Dealers Are Going Direct To Consumer | SDR #193

Welcome, everybody, to the big show. Today, we're going to talk about manufacturers going direct to consumer and what does it mean to us? There's going to be winners and there's going to be losers. Which side are we going to fall on? Also, Christian is going to talk about what's in the news today. Right. And much, much more. Coming up on this episode of Service Drive Revolution.

So a lot of you have heard that we're moving into a new building. We purchased a building downtown Los Angeles. We should have purchased it in Texas because of the taxes.

That was my vote.

We purchased a building that we are renovating. I nicknamed the building the Money Pit. I think that. What is the building called? Like, the Murphy Building. Right on the front of it, it says something. Is it Murphy or what is it?

I don't know, but I love Money Pit.

It's the Money Pit.

We had to completely redo the floors.

The electrical is a mess. Everything's a mess. It's gonna be way worse. The good news is the key to happiness is low expectations. And I planned that it would be worse than I thought, but it's bad. I think we've pushed our move in date two weeks so far, but we have. We really have no room to push it now.

Yeah, we're getting to the point we'll be homeless if we don't get this thing moved over. But I know that everybody's working really hard on it.

And by the way, Christian and I don't know what psychological. And.

I knew you were gonna bring this up.

You did?

I had a feeling, but it's great.

What is it that I'm bringing up, Christian?

You're gonna talk about the fact that we've had the building for a couple of months. I have not physically seen it yet.

How far away is it from here?

Roughly eight blocks.

Yeah, he doesn't even like. What was you saying? I don't care if I have a milk carton and whatever. I'll work. I just need my laptop and so hasn't got no support whatsoever? No emotional support.

Nothing. You don't even. I don't even think you would know where it is. Well, you saw a picture of it?

Yeah. You got the address? Yeah.

It hasn't even gone down there, which is incredible.

I will. I'm excited to see it when it's all done. I'm really excited for that part.

Is it. Is there, like a weird thing in your head that you don't want to see it before it's done?

No. I think that I've got it built up in my head and this is probably irrational, for sure. I accept that. But I've got it in my head that if I'm involved in any way, shape or form that I'm just getting in the way. That I don't have a lot to contribute to it.

Just to see it.

Yeah. Like I said, it's irrational. I should probably go check it out.

Yeah. So that's the moral support you can expect from Christian.

Just let me know when to show up.

Any big purchases or decisions in your life, call Christian.

Right.

He won't show up.

It's probably a sign of poor leadership. And there's this. I know we talk a lot about mythology and things like that. There is this king that lived back a couple thousand years ago and he was exactly 12 inches tall. He was a terrible king, but a great ruler.

Yeah.

I like how he turned that off.

Yeah, there's that. Let's go to the news.

What is in the news, Christian?

I've got a couple of really, really good articles that we pulled up. The first is an article that talks about the dark secret of electric cars being tires. And it was essentially, it was an article about a person that owns an electric car, I believe it was a Tesla, and is saying, well, this is so great. Like, I completed the annual maintenance on my car and all I do is put wiper fluid in and air up the tires. And he's like, oh, but at 28,000 miles, I had to replace the tires. And that's just. That's too bad. And for some reason I don't know why it wouldn't be covered under warranty. And he's kind of whining about it. And if we think back.

Which is.

Always good journalistic, you know.

It just, it shows your talent as a journalist when you are whining about something like that.

Yeah. So this person was implying that the EVs are, you know, that that tire thing is a little bit of a money pit. But the other thing is that the 28,000 miles for some cars is early for tire replacement. But you and I have both had experience with cars that they'll wear out of tires in 20,000 or 18,000.

There's a lot of performance cars out there. Performance cars, Pirellis or whatever. They last year lucky if they last 15.

Exactly. And even. Even if they last 15 the last 5,000 miles, they're choppy and noisy and they don't. They don't feel that good or anything like that. So I think that. And when it comes to maintenance costs on the electric car. Like this guy, he should be talking about how awesome is not the fact that he replaced the tires, but. But he's kind of going in like, oh, and the tires are more expensive because they have to have the heavier rating on them and everything like that. Because the cars are a little bit heavier.

Once again though, like if you've been driving any sort of sports cars.

Yeah. Like a run flats. Really expensive, low profile tires.

Do you ever have to put tires on your Tesla?

Nope. No.

I would imagine the tires on my Tesla are gonna be 2,000 bucks.

Yeah, that's probably a really fair number. Although you have the bigger wheels, I could see them being a little more.

Really?

Yeah. Cause you have like, it's that 21 inch wheel.

I think I'll probably. If you didn't replace them on yours, I'll probably turn it in before.

Yeah. Because you and I drive about the same, don't we?

Yeah, we're not driving far. I mean we're in traffic for a long time, but we don't go far.

No, the miles are very minimal. But yeah, so it's more support that we talk about. You got to get good at tires and alignments when it comes to the electric world.

So that's the opportunity.

Yeah, that is exactly where we're at. And then this one is my favorite. So you know these Ford Broncos vehicles that people are hard to get selling for a lot, lot of money over sticker.

The Bronco.

Yeah, the Bronco. The brand new one.

And he asked OJ what he thinks of the new Bronco.

They released the Bronco on his birthday. So he's obviously.

Did he say something?

I don't know. He's probably heavily involved in Bronco production.

I always. When you say Bronco, I just think O.J.

So do I. And the lowest speed chase in the history of man. But it would be even lower nowadays if somebody tries to go on a. A police chase with a new Bronco because the engines are failing.

Wow. Could you imagine that? Could you imagine waiting six months for your Bronco?

Is it a new engine?

Yeah, it's a.

Is it designed just for the Bronco?

2.7 liter EcoBoost V6.

Isn't that something they make?

I'm not sure. I'm going to assume so.

Come on, Ford, you got to get your quality.

Yeah, but could you imagine.

Isn't that the saying, Ford quality?

Yeah. Ford tough. Ford tough. But yeah, it's on the F150 also. But. But it's so interesting to Me, I was thinking about that like could you imagine paying 20 grand over sticker, waiting six months for your Bronco and then the thing takes a crap in the first 50 miles. Like how terrible is that?

Well also too all the enthusiasm that they've built with it in the goodwill. Yeah. You want to get the quality right. So at. What does it say? What percentage of the engines like is.

Doesn't all the only thing it says they've. They've had dozens fail and that they're failing at under 10,000 miles.

Have you heard from our clients that they're backed up on engines?

Not.

I haven't heard that either. That Ford dealers are backed up on engines.

There's not a ton of them out there yet.

I've heard that with a couple other manufacturers.

Oh my goodness. There's a couple of manufacturers that are struggling.

It's hard, you know, you gotta have techs to fix all those.

Yeah. Makes me wonder if JD Power quality things are editorial.

So that's the news.

That is our news for the day.

Let's talk about manufacturers going direct to consumers. This is a popular subject.

And there's a lot of different takes and.

I would say that the truth is probably a hybrid in the middle, as it usually is. We coined that phrase. Hybrid in the middle. Yeah, it's a hybrid in the middle.

Copyright.

Let's start off by going through the list of the ones that are going direct to consumer currently. So what manufacturers go direct to consumer currently?

Tesla.

Okay.

Tesla Rivian.

Rivian.

The one that's owned by Volvo.

Polestar owned by Volvo by the way. Everybody. So Volvo has an electric car company and they have their regular Volvo company.

Which is also transitioning to electric and.

Also kind of almost doing a direct to consumer kind of thing. Right. Copying Tesla in a lot of ways.

Very interesting. So those are the ones that popped out to me. And then the new Ford company.

Well they're not going direct to consumer yet. They're seriously just made it a different company.

At the.

Why get a different company?

Well they have the Ford Blue and then the, the.

Yeah, but why do you need like, like if we opened a second company and we're like we have this company, it's Chris Collins. But now we're going to open. We're gonna do Chris Collins E or whatever. Would that other company.

Why yeah, like would it do the same product? I would make me think that there's something very different going on at that other company. So like they're gonna abandon 120 year old model or something.

Peugeot. Can you spell Peugeot?

Okay, so let me try this. P U G E O T P.

E U G. Dang it. Close. It would have been funny if you would have done it like a spelling bee. Like Peugeot, Peugeot. P E U G. In Europe, they're going direct to consumer.

Okay.

Like a hundred thousand units, something like that. So that's Europe, it's not here. We don't have the Peugeot here.

And is Peugeot they own any other car company?

I think so, yeah.

It's out there. There's definitely some examples of people going. Direct consumer, huh?

What percentage of the cars sold in California do you think are electric? Now.

Before you answer that, hold on to your guess.

Okay.

Where does pop culture start for the world? Really?

Either New York or Los Angeles would be my two guesses.

Probably Los Angeles. So most of the trends that happen in the world are launched in Los Angeles. As far as consumer perception, some of the marketing happens in New York. Publishing is big in New York, but for the most part.

It'S. The trend is going to start in Los Angeles. The biggest export California has is not Google.

It's not Apple.

It's not Apple. It's pop culture.

Pop culture and avocados.

Yeah. So what percentage of the cars sold in the state that's responsible for pop culture worldwide.

Are electric? What percentage do you think?

Man? Just thinking of what we see.

3%, 5%?

I go 6, 10.

1 in 10.

Right now, 1 out of every 10 cars sold in California is an electric.

If we would have gone back two years ago and I said.

1% two.

Years ago, maybe 5 would have been a stretch, right? Yeah, twice that. 10 and growing.

They're everywhere.

Yeah, it's nuts. 1 in 10.

So get ready.

So the thing I said a long time ago is it's. It's not so much the electric car.

Sales, it's the market share that's going to affect the other manufacturers because they're losing market share.

Why do you think that electric car companies are producing cars when no one else is?

I don't know. Because wouldn't you assume that they.

I think this whole chip thing is.

It's a conspiracy, isn't it?

But I don't know.

I've been wondering. But an electric car needs chips.

Did you see that 60 Minute, 60 Minutes piece on the birds?

I started to watch it, but I didn't watch it.

There's this great piece they did on 60 Minutes, this kid and his friends that started this conspiracy theory that all the birds out there are.

You know, robots for the CIA and they're all spying on us. And even when they. They land on power lines are recharging and they're collecting the information through the Internet or the phone lines by sitting on the lines, hanging out.

Also unaffected by the chip shortage.

And it's just in. In the spirit of making fun of how, you know, far left and right, everything is. And how everything's a conspiracy and it's just funny. But.

Yeah, I think that with the chips, in a sense, like, I don't.

Know, I love it.

Like, electric cars are all chips, it's all computers. How are they? They're coming off the line faster than ever. But Ford can't. Toyota can't find a chip.

No, I guess not. It's so interesting to me. But, like, we could go on today and we could buy an electric car and have it in two weeks.

Yeah. But you can't find a Toyota RAV4.

Can't get a Camry.

Yeah. So interesting to me, it doesn't make a lot of sense.

So weird time we're in.

So I believe that what. What is going to happen with the manufacturers going direct to consumer is you're gonna have a hybrid. And the thing that we already know is that companies like Tesla have an unfair advantage against the dealers because they don't have flooring. They're direct to consumer.

They. They just have an unfair advantage in, in many ways they can move faster. They're not like, if you think about a dealer, you're sort of at the mercy of the manufacturer, where, when you're Tesla and you're direct to consumer, you're controlling the input and the output. You're not a franchisee in the middle hoping that Ford doesn't roll off. Ford, er, you're hoping the products are good and that there's a demand for them in the marketplace, all of that. Now, if you're sitting in the boardroom with the manufacturers, they're saying the dealers are outdated, they need to upgrade their facilities, they need to train their people more, they need to invest, you know, this and that. It's an interesting dynamic in that sense. What will happen, I think, is every manufacturer will have a different path. I think if you own a BMW dealership, your experience is going to be different than if you own a Ford dealership. It's going to be different across the board. They won't all handle it the same. And, you know, Tesla was the first one kind of through the wall in the sense that they. They got bloody. But now the manufacturers have more control than they've Ever had before. Just the idea of Ford going direct to consumer with Ford E sent the dealers into a tailspin. Right?

Yeah, That's a really good point.

And in a sense, they never really.

Had. They never gained any leverage on Ford. They just kind of were like, oh, okay, not right now. Okay. Like. But it didn't appear to me that anybody was really challenging it or trying to get ahead of it in the sense that, you know, the national auto dealers association isn't in any way doing anything that we can see from the outside. That's a strong lobby towards protecting the dealer body. The. The manufacturers are asking a lot of dealers to invest a lot of money in facilities.

If I own a dealership right now, and you're asking me to invest 20 million in a facility, Are you doing.

That as you announce that you're creating another company? It's super interesting, isn't it?

Yeah.

There's no expense spared on these redos. Who?

Christian, let me ask you this question. I know we talk a lot about mythology and being psychic.

Yes.

Do you feel like you're psychic?

No. No.

Damn it. I was hoping you felt like you were psychic.

But I'll try. Can you pretend for a minute that you're psychic? Like you have, like a crystal ball in all of this chaos?

Who's safe? Who's safe?

Let me summon summons the psychic way. What is it? The energy. I'm reading the energy of the room.

Who in all of this chaos is safe?

Service departments.

Yeah, Service and parts. I am psychic because the electric cars break. They need, like, we're talking. They need tires. They need everything. And so there will be a lot of dealers that their identity is attached to moving metal over the curb. But there'll be a lot of opportunity in service. Yeah, we're not going anywhere.

I'd get really good at those conversions of the new engine packs and all that stuff. There's so much opportunity. I think it's gonna be fun.

So my advice to everybody is don't pay attention to the noise. Just work on your business. Work on having the best service and parts department you possibly can. Creating a great customer experience, getting rid of the constraints.

Getting your profitability in line.

Like a real business.

Exactly. Run it like a real business. Because even if they go direct to consumer, they can't service it. And they. None of the manufacturers have the ability to roll out shops across the country.

That's right.

They won't. They need us. And so, in a sense, we are the leverage in the marketplace. Let's be the best. We can be. Let's think about our business in a way that we are getting ahead of this as far as the customer experience goes, as far as profitability and really genuinely protecting the dealership against the loss of new car sales because our fixed absorption is so high. That's our job. We got to get better at what we do and we got to take it seriously.

Yeah. There's no, there's no mailing it in on this. It's not just going to happen like we've for a long time. We were just attached to the sales department.

We aren't going anywhere.

Nope.

They need us more than ever. We're in the driver's seat. You guys to be.

Okay. That was a fun show. We hope everybody has a good week. At least I do. I don't know, Christian.

I also hope everyone has a good week.

But he won't come visit your building. But he'll say the right thing in the moment. Very Midwest of you.

I've been, I've been harnessing and I've been building that for years.

We'll see you next time on Service Drive Revolution. Thanks so much for watching this episode of Service Drive Revolution. We're uploading new stuff every day, so make sure you subscribe and click the bell icon so you don't miss out. If you have a question you'd like us to answer on the show, call 8333 Ask SDR and we'll answer your question on the show. That's 8333 Ask SDR. For special deals on our books and training, head over to offers.chriscollinsinc.com no, it's offers.com Chris Collinsinc.com I'm Chris Collins and I'll see you in the next video.