Signal’s Jillings explains why exports are ‘a huge opportunity for Canadian dealers’

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Hello again everyone and welcome back to the Auto Remarketing Podcast. This episode originated from the live stage presented by Ship youp Car Now Auto Logistics at this year's Canada's Used Car Week in Toronto. We hope you enjoy this insightful conversation.

Hello, I'm Andrew Friedlander, Associate Editor of Auto Remarketing and Cherokee Media Group, and this is the Auto Remarketing Podcast coming to you on site from Canada's Used Car Week at the Westin Harbour Castle in Toronto. With me here on the SYCN Auto Logistics live stage is Taney Gillings, co founder and president of Signal Technologies, a platform designed to help Canadian auto dealers turn used cars into high margin exports. So it's not a coincidence that we're here to talk to Tane about exports, specifically what the landscape looks like for Canadians exporting cars since the US Tariffs went into effect back in April. Taney, welcome to Canada's Used Car Weekend to our podcast.

Thank you for having me.

So back two or three months ago, nothing was clear about what exporting used vehicles to the US Would look like, what the rules would be and how the process would work. Not only was there confusion, but in some quarters there was borderline panic about what would happen with Canadian dealers trying to sell cars south of the border. So now here we are two months into the tariff era and what are you seeing out there? Is, is there still uncertainty? Has the situation calmed down? Is it advantageous for Canadian dealers or is it an issue they should still be worried about?

Yeah, good question. And obviously if we rewind a couple months to the uncertainty around tariffs, you know, obviously there's the direct impact to used vehicles being exported from Canada, but then there's the general uncertainty. What does this mean for new cars? What does this mean for OEM allocations? So we saw a lot of uncertainty around that. Fast forward to today and there's a really clear picture of what the current environment is and if anything, in the future we see that environment becoming less restricting, but generally it's a healthy market. Most of the vehicles historically that got exported from Canada to the US were vehicles that were built in in the US anyways. So, you know, if you looked at Ford F150s GMC and Chevrolet trucks and then full size SUVs, that's probably 80% of the market right there. Anyways, so all of that product was unaffected. You did see some vehicles from that were built rest of the world. So Germany, Japan, Korea, Canada, Mexico, that don't make sense in the tariff era. But most of the vehicles that were exported or were tariff exempt anyways.

So as you mentioned, the majority of used vehicles being exported are US built. But when the tariffs took effect, as I recall, the rule was that vehicles would be taxed according to their percentage of US Content. Is that actually happening? And if so, what effect has that had?

Yeah, good question. So on vehicles, that country of origin is US so VIN starts with a 1, 4 or 5. There's no tariff, there's no measurement of contents of vehicles. Where that comes into play is for vehicles that were built in Canada or Mexico that would be under the USMCA trade Agreement umbrella. And so there's a future opportunity to say, hey, if this vehicle was built in Canada, but had X percent done in the US then would that lower the tariffs? And so there's an opportunity there. We're not seeing it manifest itself in any material way yet, but who knows, that could change.

So one area I heard a lot about in the months leading up to the tariffs was that there have been large numbers of U.S. dealers coming across the border to buy used inventory at Canadian auctions to take advantage of the favorable exchange rate. Has that been affected at all?

Yeah, I was actually just talking about this with someone in the hallway earlier. You do see US Dealers come and buy in Canada and the same. Once you acquire the vehicle, the same thing holds true. If I'm a Canadian dealer exporting that vehicle to the US Or I'm a US dealer that's purchased it and importing it. Right. You still have to go through the same compliance and export import processes. I think what we're seeing now is the reason US dealers are buying in Canada. If you take a, and I'm just going to use an example here, a vehicle worth $40,000 in Canada is worth $45,000 in the U.S. for the right car. So what that means is a US Dealer could go into Canada, acquire the vehicle for cheaper, or the Canadian dealer can take that vehicle, export it down to the US and realize more profit. Right. And so it's just a matter of where in that value chain each dealer wants to participate. We see a lot more Canadian dealers selling in the US because they'd rather capture that $5,000 difference. But you do still see US dealers buy in Canada.

So that brings me to how important is the export market to Canadian dealers? I Mean, obviously they're selling in the domestic market to their customers here. So how much of their inventory should be going to the US and how do they determine which vehicles should be exported?

Yeah, really good question. You know, this export market's been around for a long time. There's 350,000 vehicles a year that get exported from Canada to the U.S. when you talk about how important it is to a dealer's operations, most Canadian dealers are participating in export one way or another. Again, in that, in that value chain, they might be selling a vehicle through an auction in Canada or to a wholesaler in Canada who's then exporting the vehicle. But a lot of those vehicles are getting, are getting exported today. And particularly for your domestic stores, right, Your Ford, gm, Stellantis stores, when they get a customer that comes in and wants a new car in order to evaluate that customer's trade in, they almost have to use an export number because if they don't, the competing dealer down the street will. Right. And so if you don't use export to price the vehicles that make sense for exporting, you're just in an uphill battle on the new car sales side. So one of the strategies that we see for new car stores is how do I identify the right vehicles for export, which is part of your question. And then once we've identified those vehicles, how do we put the right price on them so that we can support our new car sales?

And what are the most desirable vehicles to be to be sending south of the border?

Yeah, lots of pickup trucks, lots of domestic SUVs. I mean, if you look in either the Canadian or the US market, 70% of those markets are. 70% of those. You know, the used car market in Canada and the US is pickup trucks and SUVs. Right. So you see a similar concentration of the types of vehicles that get exported. But yeah, it's pickup trucks, full size SUVs. In the current climate, we're seeing more domestic vehicles. Obviously, though, you're still seeing some on the, on the import side, assuming the vehicle was still built in the U.S. right. So some BMWs that were, that were built in South Carolina and Nissans and Infinitis and things like that.

Right, right, right, yes. So after all the speculation and all the concern, we heard for most of this year, how much has actually changed for used car exports since the tariffs took effect. Can dealers see any difference when they're sending vehicles, used vehicles to the U.S. yeah.

I mean, the one difference is you don't want to send a vehicle that's got a 55% tariff on it. Right. Because that is going to sink your profit overnight. So you got to pick the right vehicles. And at signal, we give dealers tools to identify, hey, I'm looking at this vehicle. What's the value to me? Should I export this vehicle? And are there any gotchas. Right. Such as high tariffs? But once you identify the vehicle, the process remains the exact same as it was before. Right. So yeah.

Okay. By the way, to our listeners, just before this, Tane led a workshop here at Canada's Used Car Week on how to win with exports. Can you give us a little taste of that session, kind of a quick summary of what you talked about?

Yeah, a lot of it was just removing some of the fear and uncertainty for Canadian dealers. One of the things that I mentioned in my workshop is if you talk to a dealer in Canada, every single one of them has heard about export and like 1% are participating themselves. Right. But what I've seen with franchise dealers, once they lean in the profit that it drives to a dealer's bottom line is undeniable. So I'll share one anecdote from the presentation. I was speaking with a dealer based here or southwest of here in western Ontario, mid sized domestic store, rural area. And they just started exporting three months ago. And so the dealer shipped his first load, a transporter load, six, seven, eight vehicles, shipped his first load of vehicles to the U.S. sold them, shipped another load, sold them. Now he's doing one or two loads per week of vehicles. But what got me was unprovoked. He said, hey, so I did the math on how much money I left on the table last year. He's like, I left between 700,000 and a million dollars on the table. And you think about that for one midsize store. And how many different dealers across the country are in that exact same situation where they're giving away economics that they could be bringing in house in a way that helps also drive new car sales. So huge opportunity for Canadian dealers.

So maybe your message to the dealers about exporting in this current environment is basically, don't be afraid of this. It's a lost opportunity.

No. And you know, in today's day and age, there's all the tools out there to be successful. You know, we give our dealers a playbook to be really successful. And one of the things that I'm proud of is every dealer that we've worked with to export vehicles has continued to export vehicles because it makes sense for them. Right. So no reason to be afraid Tony.

That'S really great information. I appreciate you for sharing it with our listeners and attendees here at Canada's Used Car Week. Thank you. Thank you, Andrew and we've reached the end of this episode of the Auto Remarketing Podcast. If you'd like to hear previous episodes of the program, you can visit our website@autoremarketing.com and click on the Podcast tab to access our library of past shows. Or subscribe through your favorite podcast platform, including Spotify. For the entire team at Cherokee Media Group, I'm Andrew Friedlander. Thank you for listening to the Auto Remarketing Podcast.

We hope you've enjoyed this episode of the Auto Remarketing Podcast from this year's Canada's Used Car Week. And if you've missed any of our previous episodes, just go to our website@autoremarketing.com and click on the podcast box to find our library of past episodes. Or simply subscribe through whichever platform you get your podcasts four fellow hosts, Bill Zidites, Joe Overby and Andrew Friedlander, as well as our fantastic executive producer, Matt Rice. I'm Nick Sulavich. We thank you for joining us and we look forward to having you again next time on the Auto Remarketing Podcast.

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