How The Global Chip Shortage Is Affecting the Auto Industry w/ Reuters’ Ben Klayman & Stephen Nellis

Welcome, everybody, to Service Drive Revolution. We have an exciting show for you today. We have two guests and we are going to talk about what's going on in the industry, starting with the shortage in electronics and microchips. And it's affecting everything from manufacturers closing down plants to us at the local level, fixing and servicing the vehicles and trucks, because the manufacturers kind of shut down production, which then the secondary market shut down production, and the production of microchips was picked up by other industries. And it's really hard for us to recover right now. So we're going to talk about that, but we're also going to talk about there's a huge silver lining in all this. We're going to talk about the manufacturers competing, the future, the future of electronics and consumer perception of our industry unions. We get into an incredible conversation that's really fun and you're going to enjoy. So we have, from Reuters, Detroit Bureau chief, his name is Ben Clayman, and a Reuters reporter, Stephen Nellis. So let's go talk to him.

Okay, so the big topic here is the shortage of chips in the industry. I believe that I've contributed to that because I got the Moderna chip twice, so they gave it to me twice. I know a lot of countries don't have access to the vaccines and the chip like we do here in the US but what is. And maybe you can start, Stephen, what is the cause of. Of the shortage in chips?

So the cause is actually pretty simple. It's that too many people want them. Right. And it's for everything from laptops, like the equipment that we're using to do this, this podcast. Right. So what happened is last year during the pandemic, lots of people bought electronic stuff. So a lot of people got a new phone, got a new camera. A lot of people had to get a laptop if they were going to work from home. What that basically did is took all the inventory that had been sitting around in the chip world and basically sucked it dry. Made the situation very tight. And, you know, Ben can actually speak to more of this from the automaker's perspective. But at the same time that was happening, the automotive world was sort of having a collapse. And, you know, about a year ago, and so those guys said, we don't know if we're ever going to make cars again, if people are ever going to drive back into cities. So they wound things down pretty tightly and quit putting orders in. And the key thing to remember here about chips is that it actually takes a long time to make one. It's a really complicated process.

If I come to you and be like, dude, Chris, I need it shipped now, you'd be like, cool, come back in about 12 weeks and I'll have it ready for you. So you've got this combination of all the inventory is cleaned out because of the pandemic boom. Like one of the companies I cover here at Reuters is Apple.

Right.

Their sales have been on fire, so they've been selling lots of goods that cleaned all the inventory out. Carmakers didn't really know what their plans were going to be. And it all came crashing together sort of at the beginning of this year.

So, Ben, is the situation that the automakers panic and then the automakers also have a secondary market where you have Bosch and Siemens and Johnson Controls and all these other companies that make parts for them. So they panic on them, then they stop ordering and then the other industries pick up those orders. So like Apple says, well, let me take that, that inventory or that production and what happens?

Like, exactly, Chris. So, you know, go back to May and June of last year. The auto industry in the US shuts down. So those guys immediately, the automakers turn to their big suppliers, the names that you mentioned, and say, hey, we don't need those parts, so you can stop ordering them. So they did. And as Steven pointed out, the consumer electronics industry was more than happy to step in and take up the slack. And the automakers thought like, oh, we're not going to have, even when we come back, demand's going to come back slow so we don't have to worry about this. Well, they were wrong. You know, demand came back with a vengeance. And so they're selling cars like crazy and they need to get all the chips they can. And obviously they're coming up far short. And the other irony of this all is, is the automaker is used to being the 800 pound gorilla with its suppliers like the ones you named. However, in the chip industry, the automakers are a rounding error. They don't have the power there. So it's not like they can muscle their way to more chips.

Yeah. It's probably important to point out too that even the 800 pound gorilla, which is Apple in the chip business, they are getting pinched by this too.

Right.

They just said last week that they're going to have a hint ahead of about 5 to 6% of their revenue. So even the mightiest company in this business is getting pinched. Now, obviously that's a lot different for Apple, saying, you know, we'll sell a few less iPads and Macs. Which are not their flagship product, like the iPhone. Right. Versus Ford saying, hey, we don't know if we can make the F150 right now.

And so what? And I believe an article you guys wrote, you were, or I think you were talking about that they've asked judges to step in, or they're trying to ask judges to step in and give the automakers priority. And the judges have said, oh, we don't want, we don't want to get into that because it's not fair. Right. And so they can't even wield their power in court.

Yeah, that was one case with a particular supplier. But, yeah, the judge knew that if she actually had ordered the chip makers to supply this, this, you know, parts maker with the chips, she would have been opening a can of worms. Because how do you decide which industry or which supplier gets what? I mean, that same kind of thing is happening in D.C. where they're weighing how they handle things. They don't want to step in and say, oh, well, you got to do this for the auto industry, because if you favor one, that by definition means you might put someone else in another industry at disadvantage.

And so the way that we sit here right now, I believe the list of manufacturers not shutting down factories is longer than the one of the factories being shut down. Correct. Because just about every manufacturer is being affected by this. Right? I mean, it's from BMW to GM to Ford, everybody is, is being affected. What is the recovery time and how, how, how bad is it? Like, how long does it take to dig out of this?

Well, I mean, it's funny, you know, over the last week we've had all the automakers basically agree that the second quarter is going to be worse than the first quarter. That's going to be what they think is the bottom. Now, I have to point out they previously said that the first quarter would be the worst and would be the bottom and we would start to recover. So they've been wrong before, but the current thinking is second quarter is the bottom. We start to slowly recover after that, although it lingers through the rest of this year, and we start to get back to some normalcy next year. Now, whether that happens or not, you know, I guess, you know, time's gonna tell, but they've been wrong before.

So they're, they're trying to manage propaganda while they figure it out, but we don't really, we don't know the extent of it until we do, basically.

Right, yeah, that's fair. I mean, like yesterday, last week, Ford said it was Gonna all told when the year's out, they're gonna lose 1 million vehicles to the chip shortage. So that's a, that's a huge hit. And they said the hit financially was gonna be 2.5 billion. GM didn't give a number on the number of units lost today, but they agreed that second quarter is gonna be bad and they're gonna lose like about 2 billion to the chip pit.

Now how will this affect the local dealerships and parts suppliers for repairing vehicles and used cars? Cause the used car market's going crazy also. But, but chips are involved in a lot of those repairs. Is it going to take a little while for that to be affected in that inventory or is it coming very soon?

I mean, I'm not as familiar with the used market as to repair parts, but I mean, certainly it is affecting the used car prices because we're seeing demand of new cars are hit and that's causing people to turn to used cars. So the used car demand's exploding and the prices are going up there. So it's certainly going to continue to play out. And I talked with a lot of dealers who said.

One dealer said to me, I would take this till I'm in the grave because they're making huge profits right now on getting full sticker price as opposed to the industry historically has always been, okay, what's the deal? What are the incentives? What are the rebates? I'm paying 10, 15, 20% under sticker price. Well, nowadays you're paying full sticker for pretty much any vehicle you want. I mean, GM today talked about the average new vehicle transaction. Prices on its full size trucks in the quarter were up 10%. And for the big SUVs like the Yukon, those were up over 20%.

Yeah, the financial statements I've been seeing the last couple of weeks have blown me away that, you know, new and used apartments that typically maybe would be under $100,000 in profit are making 800, 900. Like the profitability is, is insane. So then what, what do you think, Ben? And.

Because that's really the, the sunshine in all this, right, is that we had an issue pre pandemic where we had too much inventory. And now we have a situation where if Tesla had an advantage, it was that they didn't have flooring expense, they didn't have an inventory, people would order them and then get them. And it, you know, it cuts out a big chunk. I know, from owning a dealership myself and running a very large dealership, my flooring expense could be a Hundred thousand dollars in a month. You know, of having $20 million worth of cars on the ground. Is this an opportunity for the manufacturers to flip to an order system where customers can't go in and pick up the car today, but they can order it and eliminate that, that disadvantage in the marketplace financially and catch up to Tesla a little bit by changing that model.

I definitely think we're moving more toward that. I don't know. Time will tell. Some automakers are gonna move fully to, like, build to order or order to build system. But We've had the CEOs of Ford and GM in this past week say, we're not going back to pre pandemic levels of inventories. They've seen the profits that they're making now. An analyst on the GM call today even said when GM was talking about, we want to rebuild our inventories a little bit, the analyst was like, why? You know, you've had the three best quarters in history that you've ever had. Why would you want to go back? And Mary Barra's stance was, listen, we're never going to go back to pre pandemic levels. We have to go a little bit higher. Her thinking is she does want to have enough inventory so that if you, Kris, walk into a dealership saying that you want a particular car, that you're going to be able to walk out with that car truck right there.

Yeah. You know, I think back years ago, and I've experienced this in two ways. One is, like, in Illinois, they made it illegal for you to sell cars on Sunday. And so everybody thought, oh, you know, that's terrible. That doesn't make sense. But the truth of the matter is, the same amount of cars sold, they just couldn't buy them on Sunday. But the equalizer was everybody was closed on Sunday. Now, another scenario is I'm running a dealership, and my sales manager comes to me and he says, hey, I have a handful of salespeople that want to work on Thanksgiving. Would you be okay if we opened up? If we find somebody to answer the phones and we. We work on Thanksgiving because you could see on the security cameras, people would come to the dealership and look at cars. You're just closed, right. We'd sell 20 cars that our competition wouldn't sell because we were open and people would call and they had that day off. So if it's fair for everybody, right. And everybody's doing it, then there really isn't an advantage. So it'll be interesting to see how the different manufacturers approach that, because you know, you. I recently, my fiance wanted to buy a Tesla, and she calls up Tesla here locally in Los Angeles. They don't have anything for her to drive. She can't drive the new S. You order it or you don't, but it's kind of like, you know, if you want it, you'll go online and you'll order it, but we don't have one for you to drive, which blew me away.

Yeah. I definitely think, Chris, that the competition will determine this as well. If someone takes a particular approach and is having great success with it, they will be copied.

Yeah, it's fascinating. So what do you think, Stephen? By the way, this new iPhone here is my favorite one because it's like the five, the flat. I love. I love this thing. What. How will this affect the iPhones? And maybe will they delay not putting out the iPhone 13 for a while?

So, so far, Apple has said that they expect this. What shortages. What shortage impacts there will be to be limited to the iPad and the Mac and to not. They haven't disclosed any kind of impact to the iPhone. And while they haven't explicitly said why that is, I think that it's probably reasonable to assume that just like the automakers, you know, Ben has been reporting that they're pulling all kinds of levers to save chips for their most profitable products and put them there.

Right.

And allocate those chips to the cars that make the most money for them. I think you can assume that Apple's working hard to take whatever chip supply it can get and protect the iPhone, because that's the biggest selling product, the most profitable product. Now, in terms of the timing, they were already late with that iPhone 12 relative to where they usually launch it during the year. They usually try to announce it in early September and then kind of get it out there by late September, October, so that it's sort of fully in the sales channel physically. By the time that people are really starting to do holiday shopping in the US And Europe, they kind of missed that window last year, but it doesn't seem to have actually hurt them. So it's a little too early to say how this will affect the. The iPhone 13. The yearly cycle there is usually around June to July is when the factories, mostly in China, start to ramp up and start making those things for that launch. But. So it's a little early to say. I would say that, though it's hard to see how it won't have some impact, whether that's they have fewer color variations or.

Fewer options. For example, there's been some. Some anecdotal data that that small version of the iPhone 12, the iPhone 12 Mini, which I kind of like because I like to be able to put my phone in a man's jeans pocket. And it's like hard to do that with these big phones these days.

But you know, there's already some anecdotal evidence that that one was not as strong a seller. People just like the big screen. I'm the weirdo. I'm the only guy who doesn't like the big screen. And so, for example, what you might see is, and I haven't heard any solid reports of this, but might say, you know, we're going to delete that model from the lineup and just on the more profitable ones, but it's still a little early to tell. This stuff won't really ramp up until the summer. I think you can also assume that the biggest chip makers in the world all do a tremendous amount of business with Apple. And Apple has a lot of money to plunk down on the table and say we will buy that capacity. We've already seen that kind of activity with other chip companies like intel and amd. These guys make computer chips. But. But you know, they've already been plunking down money with their suppliers to say we'll buy you some machines, reserve the capacity for us, that kind of thing. I think consume app will also do that.

Yeah. It was interesting that they came out with the purple one recently, which the story I heard was that was Steve Jobs favorite color and it was a tribute to him in some sense. There was some anniversary, his birthday or something. I don't know what it was.

They put a rainbow up in the middle of. So Apple has this big spaceship kind of thing and they put a rainbow up in the middle of this big ring ship headquarters. And in the middle of it there's kind of a field with trees and plants and stuff. And I think it's more than a year ago now. They put a big kind of rainbow thing up for.

Steve Jobs birthday and they actually have just kept it up. As far as I've been able to tell, it's still standing there even though there's nobody in Apple Park. So those colors sell really well too. You know, you wouldn't think it, but a lot of people who either haven't bought a new iPhone in a while or see. Yeah, there you go.

What color, Ben?

Purple.

You did purple?

Yeah, you got the purple one. All right.

The older one. I don't know what, you know, they're about to give us the iPhone 12. Reuters. So we'll see if we get a choice on color.

I think it's like Henry Ford. You can have any color you like as long as it's black, Right?

Exactly.

That's funny. So Ben, how will this affect the unions.

And the workers on the front lines in the factories? How is it gonna affect them?

Well, obviously when a plant goes down, those workers are on layoff. But the uaw, the United Auto Workers union, has contracts that allow for, you know, a lot of the workers get pretty close to, I think like 90% coverage between unemployment and what they get from the company so that they won't suffer too much on this. I think, you know, one of their big concerns right now that they're focused on, I don't know if you've seen these stories, Chris, is just the, you know, the talk of, you know, like GM just had the announcement about investing a billion in making EVs in Mexico. And you know, the UAW is very focused on, it wants those jobs in the US it wants the battery plants that are in the US to be union represented. That's kind of their big focus right now.

So how far do they need to come in order for it to make sense? Like we can put pressure on the manufacturers, right, as consumers, as the government, but how far does, does you, do they need to come in order for it to not make sense in Mexico or somewhere else?

I mean, they're very, you know, obviously these companies, they know what they make per vehicle and they, they use Mexico for a reason. Now the union doesn't like those reasons. They want the jobs to, to be in the US So, and they want them to be sort of these full paying union jobs. You know, the problem then becomes things like the battery plants which are going to only grow in importance. You know, typically those pay, you know, far less. Whereas the union dues, I mean, the union rates might be more like in the 25 to $30 an hour range. The battery plants might be more in the $10 to $15 an hour range. So, you know, far less. But I think the union's thinking is, well, first we got to get these jobs union represented and then we'll worry about, you know, trying to raise their standard of pay as we go.

Do you have a sense in the marketplace? And I know it's fresh in a lot of people's minds with Amazon kind of winning that vote in the, in the south, was it in Mississippi? What is the general consensus.

You know, for unions? Because a lot of people That I know that work in a union job feel like the union's just another layer of money that they're not getting oftentimes and it doesn't really, you know, show them a huge benefit. But if you look back in time, there was a time where unions were very relevant and very effective at normalizing and protecting workers. Are we at a time where that, that needs to be, you know, adjusted and rethought and maybe the way that we did it 60 years ago just isn't working for helping companies like Ford and GM be competitive against a Tesla. Is there a way to accomplish both?

Yeah, I don't know. It's interesting because back then history shows that the companies maybe took advantage of workers more so it was easier for the unions to justify why they were necessary. And to your point, it becomes a much harder argument when say a Toyota or Honda is in essence paying almost the same as the Detroit three automakers. So then any anti union supporters can say, well why do you want to bring the union in? They're only going to take away some of that money from you. I've talked with labor attorneys who say unions tend to do much better organizing plants when they are making arguments based on like safety and things like that as opposed to if you're making an argument based on money, they tend to lose those organization tries more often. But I think that that was a big blow for the union movement to lose the, the Amazon push. I think that was in Georgia as I recall. And so it's going to be interesting to see how this goes moving forward. You know, the unions feel they maybe have an ally with President Joe Biden, you know, what he does to actually support them now. Like for example, I know the UAW is making sounds with some of its political allies to push for making the EV tax credits only applicable to EVs that are built in the United States. So you know, that would add a layer of pressure. Now whether they can pull that off or not in, you know, in a Senate that's 50, 50 I think is going to be, is going to be hard to do. But I mean those, that's the kind of thinking that they're making right now.

There's two things that stick out to me in that conversation is one is we're in a climate where the population of labor, you know, people that want to be laborers is shrinking and so they have an advantage and you don't necessarily need a union because the workers have an advantage and they have a choice. Right. If you're willing to work you can be a plumber and make $150,000 a year because there just aren't people that want to be plumbers or technicians. And you know, so it's a weird marketplace where the worker has more leverage because the population and the baby boomers retiring and that sort of thing. But the other thing that sticks with me is, you know, up where I grew up in Washington, Amazon opens a warehouse up there in Belfair, Washington, and they're hiring a couple thousand people and they're redoing the streets and they're, they're investing all this money in the city and the infrastructure and people are elated and they love Amazon and they love that they can, you know, start off at 15 and work their way up and make 25. And, and the general tone there is very positive. But then when you see what, what is said on the news about working for Amazon, it's like, you know, they're starving people, putting them in cages and feeding them once a week. And it's, it's just, it's, it's so hard to understand where the truth is in that. But the thing that I revert to, I guess, and this would be what I would, what I'd love for you to comment on is I believe that workers have a vote in that because they're in demand.

Yeah, yeah. I mean, but also, and I think what played a role, say, in the Amazon vote was if a company subtly or not subtly says, you know, well, you know, we can move this plant somewhere else. I mean, a warehouse, for instance, would be definitely more easy to move than an auto assembly plant that can, that can hold sway with. I'm sure that affects, I mean, not all of them, but it's certainly going to affect a portion of voters that are going to say, listen, I like having my job, I'm not going to vote for the union.

Yeah, but it does affect the unions and if they're not growing, and the general perception isn't that it's a positive thing for workers, it does affect them when they go to negotiate with GM and Ford later on, right?

Yes. I mean, it doesn't help the union if they have continually failed to organize the foreign owned auto plants in the U.S. you know, they came super close a couple years ago to organizing VW's plant in Chattanooga.

I think they would have maybe had a good shot at being successful if they hadn't had their corruption scandal within the union because they almost won with the, the corruption scandal clouding the whole issue. If that corruption scandal hadn't been around, they probably would have won that. But that just makes it almost impossible, not impossible. It makes it really hard for the union to sort of successfully negotiate with the Detroit three. When the Detroit three is saying, listen, guys, I can't give you X if Toyota and VW over there are paying that much less than X. Yeah, yeah.

It'S the, it's being competitive in the marketplace and a lot of times Ford and GM carry a bigger burden when it comes to, you know, moving fast, changing fast and being competitive price wise. Right, yeah, yeah, it's interesting. So what, what do you, what do you think the, the future is for dealerships in the next couple of years, besides higher profits? Do you think it gives a new life to the model of dealerships in the marketplace?

I mean, if they really stick to the lower inventory model, I would think that would make dealers happy in terms of, as you pointed out, lower carrying costs. With the floor plan costs, they might be able to, even if demand remains strong, they can advertise a little bit less because they don't have to do that as much if they're selling every car and truck they have. So I think the next big thing for dealers that I'm really curious to watch is as all these EV startups start rolling out and most of them have similar models to Tesla, where it's direct to the consumer, no dealerships, how that's going to, you know, affect the dealer model, how, you know, how are dealers going to try and leverage. The dealers are really, as you know, Chris, having been a dealer, dealers are very powerful sort of body politically in dc. I mean, they're tied in to the lawmakers. So I'll just be fascinated to watch how this plays out as the EV startups really start, you know, rolling out their vehicles.

Yeah, I think that the.

Biggest issue for them has been that consumers don't like the way that dealerships have done business. And so that's where Tesla gained so much leverage, is that it's very consumer friendly and dealers are trying very hard to change, but they're slow to change and their systems are antiquated. I mean, if you go into a service department, the basic system of how a customer is greeted, the RO is written, the work is given to a technician, is the same that it was 100 years ago. Like, I literally have a manual from Ford on how to run a service department and it's exactly how most of them are ran today. But consumers have changed their perception, their needs, their wants. The vehicles have changed, everything has changed except for Us. And that's the, that's the thing that, that concerns me. You know, that's where Tesla gets the advantage. And we're handing it to them. We're handing it to them and we shouldn't, we, we have home field advantage and we have that, you know, that leverage, but we lose it when consumers don't perceive value in what we're doing.

Yeah, I think, you know, dealers are going to need to. Where are they strongest and leverage off their strengths. You know, you mentioned your wife wanting to test drive a Tesla and not being able to. I think a lot of people still are going into the dealer even though they can move to online. Not that online isn't growing online, you know, with the dealers is growing, but there's still like a lot of people that like to go into the dealer, at least at the end of the process or at some point, touch the vehicle, see the vehicle. So like that as an example, if there are other things that dealers can do where, you know, that is their sort of natural advantage, they're going to have to leverage off those types of things.

Yeah, so like just the, you know, the team I have here in the office, like they've bought cars recently and they all come back and it's a terrible experience. They don't, they're, you know, they're younger and they don't, they don't like the idea of how the negotiations at a car dealership happen. And they, they feel like it's a sport, but they don't want to play that sport. And I posed this on a panel a couple months ago with, you know, some pretty influential dealers in the automotive industry. And I said, would you rather have Amazon's AI selling cars or your sales staff?

And what do you think?

They said, Amazon's AI?

Yeah, I mean, think about it. Like Amazon follows up. They're constantly serving up the AI in the way consumers are used to being sold is very soft but very effective. It's like we know everything about you, but we're just going to put it in front of you and you make the choice. So people perceive that they have a choice in, in the old school, hey, come in. We're going to appraise your trade. Sit there for two hours while we go try to find it. And no, you know, the four square and here's the payment. Today only people don't want to function that way. Right.

I mean, an interesting thing is if the model does change and they go to lower inventory where people are more often paying the full ATP, you almost Wonder if that changes sort of a lot of the things that people hate about the dealer. I mean, if everyone's. If you're buying a car, just like you would buy toilet paper where you don't go into a grocery and say, oh, this toilet paper is $10, well, I'll give you eight. I mean, you don't negotiate, you just pay for it. So I mean, if cars, if the auto industry switches to that, maybe that, I'm not saying that's necessarily gonna happen, but maybe that erases some of what people dislike about the whole dealer procedure.

Yeah. And then once again, there's another layer of expense that Tesla doesn't have. They don't have all those sales managers and salespeople. They don't have that, you know, that, that expense. So, Stephen, kind of wrapping it up, the big question, and I'm sure you know the answer, but I don't know if you'll tell us or not. Is Apple going to make a car?

So we've reported that they're working on one for as early as 2024. I would say it's at this point fairly sure thing that, that we said in the story when we wrote it that, that that timeline could slip. And so I think it's safe to assume with all the other supply chain things going on. Yes, the timelines probably definitely slip by now into 2025 or later. But we know that, we know they're working on it. It's still a little bit tbd exactly how they roll it out. Right. You know, but they have core technology around autonomy and electric vehicle technology. We know they're going to put it to use somewhere. I think the question that's still to be determined is exactly how they bring it to market. Is it the Apple car? So far we still think it is. Who's going to build it for them? That's still tbd. And how exactly they will get that to market. Would they do a Tesla like thing? Would they leverage their huge network of stores in the United States? You know, listening to you guys talk about the way the car dealerships work, I thought, think about how that compares to when you go into an Apple Store. Right, right. If you've got, you don't try to get. There's no. Most people find it a good experience. Right. The Apple retail experience rates pretty high and they actually pay their retail employees pretty high. It's a pretty big expense. But Apple still makes phenomenal money off of it. Right. So there's a way to have that physical retail and make money off it whether Apple leverage it with that, it's still an open question. But to me there's no question they're going to be there with electric vehicles vehicles. It's just how are they going to go to market with it? There's way too many chips and stuff and too much technology that goes into these vehicles for them to ignore that market. And frankly, you know, they've just got too much computing expertise and really the thing to think about. And I know this is a funny, you know, funny words and stuff to use on a show oriented and automotive audience but like the user interface and user experience is really, really important. Think about, you know, self driving cars and whatnot. People are probably going to get be terrified to get into these things. And who can make your grandmother or your mother comfortable getting into a piece of technology like that and letting it take the wheel. Right. I mean that's something that Apple, their whole brand is based on taking complex technology that you know, is not approachable for a lot of people in making it approachable. They're going to be there questioning when exactly how they get to market.

No question the industry is scared of those guys. I've seen studies where they ask people who would you favor for say a self driving car? The studies I've seen say oh, Apple and Google. Yeah, the tech companies, the auto industry is scared of those guys and Amazon and what, what they do or don't have coming and what that could mean for them and their profit margins.

Yeah. So how, how naive to that do you think they are, Ben? Like when they're scared, are they.

Are they using that to actually, you know, get better? Because it feels like to me we're doing things the same way we've always done them, we're talking about it, but really not much has changed when you talk about the, the experience for the consumer.

Yeah, I think it's starting to change because of money. I mean like they see the valuation of Tesla, it's crazy. I mean Tesla's worth more than the industry combined. And so they want a piece of that action. Give me some of that. And.

Will they ever be valued at the same way because they still have all their ice, their internal combustion engine operations, Maybe not, but they're not getting the full value they feel for their electric vehicle and autonomous vehicle efforts. And so they are being more aggressive. We're starting to see them rolling out their vehicles, whether it's the Mustang Mach E or we got the Hummer pickup coming later this year. So they're starting to finally over this and all the startups are coming that are pressing them. So over this next sort of, next two years, I think we're going to see a lot more of sort of the next gen technology, technology coming out. And I think it's going to be interesting to see how that changes how the consumers perceive the automakers.

And Chris, one thing to add in there is just that, like how Apple will interact with the automakers, it's not at all clear that they'll be in direct competition. Right. I think the one thing that Ben and I and some of our other colleagues at Reuters have been finding out is that the automakers are very, very savvy, that, you know, Apple does need a manufacturing partner who knows how to do this stuff. Stuff. So they probably do need to work with the big automaker. But the automakers understand that if they don't approach this right, they could just end up stamping metal while, you know, they stamp an Apple logo on it. And all the money goes to Apple. Right. So they, they, they're actually coming into this very savvy. And, and Apple, I would say we, we think of them as almighty in a lot of business situations. But you know, it takes a huge amount of physical infrastructure just to manufacture 200 million of these little things. And this fits in a box, right? A tiny little box and fits a thousand dollars of value into a tiny box. So if you're talking about maybe cramming a hundred thousand dollars of sale value into something as big as a car. Right. And doing it at the scale that Apple wants to do it at globally, they need help. They, this is not the same as what they're used to doing. So, you know, from their side, they are going to have to understand that they probably can't just go in and steamroll the automakers either.

Yeah. So just out of curiosity, Steven, do you, what do you drive?

I drive a used with 140 something miles on it, little sort of hot hatch Mazda 3 with the 2 1/2 liter engine. I have to confess, I've never bought a new car in my entire life. I've always bought somewhere between clean used and total jalopies and just do all my own wrenching on them.

Yeah, but you're, you know, you're a smart consumer so you work on them yourself.

Yeah, yeah. In fact, you know, you were talking about dealers, so I bought this used Mazda from a dealer and one of the things was like, you're sitting there, the car's one price and they plunked down this thing that's like three or four thousand dollars more because of a warranty or whatever. And I'm like, dude. And, you know, and they also have the little sheep where their technicians have gone over it, and it's like, oh, yeah, the. What was it on this particular one? I think it was a. Like a swing or like a sway bar bushing in the back. Right. And they're like, you know, like, $250 to fix that mike, dude, that's a $40 part in, like, 20 minutes of my time. Right? So, you know, they kind of try to spring that stuff on you, and you just have to tell them to take it off. And it was just like, yeah, that's why I don't do this. So the more recent car we bought, which was a used Honda crv, we got it from basically just like a local dude who, like, owns a shop and a little used car dealership where he buys stuff, fixes it, sells it, that kind of stuff. Real cool guy.

Yeah. So you understand that the experience for the consumers is what has to change. That's Tesla's leverage in the marketplace. More than more than the actual electric vehicle is the experience. I, you know, that's what.

And I would pay. You know, the thing is, I would actually rather have a no haggle, like, go to the website, you know, like one of the. I mean, there are several vehicles that I just think, look, can I cuss on this show? Is it a cussing show? Anyway, freaking cool. Like, the new Ford Bronco, I think, just looks amazing. And it just, like, you know, gives me all kinds of, like, fantasies of driving it around in the woods and stuff like that. And so I'm just like, that's awesome. And I would totally be fine just going to the Ford site and being like, yeah, this is the exact color and stuff I want. I don't care if I'm paying this. If you like the point of buying news, to get exactly what you want. Right. You're not just picking off the used lot. So, you know, if you could do that and the dealer's just there to help you more. Like, when you go into other kinds of store, like the Apple Store, you know, they're just going to help you find the phone that you want. Right. If it was more like that experience, I wouldn't even care as much about paying full price. I don't need to chisel them. Like, you know, if you want to chisel, Go buy a used car in the private market.

Yeah. So the same thing is like, so if my screen breaks on my iPhone, or on my iPad. I go in and they look at it and they go, okay, you need a screen. It's going to be $200. And I'm like, okay. And I sign the thing and they go, come back tomorrow at 4. Now think about taking your car. And you go in, you tell them what's wrong, then you leave. Nobody calls you. You call them. And then there's this back and forth whole thing. And then they finally call you and they tell you you need a bunch of other stuff. Right? And then like just think about the, the efficiencies in the two different systems and how consumers end up feeling at the end. And that's why I say it hasn't changed in a hundred years. But it could be, it could be the same system, right? We're just so stuck. What do you drive, Ben?

I am a point A to point B kind of guy. So I have a Chevy Cruze was the last car I bought. I did get a hand me down from my mom and dad of a Toyota Prius.

Oh, and do you like the Prius?

I do.

So I drive a Jeep pickup. The new pickup.

The Gladiator.

Yeah, the Gladiator. It's a couple years old, so I live in Los Angeles, but I have it all jacked up. It's got a big lift on it. I crank country music and I got a gun rack just to scare people as much as I can here in Los Angeles. I love to pull into our building cranking country music in my pickup truck. The way I look, it's just funny.

Well, out in the Midwest, Chris, with that setup.

Yeah. I'm probably more, more, more suited for the Midwest, honestly. Well, gentlemen, this was really fun. I hope we can do it again. I really appreciate the insight. I, you know, love the, the article and what, what you're doing and for taking the time for our audience is very generous of you and I thank you very much. Everybody make sure. And we'll put the links in the description also. But Ben's Twitter is Ben Clayman. K L A Y M A N that's on Twitter. And then Stephen is Stephen. S T E P H E N N Ellis. So Nellis, right?

Yeah, that's it. Like the Air Force base in Nevada.

Awesome. Thanks a lot. Gentlemen, thanks so much for watching this episode of Service Job 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 that's offers.chriscollinsInc.com I'm Chris Collins and I'll see you in the next video.