Everything Must Go! The Auto Industry is for Sale

Today we're going to talk about this Wall Street Journal article. The headline was, everything must go. The American car Dealership is for sale. It's a fascinating article. We're going to break that down in great detail. We also are going to talk about the four things service drives can learn from other businesses. So four things you can learn from other other industries. Welcome, everybody, to Service Travel Revolution.

I'm Chris, this is Christian.

Hello, everyone.

Chris with a tian on the end of it.

Chin. It's like Chris with a chin on it.

I just want to remind everybody we got our big event coming up. Top dog here in Los Angeles. Was it October 22nd, 3rd?

21, 22, 23.

21, 22, 23. Also remember, we have the Dylan special coupon code.

Yep.

Parts hold and you can bring your parts manager with you and you get a free part sold. T shirt, limited edition. Never been sold to the public. We've sent them to the public, but never been sold to the public. So exciting stuff. I don't know if I'll make it there with everybody.

You're getting closer. You're one week closer. I'm super happy about that.

My ticker isn't very good and my cortisol is through the roof. If you don't know what cortisol is, you can Google it.

You're absent of vitamin D. Oh, no.

My vitamin D was good.

Oh, I thought it was low last time.

It was low, okay. But my vitamin D was 45.

Maybe it's your pool time.

I had a blood test recently and it's not good. I mean, we're lucky I'm here right now. Honestly.

Well, I mean, it's already been a time where we've lost one of our heroes, so.

Death is upon us, Norm.

Rest in peace, Norm.

That was a tough day.

Norm said it best, though. He said death is funny. Like, not funny like a Woody Allen movie, but funny like a Woody Allen marriage.

You like it when the boys laugh.

There's nothing funny about Norm dying man. The funniest ever. Let's talk about this article. So I think I sent you this article, like at 4 in the morning when I send.

It was good. It was Saturday morning. It was super early. It was great.

This is a Wall Street Journal. A long time fixture of automotive life is looking for a new model. As more auto purchases move online and national chains gobble up neighborhood showrooms, everything must go. The American car dealership is for sale. So, I mean, there's. I don't know what part of this article.

Affected you. The most.

Well, there was one. One statistic that stuck out to me the most.

The one about Ford. Yeah, yeah, we'll get to that one. So the way people buy. Oh, this article is by Nora, not Naughton, and it was in the. It was in the Wall Street Journal, like, a week ago. The. I'm just gonna read the parts of this that are fascinating. So the way people buy and sell cars is changing. Most of it is happening online as buyers get comfortable with completing transactions remotely. It is a shift that started before the pandemic but accelerated over the last 18 months as COVID 19 spurred people to do more of their shopping from home and demand for cars unexpectedly surged. The auto dealership, as a result, could soon look like other parts of the business world, upended by e commerce. National chains instead of local small businesses will set prices and give salespeople less room to haggle. Dealers will hold fewer cars on the lot and operate more like service and delivery centers, using their dealerships as hubs where customers can pick up vehicles, ordering online and getting them serviced. Then it says, like some larger dealership chains. So they're talking about Lithia autonation. The bigger groups are scooping up rivals because they're flush with cash, and they're dominating this transformation. The number of acquisitions last year hit 289. So 289 dealerships sold during the pandemic, and I think that's accelerating this year. Yeah, we've seen way more buy sells, according to dealership consulting firm Kerrigan Advisors, which is the highest count in years. Deals continue to climb this year, up 27% for the first half of 2021.

Then they talk a dealer here that sold his dealerships, his six stores from Denver.

And then they talk about Ford and how the dealership model started. You know, we used to have 25,000 new car dealerships in the U.S. now.

It'S a tenth of that, right?

No, I think it's. It's 18,000.

Was it?

Yeah. Okay, so here's the part. And this. This is what really cracks me up. You guys heard my rant about nada. The National Auto Dealers association and how they wouldn't let me talk about Tesla years ago. They do nothing to prepare the dealer body for what's coming.

They.

They have their heads in the sand, and their lobbying efforts are terrible. Their leadership is terrible. It's just an event that everybody goes to because they're in the habit of going to it, not because it provides any value or leadership whatsoever. And I know people think maybe I'm like being too bold saying that. But the results speak for themselves. People just don't want to acknowledge that it's broken. The, the, the talent in the auto business could be way ahead of this if they had better leadership and weren't blindly trusting some association that really is in the business of an event.

Yeah, that's their, it's an event.

That's what they're in the business of. Their 20 groups aren't any good. Like, it's, it's terrible. The leadership.

It's terrible. It's absolutely terrible. So. Dealerships were long successful.

At thwarting attempts to upend the status quo, thanks to franchise laws that restricted traditional car companies from setting up their own direct sales operations and made it difficult for any new competitors to enter the market. But we don't want to talk about Tesla. But cracks emerged and that's what I used. I said this more than five years ago. I said, tesla's going to put a crack in the dam. Nobody wants to talk about it. And then the whole thing's going to. And nobody talks about the fact that new car sales have dropped year in and year out. And the market share that electric car companies are going to get is like the cars aren't being sold. So if you go from 14 million new cars being sold and a million of them go to Tesla and a million go to whatever, and all of a sudden you're talking about 10 million cars. Right. It's, it's crazy, so. But cracks emerged first. The Internet made prices more transparent. Heaven forbid we have transparency. And gave customers the power to shop around, denting profit margins of new car sales. Dealers began making more of their money from loans and routine maintenance. The electric car maker Tesla challenged the notion that franchise dealers are the way to sell cars to, to customers. Chief executive Elon Musk chose instead to operate the company's own stores. The company faced pushback in several states, such as Texas, where local laws prohibited manufacturers from selling direct to buyers. Now I've been to Dallas and I've been to Houston and I've been to all parts of Texas in the last two years. There's as many Teslas in Dallas as there is here in la, even though they can't sell them there. And like a badge of honor. Yep.

To have one to skirt the system.

Yeah. It's like you're, you're, you're giving the middle finger to the automotive industry that even though the laws are telling consumers what they can and can't do, you as a consumer are going to do what you want to do. And so you're getting a Tesla.

You.

They can service the Teslas there, they just can't sell them. So people are going across state lines or whatever.

Oklahoma. Exactly.

But it's incredible how many Teslas are in Dallas and Houston. Mr. Musk was able to find ways to sidestep the hurdles to build a sales system across the U.S. helped by his aggressive online sales tactics. While he talked about doing away with the most physical stores, the company continued to use traditional bricks and mortar locations. Tesla's no dealership model now now is being adopted by other electric vehicle startups such as Rivian Automotive, who just started production on a truck that Amazon invested a ton of money in. And didn't Ford invest in them too?

I think Ford did get in with Rivian, yeah.

And, and it's so funny that that Toyota helped Tesla when they were on, on the ropes. They helped them and now who's helping like the dealers and nad and all this don't understand that the manufacturers are quietly helping everybody else do the work for them so they can go direct to consumer and nobody's calling that out. Like it's, it's kind of crazy. The, the fox is in the house. Is that the right application?

That's really good. It's way better than me saying that shooting a hostage. Remember that?

So. No, I don't. Tesla's no dealership model is now being adopted by electric vehicle startups such as Rivian Automotive and Lucid, which, you see those all over here now, right? Their showrooms, the Lucid, they're, they're in the malls just like Tesla is taking orders. These fledgling firms, backed by heavyweights such as Amazon Inc. They, they don't say. The manufacturers are lobbying to change dealer franchise laws in many states so they also can sell vehicles directly to shoppers. Now here's the part you loved. Another blow to the traditional dealership model came from the surge of online only used car sellers, which don't have the same state franchise restrictions as new car sellers. One such upstart, Carvana, an Arizona firm founded in 2012. While still small, less than 1% of the used car market, Carvana sold 244,111 vehicles last year, up 37% and its stock popped in recent months. As of Friday, it's worth nearly 57 billion more than Ford.

Carvana is worth more than Ford, the.

Used car vending machine.

That's correct. Worth more than Ford.

And then they quote a customer, Nancy Thompson Thomas, a Detroit area resident who bought a 2013 Jetta from Carvana said she was relieved to avoid what she described as pushy salespeople and long visits to the dealership. Carvana also offered her more for her old vehicle than any other dealer. She said, I don't see myself going back to a dealership. She added, okay, now here we go. You ready for this? Of course the National Auto Dealers association would be in front of all this. No, no. So dealers said the rise of online buying won't diminish the importance of these local businesses to buyers. Gradually they're going to be more and more done digitally, said Paul Walser, a Minnesota dealer and chairman of the National Auto Dealers Association. But I don't see any time, at least in the next few years where the importance of a face to face contact is. Listen, Paul.

The next few years, you're supposed to be planning 10 years out the next few, like what kind of leadership is. Well, I mean, we got two years.

Fine.

Then it'll all burn. Yeah, we have no, we really have no plan. Listen, we have no plan. That's what Paul, a dealer from Minnesota, where. How many of the cars in America come from Minnesota? How many car sales come from Minnesota?

7.

Give me a break. Why isn't the president of the National Auto Dealers association from California, Florida or Texas? Texas, New York, maybe, maybe, maybe the guy in Minnesota is like, yeah, I mean, we got two years. We got two years. We're going to be fine.

Boats and snowmobiles to sell.

Who cares about cars in two years? We'll think about it.

Yeah.

By the time Rivian is pumping out a million cars and Tesla will hit a million in the next. Because Tesla's truck will be out by then. Right. And they'll have that plant in Texas.

Going and the government's going to use all electric cars for their fleet.

You're a car dealer. My advice is make sure you reelect Paul Wasser.

As the president of the National Auto Dealers. Disassociation. We should start calling it the disassociation.

I get so mad for. I mean, it's, it's, there's so much talent in, in this industry and nobody is talking about what's really going on. It's like, it's unbelievable. There's no plan, there's no organization, nobody. There's nobody sitting around a table going, hey, you know what? There's a lot of talent. There's a lot of money in this room. Let's come up with a plan and swing a stick. I got, I know. I mean, I got the cannabis Industry in California is more organized than the auto dealers are.

Yeah.

As a group. I'm not joking and I'm not saying that to be funny. I'm not joking.

And for lunch they eat a lot of Cheetos.

No, I mean, I'm saying the big money guys in Canada, U.S. that got all of the states to flip their laws are doing exactly what Elon Musk is doing on the other end. Like if you just forget about your thoughts on cannabis, forget about your political views and just pay attention to the results for a second that more than half of the states have legalized it and it's federally illegal and Tesla's selling cars everywhere. And most of the franchise laws, including here in California. I've been asked to help manufacturers by, by putting my name on a dealership because a manufacturer here couldn't own a dealership for more than a year. They had. That's how the laws were written.

And he's doing it. He's. He's weaseled it through. There's. There's other lawyers out there that can interpret laws a different way. There's lobbying, the, there's strategy. There's all kinds of things you can do. And.

The most important thing as an industry that we should be doing is paying attention to the customer experience. Cause service is still an afterthought.

Yep.

It's still. Take it how we're gonna give it to you. Right. Show up and, you know, best of luck.

The technicians aren't coming in to our industry, so our production is going down. All of these things are very fixable. They're very fixable, but we're not talking about it. We're not organized whatsoever.

Yeah, we got some work to do.

As you can tell, I'm clearly not passionate about this.

I was just thinking about your blood pressure, but you go, yeah, I'm not.

Going to make it to Tom. Tom, you get me talking about this. Let's talk about. Let's segue four things ServiceDrive can learn from other businesses and industries. Number one.

Well, before we start that, I have a question for you. So two robots are sitting on a wall. Pete. And repeat. Pete falls off. Who's left?

Repeat.

Two robots sitting on a wall. Repeat. And repeat.

Almost didn't do it. Yeah.

You thought about letting it go because you already figured it out. That's good. So we've got four other industry.

Maybe strategies or fads that.

I'm going to lay out to you and you tell me how could we adopt those into our industry? How's that?

I Believe that that's the thing. For the foreseeable next two years we'll be here.

This is one of my favorite things is when we've moved on but you're still mentally thinking about the other thing. That's so great. I cannot believe that said few it wasn't two. Right. Like literally what's this industry going to look like in six years? It's going to be drastically different.

We, we could plan out 10. We could. We, you know, you don't have to sit here and take it.

I agree. It's.

We're, it's just defense and everybody's resolved to the fact that it is going to be what it is. And Tesla and everybody else Carvana they're leading with the customer experience and our systems are antiquated. We'd rather hold on to our old systems and our old mindsets then instead of focusing on where the opportunity is. Business is about solving problems for customers. We have the infrastructure, we have the talent to solve the problems for the customers and we just don't want to do it like we're so stubborn. So what does he say here? The exact quote. Some dealers said the rise of online buying won't diminish the importance of these local businesses to buyers. Gradually they're going to be more and more done digitally. Said Paul Walser, a Minnesota dealer and chairman of the National Auto Dealers association, better known as nada. But I don't see a time, at least in the next few years where the importance of that face to face contact is going to be eliminated. The industry added is still very, very dependent on dealers all across this country in rural markets in particular, connecting with consumers.

Yeah. Elect Paul for the. You know, because rural markets are the only thing going on. I mean aren't they both, aren't both of them important? Don't, don't we care about the cities also? Is the volume.

I don't think Waterloo, Iowa's dragging us out of this thing.

It's important, but it's not important to the detriment of everybody else.

Correct.

So the first strategy that we are pulling from another industry that we're curious how would we make it work in the service world? Automotive service, specifically dealerships which will be around for at least the next few years.

Is there any way we could incorporate Disney's use of the Fast Pass into service departments?

Okay. So would customers pay for.

Expedited service?

FastPass for service?

Yes, but I don't think that you have to charge it separately. You can just raise your rates.

Just because we've learned. We tried to charge customers for pickup and delivery and it always became this weird hang up.

Yeah.

And when we just put, put it in the price.

It, it felt like to them it was just added value because they really had no concept what the cost of an alignment was anyway. Most customers don't shop the price.

Right.

And even if they did, then they had a choice. Go with somebody whose prices are a little bit higher but they're going to pick it up and it's hassle free or go, you know, wait in line and deal with, with that. So in our experience, just raising your prices and building it in and using it as added value is, is more effective. But yes, we can learn from that.

But whatever we've charged for the valet, it's, it's harder than if it's just included.

Yeah, that's really interesting.

I don't know, I feel like there might be a, there might be a market for something that would pay to be at the front of the line. Maybe it depends on the brand.

Well, like for example, in Illinois we tried that, right. Land Rover.

Yep.

Goes all, all those states go to Indiana. Yeah, Indiana. Ton of customers in Indiana. Downtown Chicago, all over the place. When you would charge, nobody would do it. They just always felt weird about it. They would, they would pay it or whatever. But it just was weird when you just said, yeah, we're gonna come get it. And then you have it captive and then you tell them, hey, you know, the hours per row on those was like five or six and a half. Right. So if your labor rate is 120 versus 140, it. It's not that big of a deal to the overall transaction of a Land Rover or whatever it is now. You know, you got Brian Benstock with Honda. His average ticket is double what everybody else's is by picking up. So it pays for itself, right?

Yeah, for sure. And then just your reach that you're getting retention, everything like that. Like you're definitely the, you're at the forefront.

But I don't know if it'd work in Minnesota.

You can always ask Paul.

Paul, the president of the National Dealer Disassociation.

The negative automotive disassociation.

All right, so fast pass. Interesting. I like it. What about the way that the International House of Pancakes really just created a lot of buzz about themselves for no reason, just other than changing their name, they think that any news is good news. What can we learn from that in.

The service department to be topical, have a PR agency and be doing press releases, especially Even online, just having a blog and having your SEO working.

Certain media outlets will just pick that up. They're always spidering and looking for new things. And so your local media will pick up those sort of things.

Yeah.

And so just being topical and announcing what you're doing, even if to us it seems boring, it's interesting to the outside world. Especially like, you know, let's say you, you're hiring and nobody else is, or let's say that you are expanding or doing a remodel. Any, anything that you do, if you add 50 loan cars to your fleet, whatever it is, it's, it's topical and telling everybody what you're doing.

Yeah, I've seen this a couple of times where I've seen service managers write for like the town newsletter. Have you seen that before? I've seen a couple of service managers where they have like a auto corner and then they just put it, they just, every month they write a little blurb. It's a little three paragraph thing. And then at the end of it, if you need service on your vehicle, please call. Blah, blah, blah. Just that little outreach where they're not really expecting anything in return. I think sponsorship, I see a lot of dealers doing sponsorship events for schools and athletic events and stuff like that. I think that that helps. Just having the name somewhere where it's always in the back of people's subconscious is a really good way to do that. I think we can learn a lot from the IHOP model. Third thing is neat little twist at the end. But what about the take a stand mentality like Chick Fil A not being open on Sundays. What can we learn from that?

I mean I, I personally think that the other, I would exploit that the other way. And I would say we care about you. We are open on Sunday.

I don't, I don't think like.

I don't know, there's different, there's different thought processes to that, but. And Chick Fil A is very successful in what they do, so you can't argue with their success. But just my general approach or feeling about things is I would be talking about how I am open when they're closed.

So you know that Burger King actually, I mean, I don't feel like you really pay a lot of attention to the fast food industry necessarily because you're not necessarily going to Burger King for lunch every day. But Burger King has an interesting campaign. They say come to Burger King where on Sunday you can get a chicken sandwich. Which I think is absolutely brilliant. That's exactly what you're saying. But the lesson there is that no matter what your environment is, you can create an advantage based on perspective. They're taking a stay in Chick Fil A, saying, we're not going to be open on Sundays. Or. Or maybe if you've got. You're in a town with a bunch of dealerships that are closed on Saturdays and you're the one that are open on Saturdays, maybe you make a big deal out of that. Right. Or vice versa. If you're really stuck to it, you say, take the Chick Fil A and go and be like, no, we're closed on the weekends. We care about our people, and blah, blah, blah, blah, blah. So you could go both directions on that. I'm way more apt to say we're the ones open on Saturdays.

Saturdays, yeah. Sundays.

No, I mean Saturdays.

Oh. I. So I feel like I wouldn't do it like Burger King's doing it, because I wouldn't want to offend people that are going to church because I think the idea is they're Christians and they're going to church.

Clearly. I think that's Chick Fil A stance.

I. I wouldn't go right at them. I would do it in a way. I was like, hey, the best place to eat after church. I would do it a little bit different because I. I'm not. I understand that that's important and that they want to go to church, but I also have my whole life gone to big meals after church on Sunday.

Yeah. It's so funny that in a restaurant. Yep. So the meal after church is an event.

That's what I was like.

Church. Yep. I remember that, too. I always went to my grandparents without offending anybody.

Just. But maybe that's just because I was raised that way. I don't know.

No, that. That's relatable. That makes a lot of sense. You can go at it and. And not necessarily punch Chick Fil A right in the face. You can. You can compliment them.

Yeah. Just see that there's a window there and try to exploit the window without offending the. Because the people that.

That'S going at aren't going to. They're not going to go to Burger King because they think that. That. That Burger King's attacking their religious views.

Yep.

I wouldn't. I don't want to make it about the religion.

Fire on them really easily. That's great. Good stuff. All right, last but not least. Am I told any jokes today? Two.

Well, this is Amazon Prime.

That was pretty good, wasn't it? Yeah, it's interesting though, like internationally, thinking about the international climate. I'm really worried about what's going on.

And this is a joke. This is clearly a joke. Maybe what I was hoping you were going to do as a tribute to Norm was do the moth joke word for word, like memorize it and deliver it exactly like he would. So I've know how many views we would get.

I spent a lot of time watching the moth joke, and I've. I would say I've probably got about 75% of it committed to memory.

How's it start?

So this moth, he walks into a podiatrist's office.

It starts with the driver.

Oh, that's right.

35% memorized.

But if you've never seen the Norm moth joke, he was on Conan.

Yes. It was a Conan o' Brien thing, which Conan played perfectly also.

Well. And Norm used to be a writer for Conan.

Yeah. The way that they worked off of each other was perfect. Much like the way you and I work off of each other for the jokes.

No, Norm.

But talking about China. So some crazy stuff going on in China these days. Right. Did you hear they're drafting babies into the army? They're calling it the infantry.

I love it. That's good.

So the last outside the automotive industry model that I want you to talk about is Staples.

Having a back end with doing UPS services in their stores.

So the shipping.

Yep.

Yeah. And so like in our industry, that maybe applies like.

Doing detail.

Like in dent repair and airbrushing bumpers and things like that. Right.

A lot of that sublet type stuff that we typically don't collect a nice margin on. Yeah.

And so, and I think we get that question a lot, like, do you sublet it or do you do it in house? If you're big enough to do it in house, you're going to capture the. The fleet work, the internal work. Right. And then you have the ability to sell the retail. And it's funny that if you're detailing cars and doing a good job, literally replacing a customer's transfer.