Alan Haig, President of Haig Partners, discusses the current state of the automotive market, highlighting brands that are thriving and those that are struggling. He notes Hyundai and Kia's impressive profitability, while brands like Nissan and Stellantis face challenges. The conversation also touches on the impact of Carvana's acquisitions and the evolving dealership landscape. Haig emphasizes the importance of fixed operations for dealers and predicts continued demand for dealerships despite market fluctuations. Insights into brand strategies and dealership valuations provide a comprehensive overview of the automotive retail environment.
Today I’m joined by Alan Haig, President of Haig Partners.
We dig into why Q4 buy-sell activity is suddenly exploding, which franchises are becoming “must-own” (and which aren’t), how rate cuts are reshaping buyer math, and get a sneak peek at the latest Haig Report before its released.
This episode is brought to you by:
1. Equifax - Fund More Auto Loans, Faster. Auto loan applicants are 40% more likely to be funded when instantly verified by The Work Number. You can get the data you need to know your borrower better and make fast, smart decisions. Equifax provides instant, secure access to verified borrower identity, address, income, and employment information, helping you move deals forward quickly." Visit @ https://carguymedia.com/3Lplzue to learn more.
2. Amazon Auto - With Amazon Autos, your dealership can reach more buyers, drive more sales, and deliver a modern, more delightful car-buying experience. Learn more @ https://sell.amazon.com/programs/autos
3. Haig Partners - Since 2014, the Haig Report® has delivered expert analysis on dealership performance, market activity, and franchise valuations, offering a clear view of opportunities and challenges in automotive retail. Learn more in the full Q3 2025 Haig Report® by subscribing to receive it as soon as it’s released. Visit @ https://share.hsforms.com/1AEDx2iJDSsibryqbI1HyCgnr2vn
4. CDG Circles - A modern peer group for auto dealers. Private dealer chats. Real insights — confidential, compliant, no travel required. Visit https://cdgcircles.com to learn more.
Check out Car Dealership Guy’s stuff:
For dealers:
Industry job board ➤ http://jobs.dealershipguy.com
Dealership recruiting ➤ http://www.cdgrecruiting.com
Fix your dealership’s social media ➤ http://www.trynomad.co
Request to be a podcast guest ➤ http://www.cdgguest.com
For industry vendors:
Advertise with Car Dealership Guy ➤ http://www.cdgpartner.com
Industry job board ➤ http://jobs.dealershipguy.com
Request to be a podcast guest ➤ http://www.cdgguest.com
Topics:
00:59 What defines the marathon's spirit?
02:53 Why did the CarMax CEO resign?
03:49 How is Carvana influencing the market?
07:14 Current state of the auto market?
11:14 Which brands are performing best?
21:40 Who is buying cars today?
26:51 Biggest opportunity in dealership sales?
29:05 Where are the hottest regional markets?
43:59 Future outlook for dealers?
Car Dealership Guy Socials:
X ➤ x.com/GuyDealership
Instagram ➤ instagram.com/cardealershipguy/
TikTok ➤ tiktok.com/@guydealership
LinkedIn ➤ linkedin.com/company/cardealershipguy
Threads ➤ threads.net/@cardealershipguy
Facebook ➤ facebook.com/profile.php?id=100077402857683
Everything else ➤ dealershipguy.com
"...if you're Carvana And you want to own the used car space as much as you can"
Carvana is a company that sells used cars online. You can buy a car from them without ever visiting a dealership, and they even have a special way to deliver cars to your home.
Carvana is an online used car retailer that allows customers to buy, sell, and trade vehicles entirely online. They have gained popularity for their unique car vending machine concept and home delivery service.
"Let's table that for one second. Talk to us about brands... the big news was Audi."
Audi is a car brand from Germany that makes luxury cars. They are known for their stylish designs and advanced technology in their vehicles.
Audi is a German automotive manufacturer known for its luxury vehicles and advanced technology. It is part of the Volkswagen Group and has a reputation for producing high-quality cars with a focus on performance and innovation.
"...the Volkswagen group as a whole went really really heavy towards EVs globally..."
EVs are cars that run on electricity instead of gasoline. They are better for the environment because they don't produce exhaust fumes.
EVs, or electric vehicles, are cars powered entirely by electricity rather than traditional internal combustion engines (ICE). They are considered more environmentally friendly and are increasingly popular due to advancements in battery technology.
"...the Volkswagen group as a whole went really really heavy towards EVs globally..."
Volkswagen is a well-known car company from Germany that makes many different types of cars, including the popular Beetle and Golf models.
Volkswagen is a major German automotive manufacturer known for producing a wide range of vehicles, from economical cars to luxury models. It is the parent company of several other brands, including Audi.
"...they stopped innovating anything really on the ice side..."
ICE vehicles are cars that run on gasoline or diesel. They have engines that burn fuel to make the car go, which is different from electric cars that use batteries.
ICE vehicles refer to internal combustion engine vehicles, which use gasoline or diesel fuel to power the engine. This technology has been the standard for automobiles for over a century but is being gradually replaced by electric vehicles.
EV market share is how many of the cars sold are electric cars. It helps show how popular electric cars are getting compared to regular cars.
EV market share refers to the percentage of total vehicle sales that are electric vehicles. This metric is important for understanding the growth and acceptance of electric vehicles in the automotive market.
"...compared to their BMW or Mercedes or Lexus competitors is way lower..."
BMW is another German car brand that makes luxury vehicles. They are famous for their sporty cars that are fun to drive.
BMW, or Bayerische Motoren Werke, is a German luxury vehicle manufacturer known for its performance-oriented cars and motorcycles. The brand emphasizes driving pleasure and has a strong presence in the luxury market.
"...compared to their BMW or Mercedes or Lexus competitors is way lower..."
Mercedes is a luxury car brand from Germany known for making high-end vehicles that often include advanced technology and safety features.
Mercedes-Benz is a division of the German company Daimler AG, known for producing luxury vehicles, buses, and trucks. The brand is recognized for its innovation, safety features, and high-quality engineering.
"...compared to their BMW or Mercedes or Lexus competitors is way lower..."
Lexus is a luxury car brand that is part of Toyota. They are known for making reliable and comfortable cars.
Lexus is the luxury vehicle division of the Japanese automaker Toyota. It is known for its high-quality vehicles, reliability, and customer service, often competing with other luxury brands like BMW and Mercedes-Benz.
The Porsche Cayman is a two-door sports car that has a hard top. It shares many features with the Boxster but is designed for a different driving experience.
The Porsche Cayman is a coupe version of the Boxster, offering similar performance characteristics with a fixed roof. It is known for its agility and balance, making it a favorite among driving enthusiasts.
"...because they've bet so much on EV conversely certain brands..."
An EV, or electric vehicle, is a car that runs on electricity instead of gas. They are usually better for the environment because they don't produce exhaust fumes.
EV stands for electric vehicle, which is a type of vehicle that is powered entirely by electricity rather than gasoline or diesel. EVs are known for being environmentally friendly and often have lower operating costs.
"...If you want an EV, we'll have that for you If you want to plug in, you know hybrid will have that for you"
A hybrid car uses both a gasoline engine and an electric motor. This helps it save fuel and produce less pollution than a regular car.
A hybrid vehicle combines a traditional internal combustion engine with an electric motor to improve fuel efficiency and reduce emissions. Hybrids can operate on either power source or both simultaneously.
"If you want a hybrid will have that for you and if you want a gas motor will have that for you. And they have and they've absolutely killed it in the market since then they're taking share."
Toyota is a car company famous for making reliable cars and being one of the first to create hybrid vehicles, which use both gas and electricity.
Toyota is a leading automotive manufacturer known for its innovative hybrid technology and reliable vehicles. The brand has been a pioneer in the hybrid market with models like the Prius.
"Even brands that were growing quite strongly, you know before the pandemic and before the EV thing like Subaru. Subaru just doesn't really have many hybrids yet."
Subaru is a car brand that makes vehicles known for their all-wheel drive, which helps with traction. They are currently working on adding more hybrid options to their lineup.
Subaru is an automotive brand known for its all-wheel-drive vehicles and rugged designs. While they have a loyal customer base, they have been slower to adopt hybrid technology compared to competitors like Toyota.
"[1027.9s] Gas and they're taking share Hyundai and Kia are gaining share nicely. Yeah"
Kia is another car company from South Korea that makes a variety of vehicles, including electric cars. They are known for their modern designs and good prices.
Kia is also a South Korean automotive manufacturer and a sister company to Hyundai. Kia has been recognized for its stylish designs and value, offering a range of vehicles from compact cars to SUVs, including electric models.
"...if you look at Stilanus and Nissan they had a positive..."
Nissan is a car company from Japan that makes many different types of vehicles, including electric cars.
Nissan is a Japanese automotive manufacturer known for producing a wide range of vehicles, including sedans, SUVs, and electric cars like the Nissan Leaf.
"um, and really Relying a lot on the f-150 franchise. So From a dealer's perspective, even if you only made a thousand dollars new vehicle gross on a"
The Ford F-150 is a big truck that many people use for work and everyday driving. It's known for being tough and can carry heavy loads, which is why a lot of people like to buy it.
The Ford F-150 is a full-size pickup truck that has been one of the best-selling vehicles in the United States for decades. Its significance lies in its versatility, performance, and strong reputation for reliability, making it a popular choice for both work and personal use.
"...even if you only made a thousand dollars new vehicle gross on a Ford Escape, you know, you could still do f and i..."
The Ford Escape is a smaller SUV that's good for everyday driving and family use. It's easier to park and handle than larger trucks.
The Ford Escape is a compact SUV that offers a balance of efficiency and utility. It's designed for families and individuals looking for a versatile vehicle.
"...you could still do f and i You can still take a trade in you had a you had a product to sell a customer..."
F&I means Finance and Insurance. It's the part of a car dealership that helps you figure out how to pay for the car and offers insurance options.
F&I stands for Finance and Insurance, which refers to the department in a dealership that handles financing options and insurance products for customers purchasing vehicles.
"...an f-150 I think the average transaction value at a Ford source is 57,000..."
Average transaction value is how much people usually spend when they buy a car at a dealership. It shows what kind of cars are popular and how much they cost.
Average transaction value refers to the typical amount of money spent on a vehicle purchase at a dealership. It helps understand market trends and pricing strategies.
"You know the nissans and the stalinises and the infinities and the lincoln's and the volvos are really really challenged today..."
Volvo is a car company from Sweden that is famous for making safe and reliable cars. They have been facing some challenges in the market recently.
Volvo is a Swedish automotive manufacturer known for its focus on safety and reliability. The brand produces a range of vehicles, including sedans and SUVs, but has faced challenges in adapting to market demands.
"You know the nissans and the stalinises and the infinities and the lincoln's and the volvos are really really challenged today..."
Infiniti is the luxury brand of Nissan, making high-end cars and SUVs. They have had some difficulties in getting noticed and selling well lately.
Infiniti is the luxury vehicle division of Nissan, offering premium cars and SUVs. The brand aims to compete with other luxury automakers but has struggled with brand recognition and sales in recent years.
"You know the nissans and the stalinises and the infinities and the lincoln's and the volvos are really really challenged today..."
Lincoln is Ford's luxury car brand, making fancy cars and SUVs. They have been having a tough time competing with other luxury brands recently.
Lincoln is the luxury vehicle division of Ford, known for its upscale cars and SUVs. The brand has faced challenges in maintaining its market presence and appeal in a competitive luxury segment.
"...And so that makes it harder for the factory and the retailer to stay in touch with that customer because for the after sale..."
After sale means the services and help you get after buying a car, like repairs and parts.
After sale refers to the services and support provided to customers after they purchase a vehicle, which can include maintenance, repairs, and parts sales.
"...because they make a ton of money of selling parts..."
Selling parts means providing replacement or upgrade pieces for cars, which helps car companies make money.
Selling parts refers to the practice of dealerships and manufacturers providing replacement or upgrade components for vehicles, which is a significant source of revenue.
"Toyota, I believe put in place minimum advertised prices to prevent retailers from selling well below invoice and that had the effect of boosting margins for everybody in the Toyota world..."
Minimum advertised prices are rules that tell stores the lowest price they can show for a product. This helps keep prices fair and protects the brand's image.
Minimum advertised prices (MAP) are pricing policies set by manufacturers that dictate the lowest price at which a retailer can advertise a product. This helps maintain brand value and prevents price wars among retailers.
"But if the OEMs can take actions to eliminate or reduce the broker business, that's going to be I think a very positive thing for the retailers in those communities..."
OEM means Original Equipment Manufacturer, which is the company that makes the original parts for cars. When someone talks about OEMs, they are usually talking about car makers like Toyota or Ford.
OEM stands for Original Equipment Manufacturer, referring to companies that produce parts and equipment that may be marketed by another manufacturer. In the automotive context, it typically refers to car manufacturers themselves.
"...So it's how you ride is pretty much the same as a palisade um"
The Hyundai Palisade is a large SUV that can fit a lot of people and their stuff. It's designed to be comfortable and safe for families, which is why it's often talked about as a good option for those needing more space.
The Hyundai Palisade is a mid-size SUV that offers spacious seating and a range of advanced features, making it a strong contender in the family vehicle market. Its significance comes from its combination of comfort, safety, and value, appealing to those looking for a reliable family hauler.
What defines the marathon's spirit?
Why did the CarMax CEO resign?
How is Carvana influencing the market?
Current state of the auto market?
Which brands are performing best?
Who is buying cars today?
Biggest opportunity in dealership sales?
Where are the hottest regional markets?
Future outlook for dealers?
Select text to request an explanation
Dealers early access to our private dealer chat groups is now open join top dealers at cdgcircles.com
That's cdgcircles.com or hit the link in the show notes. I'll see you inside
You know, we see Hyundai and Kia stores now regularly making north of five million dollars
Sometimes more than ten million dollars per location that never happened a decade ago
So there are some really good brands out there to buy
Conversely, you know the Nissan's and the Stilanus's and the infinities and the Lincoln's and the Volvos are really really challenged
Yeah, I mean look, it's also, you know, we have there's more money, you know, more capital chasing fewer assets
Yeah, I mean it's one of the incredible just accomplishments here over the last five to seven years of how far they've come
Today, I'm joined by Alan Hague president of Hague Partners while headlines scream volatility dealership buy-sells are booming
Alan breaks down what's driving the surge which brands are winning market share and how dealers are positioning themselves to thrive in a rapidly changing retail
Landscape a big thank you to our sponsors for making this episode possible Equifax
Amazon autos and of course Hague Partners and now let's get into the show
Alan Hague back on the cdg podcast Alan welcome. Thank you. You see it's good to be back with you
Good to have you back on post new NYC marathon. I hope I hope you're hanging in there
It was a long day, you see that was about a 12-hour event for me a lot shorter for the faster runners
But for me, I I got on the subway at 6 a.m. And I came back to my hotel room at 6 p.m.
So it was quite a day though which kind of showed the best of New York City and I mean
It brought out the message everybody runners spectators, etc. And so how does that work?
I've never I've never participated in a marathon like when you say 6 a.m. To 6 p.m.
How what period of that are you actually running? Longer than I wanted to
But for the New York City Marathon, it's unique and that all the runners start in Staten Island
So you have to get all the way over Staten Island everybody and there's 60,000 people that signed up for this race and and
So they have to get everybody over there by 7 30 close the bridge and then they start to launch the runners
So there's so many runners that I started running at around 11 a.m.
And I ran so slowly I had such a bad day. I didn't finish until I was really getting dark almost 5 p.m.
And along the way are 2 million spectators and I shouldn't call it spectators because spectators implies passive
You know just watching. Yeah, these were active. These were participants
There was so much energy coming from that crowd and good humor and support and everything else that it really made a painful day
pretty fun and
There were a lot of funny signs that were out there. There are a lot of funny sayings New Yorkers definitely have their sense of humor
This morning. I was watching a video of
Of the race of you know, some people who had run and I remember passing by a guy
who was missing basically his whole right leg and his
Left leg below the knee and he had those blade runner shoes
she remember from Oscar Pistorius on his prosthetics and he had a couple of canes and
He's a young man. I learned he was from Venezuela. It was some accident
And he finished the race and I remember running by him and thinking like well, whatever I was whining about my feet or
My stomach or whatever like that man was incredible
And he really showed I think the best
The people can offer because people were out there to set a goal. They worked hard almost everybody achieved it
I looked at the stats 99.3% of people ran it finished it and they finished it
that's a real that's a really high rate because of all the fans cheering for them and
you know, I ran for this charity called Fred's team which provides money to Sloan Kettering Hospital for cancer research and
All one team raised nine million dollars and that we were one of many that were running, you know as a charity
So it was just a wonderful day. It was the best New York City has to offer and I felt just privileged to be a part of it
That's incredible. Great work
And I should say this is sort of impromptu. I didn't even plan to chat about this
But in not so positive news, I'm sure you saw the news about Carmack's new CEO or I should say dear
You know Bill Nash resigning. What do you think about that? I'm curious to hear an opinion on what's happening over there
I'm not a real expert on Carmack's, you know, I think that's um, if you look at the
Development of Carvana, I have to think that the board members and the investors say wait a minute. Why why aren't we Carvana?
We were here well before they were we've got the clicks and the bricks
They're just not getting Carvana's just not getting into the bricks with their acquisitions. We've had physical dealerships. We've had a buy online
How are they worth? No, so much more than we're worth
I believe that Mr. Full Yard. I've heard he's a brilliant man. I don't know him personally
So I suspect that they will improve. I suspect and again, I don't know this
but you might have some disgruntled shareholders and
and
Now you know if you look at what Carvana's done
It's just quite impressive if you believe in their business model or not the amount of value that created for the shareholders
The experience I give to their consumers the impact they've had on our industry, you know
It's significant and really just less than a decade
And they're not done as you know, they've been buying some new car stores
So they could have an impact. Yeah, not only on CarMax
But on the stock price of the public retailers as well
And you of course know that we launched CDG circles, which is you know primarily or dealer chat groups and beyond and
And one of the conversations in one of the circles
Has been about
Carvana and you know people the dealers are sharing different, you know tips and insight they're hearing from their from their reps and from you know
manufacturers
But all signs seem to be pointing to more acquisitions more franchises more dealerships for Carvana
You had written a letter to Elon Elon Musk about a year ago or two years ago, maybe and you said hey Elon you should
Embrace the dealership model and and they did I I forget who someone it did get generated lots of press
I mean it went viral
You know online and the Twitter verse and whatnot, but it's funny to see that
Elon while he hasn't adopted or embraced it
Carvana since has I actually recorded a podcast with Ernie Garcia and I said and no on the podcast at Ernie
so when are we when are we entering the franchise realm and
He didn't respond on the go
He's like oh, we're not I have no plans right now and in two months later
They're like we're entering the French around and obviously this had nothing to do with my podcast
You know a public company doesn't make these types of decisions since 60 days, but it's pretty funny timing
that they've since entered and
are
Selling new cars online
Well a lot of research has shown that the majority of customers still want to come in and touch the product
Maybe they need help with financing
Maybe they see to understand the difference in colors or packages or whatever
But the large majority of customers still want to come into a physical dealership to transact and if you're Carvana
And you want to own the used car space as much as you can
It limits the number of vehicles you can sell if you can't get them into your
physical environment, so you know, I think Carvana should speak for themselves in terms of their future plans
As opposed to me speculating
but this allows them to address a much bigger share of the market and
Certainly, there are people that will buy a new car side unseen
We knew we realized that during the pandemic they'll buy a used car and then on the new side in some ways
That's even more of a commodity product, right because it doesn't have any scratches
It doesn't have any smell. It doesn't have any wear and tear, right? It's totally new. So it really is a commodity
So, you know, we expect that they'll put to use their expertise in marketing
their expertise in financing their expertise in ensuring and
Provide a very good customer experience
It'll be curious to see on the fixed operation side
If that's a big part of their future
Are they going to be expanding the service stalls and expecting more customers to come in or is it really more of a
New news vehicle play that's unclear to me at least so Alan talk to me before we get into
Or let's I was starting high level about just the current state of the market our last update
Of course, we did a quarter ago, right? Where are we at today? Government still shut down as of this recording
Potential chip shortage 2.0 looks like it's getting serious
You know Honda dealer sending me memos showing that Honda's just you know keeping them abreast of what's happening
But there's no doubt about it that it's real, right? Yeah
Consumers is continuing to or I should say sentiment from what I read online
Is that the lowest or lower than it was during the recession and I find that pretty striking?
But that's you know, again, I don't I don't recall it right now who specifically measured that but that's that's a pretty stark indicator
So what is where talks us about the M&A market all that said that's macro
But what is happening in the dealership M&A market as of as of now?
Well, the M&A market took a big step backwards in the first quarter this year
They're almost half as many dealerships sold in the first quarter of 25 as there were of 24
And we speculated that's because you know these transactions take at least three months off in a year
Just to conclude
So we look back three five six months. What do we have? We had a presidential election going on
And I think that if you're going to be buying a store and spending tens of millions of dollars
You kind of want to know what talk of tax environment
I'm gonna be in what type of economic environment we end and so I think I think a lot of deals kind of went slow in
sideways or died maybe in the fourth quarter of
Last year and then the first quarter of this year
After the election, we still have tons of noise. I mean you mentioned some of you see right, but we have two wars
We have the presidential election. We have tariffs. We have a political assassination, which are the cur
We just had a mayor elected first socialist mayor in this country in decades that I know of you had the plant fire in Kentucky
You have the chips factory shutdown and is that Holland? I can't remember
On the positive side, you had the carb stuff eliminated nationwide, which is a huge relief to this industry
We got our first rate cut the EV credits were eliminated
So I mean just the whipsaw we've had back and forth positive and negative news
You know at the end of the day, how does that all shake out dealership and a m&a is coming back strong?
the number of dealerships that closed in the third quarter of this year a hundred and forty eight stores closed so if you
annualize that that's almost 600 stores
For the year, which is about you know, almost the most we've ever seen and I can tell you in terms of our practice
The number of inbound calls we've had and requests for meetings and requests for valuations
I'd say it's gone up significantly just in the past 30 days
So, you know dealers have made so much money since the pandemic started, you know, it's really been
2020 21 22 23 24 25, you know, they've they've just done so well and the average age of a dealer continues to go up
So at some point, you know, we're gonna have a pent up demand of sellers
And I think that that happened a little bit when when dealership values doubled or tripled, I should say
You know now they're still quite high
But in terms of m&a, I think the the the market is wide open
I mean the financings are coming through the banks or even to lend real estate is kind of recovered
Profitability went up in the second quarter and the third quarter
So dealers are feeling pretty good, but it does vary a lot by brand
I'll tell you that, you know, some brands are getting no low and some brands are getting all the love
This episode is brought to you by Equifax
Auto dealers and lenders are in a tough spot fraud is more challenging than ever with fraudsters constantly evolving their tactics
One of the keys to protecting your assets and approving loans with confidence
Thorough identity verification leveraging reliable data
You need to know the consumer and that they can afford the vehicle get the data
You need to know your borrower better and make fast smart decisions
Equifax provides instant secure access to verified borrower identity address income and employment information helping you move deals forward quickly
Learn how the power of verified data can streamline your process visit the work number comm slash auto today or click the link in the show notes below
Before I ask you I was I was going to go into just what kind of deals or buyer profiles are driving the current momentum
Let's table that for one second. Talk to us about brands
last podcast we recorded the big news was
Audi
taking a you know a full turn down in
In their blue sky multiple and so I'd love to understand, you know, what you're seeing in terms of
Brand and sentiment across brand with amongst dealers. Well, you mentioned Audi. So just to follow up on that
You know, the Volkswagen group as a whole went really really heavy towards EVs globally and
They stopped innovating anything really on the ice side
They weren't bringing any really many ice vehicles to the market and it was a bad bet
And we know now that the US government has abandoned subsidizing these vehicles the consumers
You know, it's less than 10% of the people would like to have an EV with the credit
We'll see what happens when the credit is fully gone where the EV market share goes
The Volkswagen group had limited production in the United States Volkswagen has a plant in Chattanooga
That was operating pretty far below capacity. They were building a plant for Scout, which they weren't planning on selling through their franchise channels
so
They just made the wrong bets and I've had some dealer friends who tell me that Audi manage my
Insist on making all the decisions and then they make all the wrong decisions and the Audi dealers are kind of left holding the bag
And I feel bad for out of yours because you know, the throughput per store compared to their
BMW or Mercedes or Lexus competitors is way lower
So they have these expensive facilities that Audi required them to build
But they're not getting near enough volume to justify the investment many Audi stores are breaking even some well
Many we know are actually losing money and there's not a lot of cavalry on the horizon for them
So as a result, we've seen the value of Audi stores decline more than any other franchise in
2025
now
Audi's part of the Volkswagen family Volkswagen is in a bit of the same boat
They don't have you know, lots of juicy products coming out the consumers are snapping up
Porsches in the same boat, you know Porsche was going hard towards EV
I think they're gonna be EV only by 2032. I can't remember the timing that they said they were talking about giving up models like the Boxster and the Cayman and
You know really moving away from internal combustion engines now
They've also learned that that's not what consumers want. It's not what governments are gonna require
So they're scrambling to keep their dealerships supplied with vehicles. I heard the new
I guess he's executive vice president of Porsche and North America speak about a month ago
You know, they're gonna keep production going for the Boxster and the Cayman
They are going to bring a three row SUV to the US market for the first time, but that's still two three years away
So I think that the profitability of every brand and the Volkswagen channel is gonna be declining because they've bet so much on
EV
conversely
certain brands
were a little bit wiser and said, you know, we're gonna have a Macy's approach to
Powertrains and I remember hearing Bob Carter from Toyota talk about this at the New York auto show
Maybe four or five years ago. If you want an EV, we'll have that for you
If you want to plug in, you know hybrid will have that for you
If you want a hybrid will have that for you and if you want a gas motor will have that for you
And they have and they've absolutely killed it in the market since then they're taking share
The profitability of Toyota and Lexa stores is close to an all-time high even including the pandemic years
On average, you know, some people many people were taking markups on cars during the pandemic era
But they absolutely had the right strategy and now they're far ahead of their competitors
Even brands that were growing quite strongly, you know before
The pandemic and before the EV thing like Subaru
Subaru just doesn't really have many hybrids yet. They're coming but they don't have them
So they're they're losing some share to
To Toyota the Korean brands have a good strategy to hybrid
EV
Gas and they're taking share Hyundai and Kia are gaining share nicely. Yeah
Well, so a couple of things there though. It looks like the EV market share
Is gonna come in for October a little bit more than half below
Uh, the prior month, right? So let's say from like 12 to like five and a half percent
So it takes us back about three and a half years if you look back to last time we were at
That level, you know early 2022
Say close to four years really
Secondly, you mentioned Volkswagen. It's sort of anticipating a rough patch ahead, which will impact valuations
The podcast right before this one that I recorded was with Fred Emick
from
Emick Automotive in Colorado one of the highest volume sellers of EVs in the country
and
I asked him I said Fred I said
What's on the horizon right like his Volkswagen? Listen, he's chairman of the national dealer council
is his Volkswagen listening or
Do you like do you believe you have the right tools to actually affect you a change or where are we going?
And listen, she's he's a Volkswagen dealer. He was very candid and honest
But he didn't sound
You know, he didn't sound
Just like he really saw the light at the end of the tunnel. That was at least how I read it
And you can you know, anyone can listen to the podcast themselves and make their own judgment
But I think everything putting that and this together
I think it signals
Some potentially, you know a bit of a rough patch for for the brand for for the foreseeable future
well years ago
Mike Jackson who was CEO at alternation for many years. He has a phrase which I
remember which is
There's a battle for talent and capital at auto retail. There's a battle and if you are an OEM
And you don't bring product for your retailers
You show that you don't really care that much about them. In fact, you want to compete directly with them
They're the retailers are going to react by
Moving on they're going to sell their stores. They're not going to put their best people on the stores
They're not going to invest in their facilities
They're going to they're going to take their talent their capital and put it into the brands
That are supporting them and so
I don't think that Volkswagen has listened very carefully to its us dealers
Over decades. It's not new
But it's particularly
Dire now in a way
because
During the pandemic everybody did well all franchises did well every product that came was getting full stickers just about or way over sticker
But now that you got to compete head to head
Volkswagen is a massive automaker has all these brands
But are they coming with the right product and power drains in the next couple years to compete with the
Toyotas of the world
You know or the chinese vehicles in these other markets because because china was a huge market for Volkswagen
And they're all kinds of articles about Volkswagen and the amount of capital they need over the next couple years versus what they have
and so
you know, that's that's a macro issue with the government of
Germany and labor costs and china and tariffs
But in the u.s. Market for dealers
Volkswagen has not been a good partner to their dealers
And dealers like Fred Emick are kind of letting them know which they should
I mean the fastest thing they can do is put that scout vehicle in the hands of Volkswagen dealers
They will sell it far better than a Volkswagen website will
Yeah, it seems like uh, it seems like a lack of listening sort of like ford circa 2022
Uh, and you know, they they definitely I got to give them credit for being more
You know just attentive and listening to the dealers and making some adjustments accordingly
Um, you know putting putting Volkswagen group aside it clearly covers multiple brands
Are you is there any other brand right now in specific or brands that?
Are uh, you know in this in a very transitory period anything you see out there? Well, if you look at
Stilanus and Nissan they had a positive
They had growth and sales in a third quarter. It's the first time and I don't even know how many quarters that they started growing which is
Terrific news for for the dealers. Um
I spoke with a large dealer yesterday that has a Nissan store and he's selling quite a lot of nissans
But they have these stair step games that are going on so he might sell a lot of cars and make no money
And he's also wondering like what's the point? You know, why why am I doing this? Maybe I should just
move most of my business over to my
Surrounding stores where I kind of get slow and steady profits as opposed to these peaks and valleys
um, I think the other challenge we may see for
Stilanus and Nissan dealers is you know, their sales have dropped quite a lot
And there's a lag in the fixed operation business between new vehicle sales and the fixed operations, right?
So as you have fewer units in operation, you might have a declining fixed operations base, which is
Scary because that's the most profitable part of our industry. So those dealers absolutely have to be building a used car operation
That can be at least one to one if not two to one or even three to one
Used to new so that they can feed that fixed operations base keep their technicians around etc
Um, meanwhile, you have other brands like Toyota where it's just got like, you know
Growing units in operation. That's going to be very positive if they're they're fixed operations
Um, you know Ford's another brand that we're watching carefully
They've been giving up a lot of their lower price products
um, and really
Relying a lot on the f-150 franchise. So
From a dealer's perspective, even if you only made a thousand dollars new vehicle gross on a
Ford escape, you know, you could still do f and i
You can still take a trade in you had a you had a product to sell a customer
At a lower price point that you could work your way up
But as they walk away from some of these lower priced units, you know an f-150
I think the average transaction value at a Ford source is 57,000 at a
Toyota store. I think it's
42
Big difference
So, you know, the customer was looking for a payment
They're going to keep going more and more towards the Toyota and less and less towards the Ford. I think
For anything other than an f-150
So we're really seeing a divergent uh success of brands right now that we didn't see during the pandemic when everybody was doing great
Talk to me about buyer profiles like who's driving demand right now, especially as demand is rising again
I think it's important to mention that when
You when we were seeing the emanate demand slow earlier in the year a lot of it was driven by the public's
And what are we seeing now? I mean, you know almost a year later
Uh, who's driving demand in in today's market?
Well, there have been several public companies that have bought dealerships this year all our nation bought some stores in the Chicago area
We know asbury bought her chambers big group of stores up in the northeast
Uh, sonic bought some stores on the west coast some land river stores
So they have been more active this year than in the past
But still the large majority of m&a are private dealers
The private dealers include a guy with one store buying a second store or a guy with no stores buying his first store
all the way up to
a private equity backed organization that has invested billions of dollars and
Can take down
Really the largest transactions out there. Um, so we we still put those in the private buyer group even though they have immense capital
Um, still a lot of
confidence in auto retail
Uh, I mentioned all those risks or shocks that were going on
And despite all that profits went up for for automotive retailers in the third quarter
So I think we're going to continue to see strong demand for dealerships
We look back at our average blue sky multiple over the last
Almost 10 years and it's slowly gone up on average
Some of it's thanks to brands like Toyota that where Toyota used to be around five five and a half
And now it's more like a seven and change
And but also brands like Hyundai and Kia that used to be three to four and now they're you know, four to five
um, so a lot of those brands have improved as
Businesses, you know, we see Hyundai and Kia stores now regularly making north of five million dollars
And sometimes more than 10 million dollars per location
That never happened a decade ago
So there are some really good brands out there to buy conversely
You know the nissans and the stalinises and the infinities and the lincoln's and the volvos are really really challenged today
Yeah, I mean look, it's also, you know, we have there's more money, you know more capital chasing few fewer assets
And it's uh
But it is I mean, yeah, I mean it's one of the incredible
Incredible just accomplishments here over the last five five to seven years of how far they've come
I'd love to understand now from a projection perspective assumptions
You're you're in the details here with, you know closing deals
Weekly basic, uh, what type of assumptions are you seeing being made right now?
We had this conversation. I think maybe a year and a half or two years ago as
Or maybe yeah to even a little bit more than two years when interest rates started rising
And dealers were
Hold on where the last two years were an anomaly. I want to look at, you know, since 2019
I want to adjust but what are you seeing now? How are dealers projecting the environment for the next 12 months?
Uh, that could be from an interest rate perspective a discount rate, you know, that can be from just overall volume
I'm curious to know what major
Uh trends you're observing
Well, when people are valuing a store, they're really going to look they're they want to know what the store has been making
But they're going to put together own projections to figure what they're going to make and then they'll value the store based upon that
Um, in the past there have been these formulas. Hey, it's the last three years of
Of earnings you average those and you put a multiple on and that's the blue sky number
We're not in that world anymore because the earnings were so high and they've come down a bit
So most buyers we see are really looking at current earnings
As the baseline they're not going back to 2019. We're we're still at twice the level of profits where it's 2019
So that's that's history. That doesn't matter at all in terms of the present valuation
And then they're trying to figure out
Okay, this brand that i'm buying house performing the market the facility, etc
What's going to happen over the next three or five years?
And if it's a Toyota store and it's underperforming
We're showing projections that
Toyota will provide them with more units to become sales effective
They can't just manufacture more units. What they effectively do is take it away from the other dealers
So if you have a Toyota store or you're buying a Toyota store and the store is not sales effective
We're projecting that over a 12 to 24 month period
A buyer will be able to make that
Dealship sales effective. So that's going to go up and other often when people are selling their stores
They're not operating at their
peak
Then maybe
People have gotten a little bit inattentive
Maybe management goes home earlier than they used to
Maybe expenses have creeped up. So in most cases when people are selling their stores
We can identify an opportunity for the incoming buyer to do better
Which is a win-win because that means that a buyer can pay a strong value for a dealership
And then improve it and get a good return on investment. That's the win-win
Where we have a challenge is when a seller has got a rock star gm
And he's 200 sales effective and the use in your ratio is three to one and
And then we go to sell that store and buyers might be a little bit afraid of the performance
Are you seeing any reluctance or hesitancy driven by
The government shut down, you know the the mayor of new york. I know that's very
That's very regional but you know again just
Gleaning inside some chats and seeing the dc based virginia based dealers
Talking a little bit, you know some somewhat somewhat of a slowdown
I'm curious to know if that's trickling yet into the buy sell market in any way
Not that event. I think people view that as a temporary event. It's happened before
you know, there's a
Stated belief that
President trump wants to shrink the size of the government and maybe this is one way he's going to do it
Right is just get people to quit
So and certainly that's a that's more of a local thing than a global or national event
I feel badly for those people that are doing their jobs. They're not getting paid. So we do need to solve that
It's not fair to them
but in general
you know the
The economics nationwide are pretty good right now, you know, california
Can't really enforce the carb laws. So dealers are going to have the full
Inventory of vehicles to sell to customers
Economic growth is still pretty good
inflation is
Two three percent, which is not hurting anybody
Unemployment is not popped up even though we hear about companies laying off workers. Maybe it's ai related or maybe they just are shedding excess workers
So that's a little concerning. I have a daughter that's graduating from a master's program this spring and
I'm kind of wondering what her her outlook is going to be for getting a job
um
We still see people we still that is very concerning. Yeah, yeah
So we have to put her on the front line selling cars if anybody needs a
A nice young lady
I think that's one of the best bet on that. Yeah, I mean she's been the partly the card girl
at the university of north carolina the golf course out here
So she knows how to talk to uh the old guys
So we still see a lot of demand for stores now
Sometimes when people call us
It's interesting because they're I say I want to buy a dealership. What would you want to buy?
What brand how much you want to pay? We do these kind of screening
And I would say a decent number of them say I want to buy a dealership in a red state
I never remember hearing that description
my whole life
That investments were just driven based upon
You know the politics of that state now. We knew certain states like
California and New York, etc. Were more challenging higher tax, etc
But there were still plenty of investment dollars going to the states
Because there are lots of wealthy people and a lot of commerce in the states
Uh, but you know, I got a call last week from a dealer in hawaii wants to expand
Skips right over california, which is the natural place for them to go and where do they go first arizona?
You know, texas
Even the carolina is maybe even florida
So that's a long darn way for that dealer to fly to buy a store
Because they're kind of done with the politics
In the blue states. Um, now we have other friends that are investing in california and doing great
So
But that red state blue state is the first time I've heard that and maybe it's just a reflection of this division
We have on our society
The polarization that's happened during the last decade. Maybe that's social media or other reasons
But we've got some transactions going on in california now where the valuations are really strong. In fact, we had
We had one transaction
We marketed it when carb was in place
People were concerned about it because these brands didn't have many hybrids
We accepted an offer and the buyer was so slow
That we ended up walking away
And remarketing and we got an offer that was 30 higher more in blue sky
So wow and after carb was gone. So to me that's
That's a
An example set of one. So I don't know that it's a massive law
But the value of that dealership group was significantly higher without carb than it was with carb
So i'm very hopeful for the other transactions. We have one in california. In fact, I know because reading the numbers
Buyers are are eager to do business in california again, whereas for a long time they were
Looking to take capital elsewhere. Yeah
Yeah, again, there's so much capital chasing these assets
You know, there's always going to be buyers for you know an asset almost anywhere in this current industry at the moment
Sticking on the topic of valuations. I'm friendly with some dealers in Miami new york
And there's been a lot of talk about vehicle brokering
Um and specifically I was asked about the you know, the perspective on
dealership valuations and brokering
um, is this you know, you think about a dealership and
Depending on what uh, what uh, percentage of their business to actually do through brokering and not as you know direct sales
but
You know, some brands are very heavy into this right now and is this do you view?
Is this something that you've thought of is this?
Uh, do you see this as a as a as a big risk to these brands if
The to dealership valuations that these brands are starting to get
You know more protective and you know going to start cracking down on brokering
Or do you maybe see it as an opportunity or to get in with these brands today before they do that?
I'm curious to know if you know, this topic is something that has crossed your mind recently or you know, you've been asked about it
So brokering is something I became aware of
Maybe 12 15 years ago in new york. We're selling a Mercedes store in brooklyn
And that's when I sort of realized. Oh, there's certain communities
You know, like in the jewish community a lot of people go to the rabbi to make financial decisions
And often their rabbi will help them purchase cars and the rabbi is the broker
And the rabbi is going to take a cut and everybody's okay with that
Uh, but it it makes it hard to
Sell a store if you're doing a lot of broker business because
Will those brokers stay with you?
if you
Turn down that business, what's the natural demand for for that store affiliate deal? Yeah, it's yeah
There's no loyalty. It's uh, it's a it's a cheaper sale. There's no loyalty to it. Yeah in california, you know, there's
More national type brokers or somebody from
The purging community, you know people who immigrated from iran, they've got somebody
A man or woman they go to to help buying cars because they don't want to go into the stores korean
You know vietnamese etc. There's certain communities where this is pretty
Prevalent so it makes it more difficult if you're buying a store
To know what the real level of demand is
now I think that
Pardon me. It also
A lot of the factories don't like it because they don't they don't know who the customer is
The the the retailer doesn't know the customer sometimes are not even provided with a lot of the information of the customer
And so that makes it harder for the factory and the retailer to stay and touch with that customer because for the after sale
It's the parts in the service
And factories care a lot about getting that customer back in the dorsion because they make a ton of money
of selling parts
To the retailer who then puts them on the car to the customer
So I have heard I believe Mercedes is doing this
that they're beginning to
Take pop to enact policies to reduce
The level of of brokers of business in their stores
And it may be in the terms of if you're selling a lot of units
To customers that are outside of your area
Perhaps you don't get the same margin on that car
And I don't know the details yet, but I do know that that's going and that's a positive for the retailer
and that's a positive for
The factory and ultimately I think could be positive for the customer because now they have a relationship with a dealer
If they have a problem with the car, you know, if they have a problem today the rabbi can't fix it
Right, so it's helpful for them to have a relationship with with the retailer
Um, so this change I think would be for the benefit of dealerships particularly in Los Angeles
You mentioned Miami
And the northeast where brokers are important. Just like a couple years ago
Toyota, I believe put in place minimum advertised prices to prevent retailers from selling
Well below invoice and that had the effect of boosting margins for everybody in the Toyota world and making that business model even better
So I know sometimes the retailers
complain about the OEMs that do things to take money out of their pockets
But if if the OEMs can take actions to
Eliminate or reduce the broker business
That's going to be I think a very positive thing for the retailers in those communities
This episode is brought to you by amazon autos. Are you ready to grow your dealership?
Amazon autos drives customers right to your doorstep by connecting you with millions of ready-to-buy online shoppers
Whether you sell new used or cpo amazon autos provides the digital storefront for customers to shop while you maintain control
Of your inventory pricing and customer relationships
Stop wasting time and money chasing leads and start earning done deals with amazon autos
And for a limited time new amazon autos dealers pay no listing fees for up to six months
Go to sell dot amazon dot com slash programs slash autos to learn more or click the link in the show notes below
It would the way I say it is it would likely grow profits, which would grow valuations. Yes, exactly us
Yeah, I should have asked you the question
Well, I wanted to get your perspective. You're the expert. Yeah talk to me about
I guess now zooming back out just general brand
Are you seeing any any new oems enter the you know must must own sphere?
Or maybe must sell sphere. We spoke about vw group, you know, we we touched on that
But anything kind of recently get um, you know creep up into like, you know must own sphere due to you know
We have strategy anything else here any other positive momentum you're seeing there across any oem
I mean to us there's certain value brands that that we like, you know in terms of return on investment
um, I would put
The general motor stores into that category where they sell between three and five times earnings. They're very stable
They have great fixed operations
Um, if you can get a dealership in a growing area, you'll have some wind at your back
We did some math you'll see about
the the very positive return on capital
for Ford stores or or general motor stores
Buying neighboring stores and closing them down
And I'd be happy to share that math. I don't know how I do it on your channel
but you really
Even using pretty conservative assumptions by closing down some of these stores because they're over dealer
But if you can buy some of these stores and Ford I believe has got some capital to help do this
You shut down the stores even if you lose half or two-thirds
Of the customer base
You pick up that gross profit with really no incremental expenses. It's a really good deal
So we like Ford, you know Ford
We wish they weren't walking away from some of their lower price products
But their truck franchise is excellent if you really know trucks on the commercial side
And you build out, you know the the Ford pro type business
That's a business model. We like that's maybe under value today
We already talked about the Korean brands
Um, Toyota and Lexus are like buying a bond versus a stock, you know, it's gonna be a great
Place to put your capital, but the prices are so high
It may not provide the best return on investment
The the Korean brands
have a
Product allocation strategy where if you buy, let's say you're a good operator, you buy in a performing store
Can you well absolutely give you lots and lots of product until you say enough if you buy a Honda store or a Toyota store
You have to play in the turn and earn system unless you buy a big underperforming store
It takes a long time to earn that that allocation
So it really depends upon your strategy if you got a lot of capital and you want to buy a store
That's not going to take a lot of work and just make you a good return
You focus on Honda and or Toyota and Lexus and maybe some of the luxury brands
Um, you know to us on the luxury side, I think Mercedes is the buy now
Mercedes took some policies that I believe reduced their profits
They went so far on the EV side
They made dealers take all these EVs and EVs and the dealers lost a ton of money on them
They didn't really bring new products for Mercedes dealers to sell. So Mercedes market share has gone down
They were negative this last quarter by about eight percent
BMW conversely was up by about the same percent
Mercedes also had a policy of trying to restrict or prevent
Buyers or their stores from
If they weren't already Mercedes dealer, they didn't want you to buy one of their stores
And so that shrunk the the demand for the stores
And now they're walking away from that. They're allowing people that are Mercedes dealers to acquire their their stores
They also were trying to restrict the number of Mercedes stores that dealers could own to I think it was six or seven without any frame agreement
They've now pushed that to nine. So I think with
Oh, one more thing is
Adam Chamberlain, who's the new president there Mercedes Benz USA. He and his his team and he's got greg gates back with him as well
They want this brand. I love this quote from a from a dealer. They want Mercedes to be
Aspirational again, not unobtainable
By that they mean at what prices they were selling their vehicles
They raised their prices so much that a lot of their customers said I just can't afford to get a new one
So they want to go from selling about 300 000 units a year to 400 000 units a year
Really in the next I think it's three or five years
So this could be a low in terms of profitability of a Mercedes store
Because they had to suffer all the losses of flushing all those EVs out
And there are other vehicle sales drops so their profits per store are probably lower today and they haven't quite some time
And if you believe in adam chamberlain and greg gates and the rest of the team there and Mercedes
You know in germany to bring the right products to the u.s. Market
Could you get a 33 lift in sales 300 000 400 000 without adding more points? That would be a home run
You could buy a Mercedes store today current earnings and the current valuation
And if you are adam chamberlain or a Mercedes dealer listening should shoot adam chamberlain the text and tell him
Let's let's let's do a podcast. We have to have a discussion about this
You mentioned the Korean brands. I was drawing this down
I had I had a couple dealers. This is a new one for me, but I had a couple of dealers just
You know one dealer told me
Hey, I'm seeing some friction on the Hyundai side and Kia
Another dealer told me they took an unexpected loss under Hyundai store
Again, I haven't dug into this. It's still very fresh
But I am curious if you've heard any
Any rumblings with respect to Hyundai kia
From dealers or have you you've seen anything reflect in any deal activity whatsoever? So it's an interesting
company because um
It's a new one. I believe hunt is the majority shareholder kia and the products that they make are
They're not clones, but they're their brothers or sisters, right? So it's how you ride is pretty much the same as a palisade
um
But the two companies
Don't really get along like I think kia absolutely wants to
sell the pants off of Hyundai
The Kia management is perceived as more friendly to dealers
than Hyundai
I think Hyundai is a little bit tough. They maybe choose favorites. So if you're in the club
You you get a lot of product you get ad points you get rights of first refusal offered to you
You you have, you know, you're you're paddling downstream with Hyundai
If you're there's a perception if you're not in the Hyundai club, then maybe it's hard to get the product
Maybe the stair stuff, you know incentives are unfair for you
Um, and so you're almost encouraged to
Maybe sell your store and by the way, we know
Who should sell it to because he's our favorite child don't sell it to somebody else sells our favorite child
So that's the you know, Hyundai dealers have felt like that's not the spirit of partnership I'd want from my factory
And that's you know, hopefully I'm not being critical of Hyundai
I think they developed an amazing product and they've taken so much market share
Profitably over the last 10 years that I have great deal respect for what they've accomplished
I'm just talking about from the retailer's perspective
What we hear now on the Kia side
I think it's viewed as a little bit more of a level playing field if you're a good dealer
you're going to get the cars and
If you can sell all those cars are going to give you more cars and
The facility requirements that Kia and Hyundai have this is for both of them
I say are reasonable compared to certain other brands like Audi
Where they have this very expensive cost to build a facility that in the end doesn't really sell that many cars
You know Hyundai and Kia we really like those brands because you can sell a lot the cost of facilities not that much
You have to update the image, but it's a few million dollars
Not seven read to redo a show room like with Audi or 15
So we're fans of those
But I think that the perception is that Kia is a more dealer friendly company than Hyundai and therefore we have
Kia stores that hire multiple to Hyundai even though it's the same product
Yep, I've seen that too
Alan before we wrap up
We've been very insightful
Curious to know what is your
What's your pulse on the market for the for the next three six nine months?
I mean, what do you what are you forecasting here for this next year?
As as much as you can because we know it's been a period of rapid change
But you know are we going to see the market m&a market accelerate stabilize slow down?
What's your what's your sense on the market right now?
I believe the market's going to continue as it is. I think that we've had all these shocks we talked about and things are still going
I think that
You know every retailer has a goal
You know if they are older their goal might be a stay in for a couple more years and do the best they can and
Give their communities and employ their their people and and continue to do well
If they're younger and they want to grow and they're looking for that acquisition opportunity
I don't think anybody ever feels like they get a good deal when they buy a dealership, you know
But I I was making this analogy you'll see and I I brought a visual aid if you don't mind me showing but
so this is the
This is the metal
That everybody had finished the line got
It's a really nice metal. It looks like the metal and for the Paris Olympics last year
And I I looked at it and they gave it to everybody, right?
I mean the finish the winner got the same thing as this except they got a big check
But I think all of us have got our objectives, right?
And we're all marching towards these and maybe we had objectives. Maybe we don't
But I don't see anything on the horizon right now
That's going to really change the economics of auto dealerships. You mentioned Carvana
You know, there's 17 000 stores Carvana now owns two
Could I see them owning hundreds of dealerships in a decade or two?
That's possible. Would that change the economics for for dealers?
Likely however, I also believe that dealers won't stand still
You know, they will react. They will adopt their own digital retailing
They'll respond more on the fixed operation side if I have a I can't compete as well on
On the variable side
I can own the customer on the fixed side and I have a new teammate
John Murphy comes from us from Bank of America Merrill Lynch
He's developing some research that shows
How massive
The opportunity is for franchise retailers on the fixed operation side that they're just letting go to the independent shops
So our business will change over the next decade
as
new entrants like Carvana come or we have
Autonomous vehicles rolling around
But the one thing I know is that the franchise retail system
Is going to respond to those threats
And the opportunities and they remember we're still selling 16 million cars a year
We're probably eight or 10 million and it's short because of the pandemic
We have a lot of pen of demand in my opinion
So I think that the retailers are out that see all the risks
You know, they're out there running their own races. They got their own prizes in mind
And it may not turn out the way they expected like I didn't run nearly as fast as I would
But I think that they're going to invest and work hard and build other companies just as they always have so I have
No real worries right now about how the next few years are going to be in our industry
And I think your point on fixed stops is a great one because you know, I recorded with uh
Nowling auto from texas or ryan ryan nowling the other day
And you know, we're just talking about the emphasis he's putting on fixed to the extent that he said you'll see
He said I am selling a car to get a service customer
I he said I don't care about front end profit. I don't care about profit on a new car
Again, he's on the more of extreme end of operators today, but he's straight upset. I want that lifetime value
I want that retention
um, and it's working for him, but you know, just that all in on fixed ops mentality
Uh, we're probably going to see a lot more of that as
The industry, you know, he saw there's more competition and inevitably in my opinion
Margins continue to compress on the sale of a vehicle. I don't think you have to be a genius to believe that
So I think I think that's a good point
I'm and I'm looking forward to seeing what john murphy puts out because I'm you know
It makes sense that there would be a ton of opportunity on that side of the business
Yeah, I mean, it's it'll be interesting too. You see is if you look at the the performance of the
Stellanus dealers and markets where
Carbona is opened
If I could see how Carbona would be taking new share
But they're going to be taking new share not just from Stellanus dealers, but from four dealers and Chevy dealers and
Really the whole market, right?
And if they sell a lot of additional units
And those units go back to their homes and they're closer to the existing stores
You might see Stellanus dealers around Carbona stores sell fewer new units, but do more fixed ops
Are they worse off that way? You know, it's not clear. So I think it's really uncertain
But
What is certain is the resiliency of our
Of our dealer base our dealer friends out there
That they will find a way to get five departments, right new use finance insurance parts for his body
They're gonna find a way to make money
It's funny you say that because i'm talking with a dealer right now who's
Right next door to a Carbona store
That I believe just opened new car store the texas one and you know, you can look this up
And we're just talking about strategy like okay
So how are you planning to compete like what's a creative?
You know angle or positioning that you can take being across the street from a Carbona store
And that's an interesting idea that you just presented. It's like hey
Let them get their new car business
Maybe conquest their service business. I don't know but you're right in tvd
It also begs the question what percentage of their sales are happening out of market
And you know, that's of course a customer. That's not local, but it's uh, we're gonna follow that closely
We'll see we'll see how it shakes. Yeah. Yeah. All right. Well allen allen haig haig partners allen always a pleasure
things for coming on and uh, it's been super fun
So I enjoyed it. Pleasure to speak with you guys always. Yes. See talk to you soon. Bye
All right, hope you enjoyed that episode please give the podcast a rating consider subscribing to the show
And check the show notes for links to what we talked about. Thanks for tuning in. I'll see you guys next time
Request an explanation for:
5 cars
5 cars featured
Request an Explanation
Heard something you'd like explained? We'll add it to this episode.
Sign in to request explanations for terms you heard.
Want to learn more?
Browse our glossary for plain-English explanations of automotive terms, jargon, and concepts.
See something that's not quite right? Our annotations are AI-generated and can sometimes miss the mark.
Click the flag icon on any annotation to suggest a correction.
