauseconditions were favorable, right. Pricing was high, valuations were high. Andguess it seems like it's continuing. I mean, off

Kyle Mountsier 06:02

off tothe races yet again. Aaron Kerrigan said, if you asked me in December, I wouldhave expected the Buy Sell market to be around the same level. But based on thefirst two months of this year, I think the Buy Sell market of 2022 will be moreactive than 2020, then 21, which I didn't think I would say, which is wild.Like, I can't it was it seemed like every single week last year, there wasmassive m&a, you know, acquisition,

Paul Daly 06:29

especiallysecond hands here. Yeah. Well, last city ramped up so much. And I mean, we'reprobably we're probably writing that velocity still, you know, I didn't seeanyone to talk about this in the article, Alan Hague, who we know are friendswith here, it says the deals in the pipeline indicate it's going to be as gooda year in terms of the number of rooftops but even better, in terms of thevalue that our clients are getting for their businesses. So um, so he's saying,like, maybe similar number of rooftops, but more money for the stores. And, youknow, I didn't hear anybody say this in the article, but remember, toured lastyear, and that the year and extravaganza, you know, everybody was rushing,because of the potential tax rate change capital gains tax rate, you know, sopeople were like, Hey, can we get this transaction close fast enough? Right. Sopeople were rushing. So I wonder how many of like the q1, the January, Februarydeals, were one that just that just couldn't get it, you know what I mean, thatjust couldn't get it done. So I didn't hear anybody mentioned that. I wonderthat but um, here's some totals that were highlighted in the article in 2021,there were 376 transactions for a total of 673 stores. So averaging rightaround two rooftops per deal in 2022. So far, so we're not even through q1 yet.Actually, remember, we started a week and a half left, and things tend to closeat the end of the quarter. And so 2022, so far, there have been 52 transactionsfor 78. stores. So I'm definitely more transactions, you know, the ratio ismuch lower, you know, as an average of two last year total, right? This is alot more closer to like, 1.3. And, you know, it's just,

Kyle Mountsier 08:04

I mean,even just in the people that you and I know, I know of multiple owners, dealer,principals, general managers that are seeking out, yeah, opportunities topurchase right now. And so you're right, on the, we're on the hunt, they'relooking for it. And I think it's indicative of, you know, the reality that ifyou don't have, you know, multiple rooftops, the capacity to be market playersin this particular region is going to be lower and lower. Alright, so thinkingabout so many of the groups that are going after the Carvana and Roombasbusiness on a regional or national basis, we we saw, you know, driveway with Lithia.And we saw Asbury with click lane, and Penske with car shop, we saw them takingthe lead at the big group scale, but some of the, you know, 15 to 20, Sirgroups are making that push right now. So, I think the move is to go from thatthree to five store group to the mid teens so that you can execute at thatlevel. Yeah, you

Paul Daly 09:08

need,you need a certain critical mass to get that operational efficiency, like youget a little at three, four, or five. But you really start to have leverage whenyou get over like a dozen, right, that's when you can start like hiring peopleto run whole departments that you probably couldn't afford at 60. And we talkedabout this in marketing a lot. Right? At some point, you have enough leveragethat you can pull out of like the agency dependency and get into like a seriousCMO, right a serious creative director, right, a serious content department,and then that leverage just multiplies exponentially and like growing the valueof your brand and your business. So um, you know, I think there are pros andcons when we talk about consolidation, always pros and cons. Nothing is everall good or all bad, are some of the pros of consolidation are definitelyinnovation. Right? You're gonna take stores, you know, obviously if someone'slooking to sell they probably have been struggling for little bit or at leasthad their foot off the gas because they've been looking saying, Okay, where'smy off ramp? A lot of the stores that might not have a succession plan inplace. And so, you know, you get tired, right? I know. I'm 60 I'm 65 like,look, just all this new stuff, Brian Brian Kramer's running around with Oculusgoggles on. I'm like, you know, you know, we're really wanna enjoy my grandkidsand the boat. And all the decades of 80 hour weeks that I put in, before Ithrow on some Oculus goggles, let me and

Kyle Mountsier 10:28

a bigchunk of change is staring at staring yet the fate in the face.

Paul Daly 10:31

I mean,at that point, most of it was like generational money, you know what I mean?Like most people that are selling the store, most are like, it's not reallygoing to make a substantive change to my lifestyle. You know, but so all that,that, handing the torch to someone who is looking to build an operational efficiency,and innovating tech systems and innovating, see customer experience systems,right, that's good for the industry. Because it levels up on the flip side,right, we do lose some of the some of the the family heritage and legacy thatreally makes automotive and people you know, that transition from a smallerstore to a bigger store might feel bad, right? There is something to be lost.Right. But there's also a lot to be gained. So I think there's never a cleanway to cut it. But you know, the consolidation with the right people with theright mindset, I think overall is a win for us.

Kyle Mountsier 11:19

Yeah, Ithink it's a good it's a I think it's necessary for franchise retail to kind ofstay in the game. But I get that there there are cons and there are those thatyou know that that have a little bit of of loss of feeling that are at thosesingle rooftops and employees and things like that. So I think that'sencouragement to those that are purchasing stores to watch that. And realizethat when you're purchasing a story, you're not just purchasing a financialfinancial worksheet. You're, uh, you're you're bringing on people and you havea lot of opportunity to care for a whole new set of personnel.

Paul Daly 11:55

Yeah, soI've seen a couple great scenarios when stores are being acquired and somepeople that that popped to the top my mind, liars, my lies in Myers porches,like when they buy a store, boy do they put their arms around the people in agreat way. The West her group out of Buffalo, Matt Lasher, leading themarketing team. They're like when they buy a sport like they are just so caringand sensitive. It's pretty awesome to watch because there are a lot of greatempathetic groups that are really grooving company culture by bought throughacquisition. Let's see Let's bounce across the pond. Tesla just is about todeliver its first 30 vehicles from its giga factory in Berlin, the BerlinBrandenburg giga factory, they're going to deliver 30 model wise, theperformance edition is going to be the first 30 that came off the line theywere building the the plant for two years, and the vehicles cost $70,000. USit's like 63,000 or 64,000 euros $70,000 apiece popping off in line they have3000 of the 12,000 workers 12,000 workers place. And you know, JP Morgan poppedthe forecast out the factory produce about 54,000 cars this year. And 280,000next year and half a million vehicles by 2025.

Kyle Mountsier 13:18

So onours, y'all. Tesla's Tesla's playing game right now they're not messing around.That's for sure.

Paul Daly 13:26

Youknow, the $70,000 for a model Y is a lot of money. It really is. It talkedabout yesterday with the $48,000 base model three like just

Kyle Mountsier 13:34

itsounds like all new cars right now just are a lot of money. And

Paul Daly 13:39

$1,000hatchback. That's crazy.

Kyle Mountsier 13:43

I can'timagine I mean, I Yeah, the money is out there. You just, you just you just youthink like there's got to be a way to make EVs affordable for the common likeeverybody ever because I saw this yesterday, there's a charging station thatessentially has like, here's the gas price. Here's our electric price for afull charge. And it was significantly less, but I'm still staring at that.Number, literally, nobody cares. That can buy a Tesla how much their gas org orelectrical costs. Are

Paul Daly 14:20

theyjust right at $70,000 for the car, you're like, Oh, I saved $40 this month.Your payment was $300 Higher? Yeah, so in in Europe, and you know, the Evierace has really heated up more quickly than it has here in the US. So we kindof watch that as indicators you know, one of our investors and crack CrackerJack dealer Brian benstock has been over in Europe like trying to bring bring,like get a look over the horizon. Bring some things back. So VW owns actually a25% stake in the EVs in in Europe, or in Germany, at least so they have 25%stake Tesla has a 13% stake. So you know VW is really Stepping up in their AVinvestment they just you know, invested like a 2 billion euros in. So it's morethan $2 billion 2 billion euros in a new plant and a several battery factory.So, I mean, they're stepping up to the plate, and they're saying like, Alright,we're gonna do this. We're gonna do this. And so yeah, just literally the newsfrom over the pond. So

Kyle Mountsier 15:19

littleover the pond speaking of oh, here we go over a Tesla. Segway we just got tojust roll the footage first.

Paul Daly 15:32

Yeah, ifyou're not if you're not playing it, but go ahead. This guy, I'm gonna explainit. So we have a Tesla waiting at the bottom of a big hill, he flashes hisheadlights and the hills probably got to be, I don't know 100 feet under hereand the landing and skid to a stop so somebody in LA launched their Tesla Modelthree over the hill obviously the cops are looking and you don't really seeanything identifiable in the video. But this sucker just rockets up this hilltakes air the front end of the vehicle looks like it might flip but it justlands kind of on the front end of the car. The hood flies up the brake lightsgo on. And I don't know. It's just a thing. Nameplate and comments. I heard itwas a rental we bought the extra insurance

Kyle Mountsier 16:25

I'mtelling you people are doing the most ridiculous stuff with Tesla's it's it'sliterally never driven

Paul Daly 16:31

one itdoes feel like a go kart. I understand that. Have you ever like driven a gokart like Gone electric go kart racing and then you get back in your car? Youjust take the corners a little tighter and a little factor?

Kyle Mountsier 16:43

Yeah,exactly. No. So I think it's indicative of the culture around EVs. I think youknow, it's it's a very technical, you know, we we've had the story of a guyhacking a Tesla, right. Now we've got and then, you know, doing playingChristmas songs with the Tesla's video. It's a whole like meme culture around acar.

Paul Daly 17:06

I I feellike there needs to be like a Knight Rider edition. Like if he had that littlered light in the front flashing Yeah, forth. It kind of reminds you of like thelike the the eight year old than me that always wanted a turbo boost button.

Kyle Mountsier 17:19

Right?Yeah, yeah, it's exactly what it feels like to get

Paul Daly 17:22

DavidHasselhoff in a black test done. It looks like Nightrider I think is what theworld needs. We're running out of time, we're out of time. We were gonna talkalso a little bit about South by Southwest festival, the big technology andmusic culture festival. That was the biggest deal in Austin COVID happened itgot canceled last year was was virtual. So you know, you had the take that whatit will be and that the conference came back this year, it was mostly a lotabout NF T's and musicians and all this collabs but I gotta say, the energy aroundit didn't even seem nearly the same.

Kyle Mountsier 17:57

As itwas in there. I didn't see as much as out there as what I normally do on theinterwebs. So no, and you

Paul Daly 18:04

look forarticles like, I'm like, there's just not I'm like, man, no one's really evencovering it really well. Which is interesting because we happen to just getback from nada, which had all the energy and actually more energy than everbefore with a vengeance. So I think it's easy to think getting that box becausewe're an automotive like, Okay, we're back. No, like big. Other otherconferences like SXSW Guess what? They can't pull that off. They didn't pull itoff this year. I saw some pictures of it was funny because you see like 100people in this room and everyone's looking at their phone like no one's evenlooking at each other.

Kyle Mountsier 18:39

They'vegot a really unique industry. Oh, man. There's just so much to talk about somuch to talk about but super unique industry that I think just has the energyto pull off so much right now so I'm pumped. Yep.

Paul Daly 18:52

So Iguess there's your Tuesday shot we got off to a rocky start, we pulled up. Ifyou're not on the email list, sign up a soda calm. Um, go to the website. Checkout that oh to service advisor share with a service advisor or service personthat you love.

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