Hall on Scout DTC Win in CO, Haig on Dealership M&A Market Update | Daily Dealer Live

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brand just got approved to sell direct in Colorado outside the franchise system is this a narrow ruling or is it the blueprint every OEM's been waiting for will break it down with one of the sharpest defenders of dealer rights in the country then we shift to the

buy sell market where valuations are holding where they're cracking and why brand strategy fixed ops and even politics are starting to matter more than ever if you own a dealership if you run one or plan to sell or grow in

the next few years today's episode matters to you we're excited to have you here but first before we jump into those topics let's hit today's auto industry news first up today 2025 is ending stronger than expected with us new vehicle sales on track

16.3 million units that's the best year since 2019 that according to Cox automotive but December shaping up a bit softer with sales projected down 3.5% year over year and a monthly star of 15.9 million that's still solid but it signals the market is losing

some steam after a resilient year what are the culprits well you can point to them elevated interest rates fading ev incentives and tighter consumer budgets are probably creating more and more pressure as for the automakers GM Fort hood

year well 2025 appears to be ending in good shape but 26 will require more disciplined operations to protect margins will ask Alan Hague more about that during his segment later today that notion rings next up today the notion rings

especially true for dealers facing the end of the year with more metal than they'd like dealers facing an inventory year and glut as 24 25 models pile up there's a growing pile of 2024 and 2025 inventory pushing some stores to price more aggressively to avoid straining floor

plans are disruptive inventory management but it's quite uneven across name plates it's a tale of two OEMs or more the Dodge Hornet for example still has more than 80% 80% of its 24 inventory sitting on lots while 2025 vehicles like the BMW I for and Lexus GX are also piling up according to data from icy cars I want to see that and that pressure is turning into real buyer leverage as captive lenders roll out lower rates and longer

terms to help more inventory next up today recent by cell activity coming up Patriot automotive cells New England Subaru stored at Imperial cars Hananiya automotive acquires Chrysler Dodge Jeep Ram in Florida dealership consolidation keeps on rolling Hananiya automotive just picked up a Chrysler Dodge Jeep Ram store in Palm Coast

adding another rooftop to its growing southeast footprint and bringing its store total count to 19 and it makes sense Palm Coast sits right between Hananiya's existing St Augustine operations giving the group tighter geographic coverage and more leverage in a region where it already has scale at the same time portfolio

reshuffling is happening up north Patriot automotive sold at Subaru store in north Attleboro Massachusetts to Imperial cars and again not so shocking given the strong demand consistent product performance and solid margins that Subaru vehicles typically bring

and that's keeping store valuations high and buyers active in the brand and so you don't forget you can see this deal on other announcements throughout the entire year by visiting CDG by cell tracker at CDG by cell dot com and next episode or hundred actually episode after next will bring back our jingle so

fine finally up today the Volkswagen backed EV startup scout motors has received legislative approval to sell vehicles direct to consumers in Colorado moving one step closer to bypassing the traditional dealership model entirely

the move let's scout control pricing branding and the buying experience end to end similar to how Tesla Rivian and Lucid operate and not surprisingly dealers aren't thrilled so today we'll actually bring on a guest ready and willing to have that conversation

but on that scout news that's a wrap on today's industry news

all right and Hannah Farmer says tuning in from Nashville Hannah what's up holidays from snowy Pittsburgh Lauren Klein Lauren thanks for being back on

dancey good to see Hague partners on the live stream and Alan responded thanks and Evan right obviously what's up and how are you doing Sam so

it's fun to be back and this is the Super Bowl of automotive it's a great selling week yoga car says it's raining in Massachusetts which means car buyers buyers will swarm to the dealerships to close out the year strong so

you having a good you having a good gap we care between Christmas and New Year's you leave

yeah you know I could complain but it won't change any of the any of the things happening but how about you

yeah same here same here but guess what I'm most excited about we get a bring on to industry experts today

first up our friend and I think he's been on the show now three times I think it is to talk about this new scout ruling in Colorado

let's welcome to the show Don Hall president CEO of the Virginia auto dealers Association Don welcome to the show

Sam you'll be good to see you guys again

Don welcome thanks for being here and by the way running the operating board the switchboard behind all this today is call short CDG zone we're on our own production staff today

and we're going to be back episode after next for our hundredth episode back with our regular team but props to Cole and the entire CDG team for bringing it today so

super pumped about that so Don welcome back what the heck is going on in Colorado Don

well you know before I give you a direct answer it is a Super Bowl week it's a week of selling cars and getting excited

I know my particular subject today may not be something that excites you necessarily today but something that as professionals committed to this industry

we all need to pay attention and we need to care about it so the board with through their department motor vehicles in Colorado basically what they did is they allowed

scout to sell direct their law has some wiggle room in it and I'm certain there'll be a lawsuit over this ultimately but scout picked the state of Colorado to sell direct

now if I were not a VW dealer and it's Super Bowl week I probably say hey we're selling cars baby I'm going to worry about that Don seems like an interesting guy but I'm going to move on because I don't care about VW because I don't sell VWs

at all look what scout has done is exactly what many if not all of our manufacturers want to do I have in my hands as we speak letters from the manufacturers to the Department of Justice the U.S.

dealers exist in the way we know them today to exist or they don't VW scout I've got a letter from scout right now to the Department of Justice in my hand and they made it very clear in this that they think the franchise system is a mistake

it is anti consumer it is not true the idea is what makes this country great is what they're saying freedom and fairness and the fight to earn success this is what scout is saying that their rights are being trampled upon by the franchise system

that affects everybody in the business whether you sell VW or not so VW wants an opportunity and here's the funny thing about this story guys is VW says North America headquartered in Virginia says no that's not us we're not doing that

that's scout well who own scout we don't own scout we're VW North America okay then that's your corporate owner out of Germany that owns you and own scout we have we have no control over them

no it's the same people but they're playing a little game here of kind of moving around saying well that's not us not us ladies and gentlemen manufacturers I will tell you factually want to sell direct

they're looking for ways to do it they want to criticize our systems our way of life and our competitiveness that we provide to consumers be it through sales service or any other other mechanism and they want to do that by doing it direct

this is a huge step we've got to prevail in Colorado and stop scout because it will be other states they will come to soon enough with a VW that by the way is lacking inventory they're taking away inventory they're taking away EVs

and now they've got a vehicle that's going to be hot and they want to sell direct that's what other OEMs will do as well

so Don the franchise system is a distribution model in the United States as well established and state by state ATAE such as yourself have engaged in with political bodies to make sure legislatively that that

that franchise system remains in taxed strong laws buried by state but but there's a template and in most manufacturers have respected that

what's the exact legal argument that cracked the door open here in Colorado and allowed scout an affiliate of Volkswagen to receive approval to go direct to consumer rather than respecting the already established franchise model

I'm going to pull some some actual language that they had their language in Colorado says that I'm going to read it so you all can hear it okay everyone else here as well

yeah operation of a motor vehicle dealer if the manufacturer has no other dealers of the same line make in the state in the words they can operate if there's no other dealers of the same line make in the state

well wait a minute interesting this is the W line yeah correct and there is no and there is none Virginia is very different they couldn't do what they're doing in Virginia

so what I'm saying to people is this number one you better give a damn this matter I'm an old guy I'll be gone but you won't be gone who have got a 20 year career ahead of you

you're going to be dealing with this and it won't you won't like this and I don't want you to look back and say well Don Hall was right I don't want to be right

I want to make sure dealers step up stand out and speak up and recognize the franchise system is under attack your states go to back to Sam you determine a TA Automotive Trade Association executive which is what we all are that run the state associations

go back to them and say I'd like to see a copy of the language that prohibits a manufacturer from selling direct in my state

get involved ask what that language means you read it give it to your lawyer get your lawyers comment make sure your law is strong enough that you've got an opportunity to prevail in the courts now California is picked up a lawsuit on this Florida has as well

so we're hoping they will do well at the same time if these laws are not well drafted and and and cover this properly we have a chance of precedent setting cases

meaning that cases federal cases that could potentially affect everybody in the nation and open up Pandora's box and what is Pandora's box

it's every manufacturer deciding if they want to pick out certain inventory called a new brand called the Lexus brand and then sell that direct

no thank God for people like Toyota who said no no no we're going to deal with Lexus and we're going to make Lexus dealers not every Toyota dealer is a Lexus dealer not every Hyundai dealer is a Genesis dealer

we're okay with the idea that not every VW dealer is a scout dealer create reasonable standards and will give you the quality sales experience that you want to have Mr. VW and so forth and so this really does matter

so Don you mentioned in scouts appeal to the federal government they cited democracy free markets and hey in the market of free ideas the consumers benefited I'm making it up I'm assuming it goes down this road by competition

whether it be direct from the manufacturer or through the franchise model tell us why not just allow these other models to be directly distributed in a state by the manufacturer

and and see if they fail or succeed if if they if the if the franchise system is as strong and is as good as we dealers think and we create a better end user product representing the consumer better than direct

in theory that would fail what what's the argument for not allowing that experience to go through that failure loop

a couple things Sam number one we have a history of building these franchises to what they are today VW is what it is because 75 years ago American automobile dealers took on this brand and built it through the good years and the bad years and that's true with every

OEM that we can talk about this never had a franchise system so there is an obligation contractual and otherwise this idea that you can just peel off is different now look if people want to buy Tesla so be it I have no issue with that there's never been a franchise system

but if you buy Tesla as I've said even on this show in the past is the experience you're going to have is always going to be unique for sure different which are not going to have a quality experience particularly when you have service issues

selling process is different but I'm happy to say that Sam that you and your peers they're out changing the way you sell cars today anyway we've embraced technology we're giving the consumer the experience they want Mr. OEM pay attention we're getting really good at that

and so we're not in a situation where we have to throw the baby out with the bathwater the system works and the system provides great competition and many many cities you have a number of dealers who compete for your business

whether as I love to say for the financing that the use car the new car the trade in and so forth there's all kinds of things we compete for and you the consumer gets inside what bets suits you you buy from a franchise or you're going to pay whatever the hell they tell you to pay and it's the deal you get and that's it

you might say why I like that because there's no friction look our dealers understand we've got to take friction out of the buying process I am pleased to say that it that a large percent of our dealers are getting that message and these young people today they're in the business understand it and thank God

literally we're beginning to really turn ourselves around and get back to doing what we do best take care of people take care of our staffs so Richard Brunel online says Toyota believes in the dealer model best partnership in the business

who is advocating who is best advocate for this you know it's you it's probably an ADA and so I'm gonna ask you in just a minute to restate what us dealers can do to help fight this but I am curious

reading the rule it looks like this license from Colorado runs through 2026 don't scout vehicles aren't even expected to be available till 27 what's Colorado think the one year license are they testing it are they trying to see well

I think it's first of all the regulations are such that's the term they can grant them the issue is this once I'm a city kid from Los Angeles California born raised once the cow gets out of the barn horse gets out of the barn whatever they whatever they do in these barns once they get out it's awful hard to reel them back in or bring them back in

I spent a number of years in the retail and various management positions and then came to this association long ago because I love the politics the industry and I know we can make a difference and you have to have people that are motivated that understand

I've had dealers call me and say what do we need to do and my answer is very simple get fucking involved get involved in the fucking game understand what it's about care about it give a shit and not say well I but don't understand

you know this is a shitty month I got to do better next month and I will get to it in April April you can't do that ladies and gentlemen this is serious my ass will be gone retired this is serious this matters this is a real deal issue this is not them playing games to write the department of justice and make the argument that this system is not a good system for America is wrong and we cannot sit back on our hands and let it just be that way we've got to speak up speak out

but more importantly treat your people right treat your customers outstanding give them a great experience and we can and will prevail

the better we do in the industry the stronger grasp we have on any model no matter what that model is and the more competitive we are by that model it's interesting down because under Virginia's law specifically you mentioned scout strategy would not have worked in Virginia

and so they went to Colorado and they'll probably be other states where they go two questions specifically what was it in Virginia that would not allow this model to happen and what state is next where will this be tested next outside

well again there already there's a lawsuit in Florida there's a lawsuit in California so there's already been some movement in those two big big states compared to us we added some language a couple years ago knowing that this potential existed as part of our jobs we have to forecast we have to think about the future not just today

but what's the future look like and the language we added was that if a manufacturer had a subsidiary or company affiliated ownership and they had at least 25% ownership in any way shape or form then it constitute a violation

so what so what tests excuse me what scout is saying is we're separate we have nothing to do with vw which we all just messed up yeah it's all it's all bullshit pardon my life folks yeah today I I'm not aggravated I'm trying to get folks to that about wake up I was

exactly

because they know who their customer is and that's the dealer and they do everything in their power to make the dealers great and grand and everybody else does the polar opposite when they can get away with it

I want to see a copy of the language I want to know what's being said I want to understand it get involved if you can't get involved get one of your senior managers involved get him involved this is not an old boys club old girls club this is a club of people who give a damn about this business and that's why you get involved in these

associations and if you're not do so and if you don't have the right people running your association then get one that is able to run it and understands the need to be on top of their game in this game if not we're going to lose a lot

and Alan Hagen others won't have much talk about 10 years from now when this game changes you know substantially because the franchise system has been eroded

why do why do oems think they can do a better job don oems ebb and flow in terms of their effectiveness I think part of it don is they've seen the success of Tesla but what we all forget is all the government money and support that went into it and then as soon as that

I was heavily involved in that they failed miserably doing it there is this jealousy there are a lot of young people with a lot of advanced degrees working for these oems saying well boss you know we can do this we can do that you

if we get a chance we can do these things they don't understand our business but they see the things we have and do in the life so we live and they think wow I'd like to be like them and remember a lot of these oems don't

they're they're envious and the money is is big big dollars and they think they can do it for a lot less they cannot much what we do would have to be replicated by a manufacturer to begin with

so Don it is interesting you referred to the Ford test when was that like the late 90s I remember I was selling cars in Utah back then and Ford came in and remind me my history on this because I

and they failed what what's the lesson there for oems trying to do this today again most people around back then aren't around today and they failed because they weren't as smart as I am see I'm younger I'm more educated I get the retailing better

they failed miserably that the retail business is very different from the wholesale business you all have dealt with this you know this when you deal with your folks from the manufacturer again not bad people in fact people we got to employ sometimes

our own stores and organizations and many of them have done that they made that job but the other day wholesaling is not the same as retailing it's a huge difference and we deal with lots of problems trying to put together a deal trying to get the deal to stick

we spot the car we've got to make it stick we've got to work we've got to abide by the laws we have lots of things going on it's a complex business this to manufacture don't do this you're not going to win you're only going to bear yourself at the end of the day treat dealers with dignity

and the same time dealers do what's right by your staff and the customers and we shall win with a franchise system 50 100 years from now

Don last topic or question because I'm curious about this just following this thread so I think as I hear you talk about dealers the franchise system how we deliver our best to the consumer Tesla right there the outlier maybe there why oems think this might be a good idea

would Tesla be a better brand if it participated in the franchise system if Tesla all of a sudden said look we're out we're going to form an alliance with name the OEM we're going to bolt we're going to start distributing using the franchise model would Tesla be better as part of the franchise system Don Hall

Sam you're going to be glad you asked me this question you ready for this I go for I said I said in the room with I think there were seven lawyers and myself and one of those lawyers was the number one lawyer for Tesla years ago

because we were involved in a serious big case and we're going to court we were going to the court of appeals in Virginia we lost ultimately but in that room their lawyer at the time I'm not going to mention names anymore

all lawyers but me and I was me that you see today yeah and saying over my fucking dead body will you do this and our staff at the end of the day at the end of the day that lawyer said look our game plan Don I'm telling you this don't repeat it

to the masses our game plan is as follows to ultimately franchise we get the value of a franchise we get the value of dealers paying for the property paying for the inventory paying for the parts paying for the people we get it

right now we're on this track and Elon wants to go this direction at some point we're not able to take care of a large network of people now what are they done now they're contracting with my dealers to do service work body work yeah

interesting enough they're contracting with others to work for their cars again we have seen OEMs we all four have seen OEMs go down the tube they didn't make it all three of us they didn't make it and at the end of the day it's the dealers who take care of those customers when those OEMs are gone from this country and they blow it

the mistake Don is saying that there's not competition in the franchise model in fact there's more competition because you have so many individual operators

100% and that's a message that car dealers ought to be saying to legislators Sam won final comment on this politics game

having been around this thing for a long time the grandfathers who are now retired were active in this in this political game for years and years and years even the state you grew up in the car business they were very active the sons have not been and daughters have not been as active

it doesn't appeal to them the business is different for them and I get that I get it I respect it but you got to be active because if not Republicans here this ago well I want a competitive system I want the free market to prevail

well this isn't a free market the OEMs play games against us and ways that are unique from inventory inventory selection the colors to whatever in order to kill us as a franchisee they can play all kinds of games

it's not a fair game we have to have laws to protect us and dealers have got to be communicating that message to Republicans and Democrats both in doing so we will prevail and you all have a job in the franchise system 25 years from now 50 years from now

don props you're getting a ton of comments online from our audience just saying great great job representing the dealer viewpoint and great counter or interesting counter to the

to the lack of competition in the model truly there is more competition it would seem to me anymore that way so don hall head of Virginia auto dealers association appreciate you coming back on the daily deal live thanks for being here today don

thanks guys you have an outstanding day happy new year

thank you happy new year

Yuli can I tell you something I love his passion don't you just love it like absolutely is so passionate about this business I get excited when I hear him talk and I love that he allows us to challenge his thinking on it because I do think

I sense one of his concerns is not only dealer apathy but like a lack of understanding on how to counter the argument and I think that's a legitimate concern like we are pro free market sort of we are pro you know competition

but by having these entities come direct into the market direct to consumer it actually removes competition doesn't increase it and ultimately customers better off truly even if you're trying to be the best apologist for your customers

Tesla is an anomaly to their tech company first that happens to sell cars so these other OEMs that are coming in trying to replicate the same thing like even a scout it's not the same thing and I gotta tell you if if I'm a VW dealer I'm mad as hell that they're rerouting funds that could help me refresh my model line

and pouring it into scout and then trying to go around me as a dealer that's insanity

especially especially when a lot of VW dealers I would say we'll ask Alan Hague about this on the M&A side but I think some of them are challenged right now so

yeah all right let's talk Impel today's episode is brought to you by Impel Impel service AI with voice AI changes that with proactive then specified outreach based on individual driving behavior

missed call capture and instant appointment scheduling by text and email advisors can stay focused on the drive customers get fast personalized service learn more by clicking the link in the show notes below

and we will have the QR code back on our next episode is our original production team returns so happy New Year's week happy Super Bowl week everybody

so huge props to Impel for supporting today's show and again if you want to find out more go to the link in the show notes thanks Impel for supporting Don Hall's incredible content today

all right next up without further ado let's pivot straight to Alan Hague president of Hague partners Alan welcome to the show back on go ahead we just have a little technical difficulties go ahead Alan

no I was just saying that another point here which which has been made over the years is that the factories have required our dealer friends to construct large and image compliant facilities

yes in order to retail these cars they're not buildings that are multi purpose they can only be used for Volkswagen for instance yeah that's another reason why dealers need protection from the arbitrary

plans of OEMs who decide here we're going to create a totally new product line and sell it outside our current distribution channel it's not fair to have it both ways

so pull that thread a little bit thinking about VW if I'm a Volkswagen Audi dealer how should I be thinking about this news in Colorado as it impacts M&A the valuation in a buy sell marketplace and or if I'm looking to purchase one of those brands looking to go direct

well I would say that Volkswagen dealers have been suffering for about 30 years you know Volkswagen probably had its heyday in the late 60s early 70s and since then it's just been a constant struggle they haven't designed products that truly were designed for the US market

like a pickup truck full size SUVs you know it's better now but you look back about 8 years ago almost every product they had was a slightly different sedan which didn't sell very well so they made another slightly different sedan which also didn't sell very well

so when scout comes along like hey we own this brand by accident we bought this trucking company or farm equipment company and we have this brand now a Volkswagen dealers I'm sure we're praying like please create a pickup truck or rugged SUV that we could sell in our showrooms and bring in some of those red blooded American customers

and to see them go the other direction and then see the state of Colorado allow that potentially it's got to be yet another depressing moment for Volkswagen dealers who work so hard to bring customers into their showrooms and when they do have an attractive innovative cool product for them to buy

and I think the response to scouts been really good but they have a lot of deposits friends of mine say hey I'd like to buy one how do I get one and I'd like to bring up about a year and a half ago I wrote a letter called a letter to you on proposing that because they were having some challenges selling the vehicles that they should enter into a franchise system

so for all those reasons the Volkswagen corporation in Germany needs to do the right thing and that's been the next five years litigation with its Volkswagen and Audi dealers in the United States it needs to simply award dealerships to the Volkswagen Audi dealers who are dying for great product and they'll sell the heck out of it

yeah it is fascinating so is it kind of a dying gasp of a company that's been challenged for as you say decades now is this just kind of a desperate play to get better penetration in the market or is it

or is it step one in a broader trend other OEMs will follow in states like Colorado and elsewhere trying to chase the Tesla model

I feel like it's if you look back at when Scout probably got started let's call it eight years ago was probably when the idea came if you look back at where Tesla was eight years ago it was on top of the world right it was incredible market cap

they didn't have the robot business then so it was really just selling cars and the other OEMs like General Motors and Ford if you recall they also started to say like their market cap is far higher than ours

even though they sell a couple hundred thousand cars we're selling a couple million they're worth far more than we are what should we do it's not an illogical response to say if you can't beat them join them

right so you had General Motors and Jim Farley Ford saying we're going to be an EV company and we're going to have a fun driving

yeah yeah well it's billions of dollars later it's kind of hard to sustain that strategy but I think a lot of if you're the CEO of an OEM and you see Tesla valued here and you're here and you go to your board meeting

and the board says what are you going to do about this we're going to have the same thing we're going to start our own direct consumer model it'll be all EVs and this existing business will wind down as the other business grows

you can see how that would have been a boardroom conversation eight years ago six years ago four years ago but now it's it's obvious that at least in the US the electric pickup truck is a dead man walking nobody wants that product at least a very small numbers

it's a cool van like a truck like a Rivian that has a camper you know a thing with a grill and a cooler built into it that's kind of innovative you can see that working at a tailgate

but for people that use a pickup truck to haul anything it's a price point right I mean that's why they just pulled the plug on the lightning and it weren't they trying to sell the lightning initially direct consumer as well just the Ford lightning from Ford

you could slate is viable under 30k but other than yeah well it's I mean I do feel I don't feel bad for the OEMs because they provide us with this great product and they can make a lot of money

but their business model is far tougher than the retail business and again that's another reason why Don and maybe you all mentioned that over the years of people that work at the OEMs they see that the dealer statements come in every month

and I'm like wow you know so and so Toyota made a million dollars last month and he's going to do that every month of the year is making 12 million dollars a year and their thousand Toyota stores that's a billion dollars in profit we can keep for ourselves you can see why they do that math

but the retail reality is what Don said is that those owners of those dealerships live in their communities

they're supporting the tools they're supporting to the animal shelters they're hiring and training local people they're providing job opportunities and doing all those kind of things so there's a reason why those businesses have become successful over generations

because they've been working hard and making good choices for a long time

so so Alan let's walk away from the scout topic just briefly here you let's go into your M&A marketplace you've you've said roughly 148 rooftops closed in q3 last year big M&A activity as we exit cute cute well last year I mean 2025 right so as we exit q4 is that pace maintaining accelerating rolling over and what's driving the M&A marketplace right now

well in 25 2025 the markets down about 25% in terms of the number of rooftops that that will sell and I think it's a function for two main reasons one is

in the end of last year we had a presidential election that was quite extreme which way it could go and so if you're a dealer thinking about exiting in the fourth quarter of 24

you might want to know what kind of tax environment you're going to be in before you sell might want to know what type of economic environment you're going to be in

so I think a lot of people that would normally sell you know in the latter part of last year decided to wait

so in the first part of 2025 there was a big hole in terms of M&A because it takes about six months from start to finish to sell a dealership

so if you're waiting in the fourth quarter until the coast is clear you could see how okay well the taxes are going to be low the economic environment should be good now I feel safe going to market

so Trump selected the tax environments good but now we have terrace and so we've had a number of transactions that normally would close in you know six months are taking almost a year to close because sometimes the buyers like well this this group includes an Audi store we have a situation like this now

it also includes a Lexus or Toyota store so the buyers really interested in the platform but they needed to understand what the situation would be with tariffs

is Audi going to have products to sell in the US how will they be priced you know what will the profitability that store be

so these questions that are that have arisen about tariffs and think about all the other brands that have been impacted by tariffs

it's sort of slowed down the process of M&A and I think that caused some deals not to die but just take longer to get done

are tariffs having a valuation impact on buy sells

yes certainly in the case of Audi we've seen you know they don't have any US production they don't have any plans for US production

I'm really hoping that they would use that scout factory to produce some Audi's in this country because that would help them save you know significant pricing disadvantage

but it's not just Audi that's suffering I mean there are other brands all the other brand is having to adjust a little bit their pricing and that's now showing up in the latter half of this year there being a price

push those price increases on the consumers either through the form of lower benefits or you know higher sticker prices or lower content at the same you know model

so be specific with us as you look ahead to Q126 where are valuations holding firm are escalating and where are they receding as we come into this next year

well Don mentioned before the best partner for dealers in our industry is Toyota Lexus and those values have not dropped a bit if anything they've gone up since 25 started

you know the product cadence they have the quality the control over production the margins are high the volume is high the fixed operations are incredible

so those brands have escalated the value fact we raised our multiple on Lexus and Toyota earlier this year

you know if we get one if somebody says hey I really want to have a blank franchise it's Toyota and in the dream they'll call and say I've already got a couple of Toyotas I really want to have a Lexus that's the one next one that I want

so those brands have done fantastic you know the brands that have suffered is you know the Stilanus really took a tumble probably beginning in 23 and it suffered to 24

but we're now actually seeing recovery and value for Stilanus stores really yeah yeah we're seeing more demand for those stores now I think they've bottomed out they got the message they had to adjust their pricing to be more competitive

you couldn't charge 70,000 for a Jeep Wrangler and expected to sell in any quantity

I don't want you to stop the list because I want to finish this list but at some point can we talk Carvana so Carvana having bought four points Stilanus

and anybody's guess is that they would continue does that how's that impacting M&A in that space is it increasing valuations is it good for the market what's your take on Carvana

so we spoke to some dealers that are in the Dallas market where Carvana acquired a dealership and that dealership went from I don't know 70 a month selling new to I think over 250 new

so it's one of the number in fact I think it's the number one volume Stilanus store in the country now

and I asked why are you seeing an impact on volume not really are you seeing an impact on pricing not really so they were told by they told me they were told by Stilanus I'd be careful here because I don't have any direct knowledge

that Stilanus said hey they're gonna this will be a benefit to you because they're gonna increase the units of operation out there and you'll get that fixed operations

okay so so far those dealers are not screaming that they've suffered so and if they're not losing volume not losing grows that to me means those units are being sold outside of the Dallas metro

and they're being delivered I guess by a truck and surrounding environment so somebody may be suffering it could be their competitors could be Ford and General Motors that are suffering

right that they're taking share that would be Stilanus's goal because if you just sell out of a Carvana store and it comes from an independent franchise dealer you're not gaining anything

right their plan has to be to take share and and buy some for their some certain percentage of customers is called 8% or 10% of people are comfortable buying a vehicle online right Tesla customers are

Rivian customers are lucid customers are yeah our customers will be so those folks are now buying Stilanus products maybe they wouldn't have done that before maybe they would have bought something else

so there's a chance that this will grow Stilanus's market share but if you have a brand that's constrained by your supply like Toyota Toyota a little bit right you know this model doesn't really add value to you

and you could say it sort of it could eliminate a tie between the dealer and the customer that's important for the service after sales they always make a lot of money on selling parts to dealers that's a big part of the profit chain for the OEM so they need there to be a relationship between the dealer and the customer

so I kind of wonder all these Stilanus products that may be shipping out of Dallas they're landing someplace that customer doesn't have a relationship with the the the dealer so when something breaks let's say after the warranty period is over

are they going to go back to the dealer to get it repaired they're going to go to an independent who's going to put non OEM parts on those vehicles so over the long term is this really in the interest of Stilanus compared to selling through traditional dealers you know that remains to be seen

but I think it should be evidence to dealers that there is a percentage of customers that wants to buy online in a frictionless environment which means one price for trade ends for FNI for the new etc

so your takeaway from that would be it's not necessarily a terrible thing it'll continue if it does based on market demand but the takeaway for dealers is become better online learn from Carvana what they're doing

do you see them doing other OEMs sorry go ahead I would say it's still early right and the information I'm getting is anecdotal we're capturing the data to see where are these units actually being registered

we know where they're being sold where they're being registered so maybe we can come back on the first quarter and give you some information on where they're actually going that'd be great

I would expect other OEMs to be Carvana curious you know they see hey that car that store went from 70 a month at 300 a month I want some of that

so I would guess Nissan would be interested right there having a challenge with selling as many units as they want they want to gain more market share

so Nissan be willing to approve Carvana as a franchisee especially after Solanus already has I could see that happening we know that Hyundai is been partnering with Amazon

would they allow Amazon to own dealerships and sell new Hyundai's directly to customers I could see that happening so but do I have any direct knowledges no

so we talked with Don Hall we've talked a lot about franchise agreements the direct to consumer are there implications in franchise agreements with OEMs like Solanus and maybe Nissan and others that would limit Carvana's growth

or not allow them to continue to grow what are those and do you see that changing at some point

I mean Carmax owned at one point over 10 franchise dealerships they own Solanus stores they own Toyota stores and they did a big job selling new units for a while

they realized like well you know every 10 years you got to invest in a new building and you got to have you know your customer satisfaction ratings higher you get hammered by the OEM and they decided to exit the new car business

in fact our firm we represented Carmax in the sale of their last two Toyota stores one was in Maryland and one was in Wisconsin

yeah Kenosha it was a big one it was a behemoth of a store yeah

well so there's been a history of OEMs or you know news car retailers entering and exiting the business and OEMs approving these in the past so I would expect to continue to be part of what we experienced in our industry

you know we have dealers fortunately they make most of their money in F&I and parts and service and that's not easy to do online

right you kind of have to do that in person often someone that's a complicated situation that you finance and sometimes they have to come sit with the F&I manager for hours

and people complain about how long it is but they're not showing up with a lot of cash to buy the car they're showing up with negative equity

you know or a trade that they want more than what's really worth and so their reasons why dealers know there's more than I do

sometimes it's important to have a face to face interaction with the customer other people are comfortable buying online so maybe you have a buy it now price that's different than what it is in the showroom

so Alan you mentioned Amazon let's talk Amazon autos because that does impact valuation or does it

Amazon right now seems to be a little bit more of a marketing play but there are implications on who owns the used car

on F&I penetration which as you said is such a crucial part to net profit F&I and profits

what's your advice to dealers either looking to sell or buys it relates to Amazon and getting on board that train or not as they expand from Hyundai and to Ford and some of the other relationships they're pursuing

Sam I'm not sure if I have enough information to make an informed comment I will say that I guess it was about NADA when we were heading to New Orleans I flew with a couple dealers that had a Hyundai store and they were participating in this

you know the the program with Amazon yeah what did they think and they said oh it's cool it's bringing us some extra leads you know and it's helped our volume a little bit

you know sometimes an impact the relationship with the customer and I said well how about pricing is it the same is it more he goes well Amazon is giving the buyers to $800 Amazon gift cards

oh and I said right that's why and there's some guys in the buyer he goes yeah the customer wow so that said to me that the model wasn't working great that Amazon customers weren't flooding into this program to purchase vehicles they had to be induced

yeah

and I'm sure they're watching what Carvana is doing and ask themselves do we want to get in that business and Carvana is making a lot of money maybe almost all of its money through the F&I process and selling you know a loan to a customer that it then

securitizes and marks up and sells to the to the public market so they're making a nice spread on the financing of that vehicle you know does Amazon want to get into being a bank

that's consumer product you know open all types of of regulations you have to go by with and it's tricky and you can get sued and Amazon hasn't gone there before in the mortgage market are they going to go there in the car market I'm not sure

yeah it's it's an interesting plane to your point they've got the financial resources their biggest asset is their distribution though every one of us on our iPhone or desktop has presumably most do an Amazon account so they've got in the eyeballs

and to your point where they decide to spend that that $800 gift and that's almost an OEM type rebate but not from an OEM almost a marketer that's fascinating yeah yeah yeah again I don't know if that's still going on but it was according to this deal

so transitioning for a minute to brokering we've talked about that a little bit on the show you've warned in the past that brokering weekends dealer customer relationships are buyers discounting stores that rely too heavily on broker transactions what's your take on brokering we see it a lot in the east coast it's been a big topic on the show

yeah I think there there are two areas that add volume to a new vehicle dealership that are brittle one is if you use a lot of brokers the other one is if you do a lot of fleet yeah now fleet tails a little bit different but fleet and the risk is that you know your store is not really attracting that business it's some individuals

and the firm of a broker an individual outside your store or in the form of fleet it's a fleet manager in your store if somebody wants that fleet business they could call your fleet manager and offer them a little bit better spread

and that guy is leaving he's going to your competitor across town wherever maybe a different town altogether he's taking all of his accounts unless you really can lock down that those are your accounts and not the fleet managers accounts and he's going to do the same thing and all that volume is going to go

and maybe you get stuck with a couple hundred units that were ordered to sell that didn't sell and now you have to pose of a couple hundred extra white trucks that maybe are configured in a way that are different than what your retail consumers would buy them

so that's makes your business a little brittle and if I'm selling a dealership that has a lot of fleet business the buyer is going to ask that same is that guy going to stay is he going to get any money out of this is he signing on compete no he's not getting any money

selling a dental practice to a dentist right like they are the practice they are the valuation right yeah yeah yeah and the broker it's a little bit the same thing you know if they feel like well I'm selling be a lot of customers want BMWs Mercedes

and you know today there's a new car managers working with me but if that new car manager moves to a different store whoop I'm going with him or her and then the you know the business can fall down and if you're a buyer of the business you really are getting the future not the past so you care

well what's who's going to be left at the store when I own it will the business continue or not so you know it's really best if a dealer can build up his or her own new vehicle department with sales people and sales managers that are truly selling to the retail consumer

you know

washes

than ever. That's such a big money maker for our dealers that having a nice healthy service department that is among the most valuable assets that a seller has. A lot of people will care about the new vehicle volume.

But what they really love is a lot of fixed gross because that's sticky business.

It's fixed right. It's consistent. It's the engine.

So, Alan, as we wrap up, there's probably dealers that are watching the show today that are saying, hey, you know what, I'm interested in selling, but maybe a year down the road or two to three years down the road.

And aside from calling me and Aaron, I'm just kidding, self promotion.

What advice would you give to dealers that in the back of their mind are thinking, hey, I might want to look to sell a year or two or three years down the road?

What steps should I be taking today to prepare for that time as it nears?

I think from an operation standpoint, do everything you can to maximize your profits.

So that means really paying attention.

Hold your team accountable to get market share and to have even a labor rate.

Sometimes we have some clients come in and their labor rate is well below the market.

Like get that immediate profit for you.

So really care about your profitability because that's what you're going to have to sell on.

It's nice to sell the future, but it's nice to sell a nice stream of existing profits.

I would also encourage dealers to simplify their income statements.

Try not to have a bunch of packs and personal expenses running through the store because the buyers will give you credit for most of it, but not everything.

Try to simplify, leave all the money in the store that the store generates.

If you have a capital investment requirement, like if you don't have an old showroom, you need no showroom, get the plans drawn up.

Get bids from contractors. Get it approved by the factory.

So you can say to potential buyer, hey, this project is going to need to be done in the next five years.

Here's what your liability is. Here's what your costs are going to be.

Because if a buyer doesn't know what it's going to cost, they're going to be a little defensive.

So those are some things that you can do to prepare for sale, maximize your profits, simplify your income statement, understand if there's a capex project coming for the next guy.

Because the factories are usually a little bit more lenient on the existing dealer in terms of the size and the expense of a project versus when the new guy shows up.

Especially if it's a big public company with deep pockets, the factory is going to say, okay, the seller gets this big bag of cash.

What do I get? I want a big new store.

So I'm going to hammer them. And that impacts value.

So the more expensive the next facility project is, the less the buyer can pay for the existing business.

And then last question, Alan, thinking the flip side of that argument, not the sell side, but the buy side.

There are many groups looking to grow to expand and continue developing as groups, maybe single points as well.

Any advice coming into 2026 for that operator looking to grow on this?

Have a strategy. Know what brands you want to acquire, what performance you're looking for if you want underperforming stores or you want stores that are just turnkey.

Understand where you want to grow. Understand how much money you have to grow.

And then communicate that strategy to people like me that have businesses that we're representing for sale.

Communicate it to the OEMs that you want to grow with. Communicate it to the dealers in an area that you might want to acquire.

Don't be sneaky and private like, I want to grow, but I'm not going to tell you what.

Because we have people call us and they say, hey, would you show me some of the dealerships you're selling?

And if I say, well, what kinds do you want? And they're like, well, just show me everything you have.

My response is going to be, I'm not going to show you anything because I have a duty to try to preserve confidentiality for my clients.

I'm only going to show them to the buyers that have a strategy that matches the client that I'm representing.

Then if I can go out to the eight, maybe 10 most motivated buyers, that's how I'm going to do the best for my client.

And honestly, if you don't really know what you want to buy, you're going to spend a ton of time and money just looking at things,

you're never making an offer or making a low ball offer.

You create a bad reputation for yourself in the market as a buyer and people will not show you opportunities in the future.

So develop your strategy if you can't close.

Exactly. Exactly.

What about, you know, I still hear this in the marketplace, they dealers sometimes saying, you know, I can sell this on my own.

I can market it on my own. I'll give it to a friend in the neighborhood or I'll go out of state somewhere else.

I mean, having good advisors, you know, more so even than the real estate market is important.

What do you say? And I know this is self-serving. This is a tea up, Alan.

What do you say to that dealer that says, hey, I'm going to sell this on my own. I don't need a...

Time is money.

I would say for years ago I used to work on AutoNation and I was responsible for buying and investing stores for them.

And my favorite position to be in was when I was one on one with a dealer who wanted to sell because I was setting the market.

That's the only way I ever felt like I got a deal if I was directly involved with that seller.

I knew when it was competitive, when there are other public companies looking at the same asset,

I had to sell internally and try to get as much money as possible to bring to the table to win that deal.

Because I knew that it was competitive.

So I would say and, you know, if you can talk to the people that run public companies and ask their corporate development teams,

you know, when firms like ours take part as involved, is the price higher or lower than when you're talking to a seller directly?

Ask them and I think they'll tell you it's higher.

And I had a conversation at the Toyota dealer meetings in September with one of the largest private auto groups in the country.

And he shared with me a story that he was a little bit, he was being complimentary, but he was also a whistful.

He says like, you know, since you guys got involved, meaning you firms like Hague Partners,

you know, the ROI and acquiring dealerships has gone down.

The return on investments gone down and that's because the price has gone up.

And that's why I'm confident that we earn for our clients far more than they pay us in fees.

Because what comments like that when when we're involved, the price is higher and it returned lowers their return.

And so they're grateful that we bring them opportunities.

But I think they would always prefer to be one on one with a seller because they buy it for less.

Well, what is it?

It is interesting.

What is it about selling an auto dealership, whether single point or multi point where sometimes there's this desire to kind of keep it secret?

Like maybe it's you don't want your employees to know because you feel like you're letting them down or you like there is for some sellers,

I think in the marketplace this desire to keep it secret till it's all done.

And then you get people popping back in saying, well, hey, I would have paid more,

but it's like you kind of want to keep it under the cover until until it's completely done, right?

I think it's because we haven't talked about this yet, but we talked about franchises and inventory and fixed operations.

But none of that means anything unless you have a general manager that can take advantage of those assets and convert that into cash.

And I think that what dealers are afraid of is if I go to market and it becomes public and someone calls my general manager,

my sales manager, my use car manager, my F and I manager to hire them away, my business will suffer.

I will lose profit and it will become less valuable.

So they try to keep it really quiet.

Maybe they just answer an inbound phone call for someone says, hey, I want to buy your store.

Well, okay, maybe I'll just sell to you.

And but what they're what they're losing there is that one on one, they don't have this competitive process.

And so the value that they're going to gain by having a private sale, the value they're going to lose is going to be significant.

I can tell you twice in my career, we've had people who started to sell their business on their own and they hadn't been satisfied the results.

So they called us to get involved.

And in both cases, the blue sky was 30% higher.

It's just oddly the same number.

Now it always added that much value every time.

I don't know, probably not.

But that was so significant.

It's the two that we were involved in when someone tried to sell it on their own and weren't satisfied, called us.

Then they were pretty happy.

What do you say to the concern of the GM jumping ship or the finance manager?

Because truly those are pivotal roles that are crucial and critical to maintaining that profitability in any organization.

Then you need to have a smooth process so that the time from bid to closing is short.

That means you need to be organized, you need to have all your materials ready, you need to be able to tell a story, you need to be able to back it up and do diligence.

You need to have a team of accountants, M&A advisors like ourselves, M&A attorneys who can negotiate a transaction with a buyer so that the terms that you negotiate in your letter of intent, including the price, that's the most important one, is what shows up in your bank account on closing day.

So speed matters, so that means organization knowing how to respond to issues as they come up and they come up.

Almost every buy-sell has got some bit of hair on it, either the dealership's a little hairy, or maybe the buyer's a little hairy, or maybe there's something that happens in the market like tariffs that you need to figure out how to respond to.

So Alan Haig, we absolutely appreciate you being on. You got to give us one last thing though. What's the biggest sleeper OEM right now headed into 2026, where you see best value in return for blue sky paid?

Well, we've been big fans of Mazda in the last few years. They've improved the sales per dealership more than any other OEM.

They suffered, especially in states like California because they didn't have any hybrids, right? And they still really don't.

But we didn't talk about this, but since CARB has gone away, the value of dealerships and the state of California and other states that had adopted CARB has gone up significantly.

Interesting really.

I mentioned the 30% number. We ran a process with a group of stores, two groups in California in the spring.

In both cases, we got offers that we didn't really love. So we said, well, let's just wait, maybe we can improve performance and remarket in the fall.

And so we did. And then what happened during the interim was Trump killed CARB, we went out and remarketed, and in one group we got a 25% higher offer than the first time.

The second one was about 30%. So CARB is absolutely, the elimination of CARB has absolutely benefited dealerships in those states.

So that's one good thing because we were worried about our dealer friends in California, how they're going to sell these stores if they have to be all EVs by 2035, I think it was.

The other brand that we like a lot is Kia.

Let's say pre COVID Kia was okay, probably the bottom half of franchises, but they came up with a lot of great product and they were able to produce during COVID.

So they took a tremendous amount of market share.

And what I really love about Kia is in a buy sell, they will give the incoming buyer a lot of new vehicle inventory for them to have a successful entry into that dealership point, especially if it's an unperforming store.

Toyota does the same thing, but Kia even if it's not sales ineffective.

And so other brands are very hard to get inventory like to get more inventory from Ford or General Motors Chevrolet.

The turn and earn system is very difficult, I think for incoming dealers.

But in a buy sell, if you buy a sleepy Kia store, Kia will load you up with inventory and push you.

And what's interesting is Kia, even though they're sister companies with Hyundai, they really want to hurt Hyundai.

They really want to be the dominant of those two.

Isn't that the truth?

Those two brands compete like that was my next question is why do you cite Kia and not Hyundai?

What gives Kia the leg up and I do see the competitive side.

They just compete.

So I'm going to, if I can give a little bit of a plug and Sam, I think you're coming to our, we have a maximizing value conference.

I'm going to be there.

I think you're registered and we've invited Kia to come and talk about what is the investment thesis for investing in Kia dealerships.

And we have Honda coming as well.

Toyota gets all the love, you know, in Lexus.

But the other brands that I mentioned Mazda, those are brands that to us are a little bit less expensive, have excellent product, have good customer loyalty, have growing fixed operations, which is really juicy part of our profit model.

So come to the maximizing value conference.

It's maximizingvalueconference.com.

We can come to our website and register.

And you can listen to them sell you the dealer on why you should be investing in those franchises.

Another other brands we like to, we're getting a lot of calls for Ford now that they've abandoned this EV strategy.

I think a lot of dealers will worry about Ford.

But what makes Ford special amongst the domestics is their focus on commercial vehicles, medium duty trucks.

If you have a Ford pro franchise, you are crushing it today.

And so that is almost a commercial vehicle franchise.

You know, Penske's bought all these heavy truck freight liner stores.

The margins and fixed ops coverage is, I think it's like 110% fixed ops coverage at those dealerships, maybe even more.

And we sold some freight liner stores over the years so we see those.

But the Ford truck business is stronger than any of the other brands that exist.

And now that they're kind of done investing in EVs and they can focus on what their customers really want to buy,

I think dealers are anticipating that Ford is going to take some market share.

And I just got, there's an accounting firm called Woodward Associates that puts together a little newsletter

and they compare the gross, excuse me, the pre-tax margin percentage for Stellanus, General Motors and Ford.

And Ford is a good bit higher than those other brands, not as high as the import brands, but a good bit higher than their closest competitors.

It's interesting, Alan, because the next show, I want to tease you for your next appearance, whatever it's going to be, because we are over time.

It'd be great to have a conversation about, so a lot of these winners you've cited, it's politics, it's political policy, it's government policy, it's legislative policy that's creating winners and losers right now in the market.

And how should a dealer, no matter what their political stripes, be thinking about politics and how that's going to guide their M&A and or their valuations now into the future.

So go ahead.

One more plug is Mercedes is back.

Mercedes is back. They also pursued a really EV heavy product plan and dealers suffered and Mercedes suffered.

And so this could be the best time in a long time to pursue Mercedes dealership because their profits suffered a little bit during that EV era.

But they're talking about going from 300,000 new vehicle sales to 400,000 in the near future.

Apparently they have the money from Germany to support in terms of lease incentives and others.

And they have a new set of products coming that are priced that are more affordable.

So you could be an aspirational brand instead of an unaffordable brand.

So I know dealers are really bullish on Mercedes again and for a while they only wanted to have Mercedes dealers buy Mercedes dealerships.

But that's open season again.

So that's the last brand that I really want to plug.

In terms of politics, obviously we've seen the whole push towards EVs had a good intention behind it to try to improve our environment.

There's a lot of debate about whether EVs do that or don't.

There's a lot of debate about does that play into the hands of our Chinese friends who control this battery technology?

Should we be supporting gas engines because that supports our economy?

That'll leave for others to debate.

But there's no doubt that when we sell the consumer, when we offer the consumer product that they really want to buy and we don't have to incentivize it, everybody wins.

The taxpayer wins, the dealer wins, the consumer wins, the factory wins.

That creates a wealthy society that allows us to handle other issues perhaps like air pollution or warming in different ways other than forcing a customer to take a vehicle that doesn't fit their wants or needs.

And on that, Alan Haig, president, Haig partners, absolutely appreciate you joining the show today to share your perspectives.

Excited to see you at NADA. We'll see you in Vegas here soon.

Alright guys, nice talking with you.

Thanks Alan.

Fascinating conversation just about how like how to think about valuations, how to think about M&A coming into next year.

Truly it is interesting how much of it is policy, you know, generated a lot of these opportunities.

But you know what, that's the case anytime in business, you know, market shift and the opportunity always pops up in the shift and the winners run towards that shift in a way that, you know, others just don't.

So, Julie, thanks for being here. Guess what? This is episode 98 of Daily Deal Alive.

We've got coming up for you on New Year's Eve a special best of, you saw Don Hall here today on the show.

Passionate as ever. I'm going to give you a little tease. Don Hall makes an appearance on New Year's Eve in our best of episode as well as many other of our best episodes that we've had up till this year.

Unfortunately, Alan's won't be in there because, you know, we crafted that thing before on New Year's Eve.

And then coming up Monday, January 5th, Julie, it will be a celebration of the Daily Dealer Alive, Cardiola Ship Guy 100th episode.

So looking forward to that. We'll be there. You'll be there. I'll be there.

But until then, to all of our Daily Deal Alive audience, we say thanks for watching Daily Deal Alive.

We break down the biggest moves in the car business as they happen.

So don't forget we're here live every Monday, Wednesday, Friday, 1pm Eastern.

We won't be here the day after New Year's. I'll tell you that much. But we'll be back Monday for the 100th episode.

If this is your world, hit like, hit subscribe, turn on those notifications so you never ever miss a beat.

And we'll see you next episode, everybody. Thanks for being here.

Thanks, guys.

Hall on Scout DTC Win in CO, Haig on Dealership M&A Market Update | Daily Dealer Live

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