Car Dealership Guy on the auto market: who's winning, who's struggling, and why the dealership model isn't going anywhere

Carolina plant he's in he's in hey can you guys hear me yeah we can hear you you look fantastic you sound fantastic tvpm that's the least I could do if this is what I do all day this is fantastic uh great great to have you here uh can you can you kick us off a little introduction what do you do what's your name who are you well it's great to be on the on the Fortress of Finance thank you um no I'm so I'm the founder of card dealership guy you probably seen me on Twitter if you're if you're listening to this right now uh we are the leading uh content news and insights platform for car dealers cool uh didn't start that way we were very consumer based but it's been you know a couple years where I've really um just shifted to focusing on the industry and today you know we're pretty much you know offering anything for dealers to come and you know learn kind of stay informed get ahead really just trying to make a better industry with the kind of ultimate Vision that if we can if we can create a better dealership experience and educate the dealers and you know kind of democratize knowledge then the consumer experience would be better and everybody wins so that's kind of like the utopian Vision I know very little about uh car dealership so I bet my questions would silly maybe give us the crash course history your personal history industry leading up to this because this is not not the kind of business that you start uh you know just because you had a good good X account uh I imagine you you experienced a lot of the you know the the turmoil of the industry and the good and the bad yeah so it's quite the opposite uh but I'll give you like the short version so I was a dealer I grew up in usar business uh father had a small Ed car dealership so that was where I spent most of my time uh in 2018 I got the bug I said there's no way that we're still selling cars this way right everything's done online why do I have to why do people have to come to my dealership you know why can't I expand virtually and whatnot and so I took this traditional dealership and I said we're going to build a better way to buy a car we're going to do it 100% online at the time carvana had just gone public but it was still kind of a aent thing you know selling cars online and so I actually raised capital and we transformed into a venture-backed online auto retailer you know we started building out our own website our technology our platform and I spent five years doing this so we were completely vertically integrated this entire time so as we were building this business you know we were acquiring the warehouses building up the logistics Network and actually retailing Vehicles online from what was a small use car dealership um it was a crazy experience I mean you know we raised lots of capital throughout the time and um grew the business to close to like a hundred million do in annual sales and in end of um I want to say was 2021 when rates started Rising you know we kind of things got really tough uh we spend the next 18 months you know we couldn't raise more Capital business was obviously you know the burn was accelerating and we kind of had this like existential we're facing this exist existential point in our life and the next 18 months were just brutal we ended up shutting that business down we tried to Pivot to private Equity we almost got acquired but that didn't work out and in the meantime I sort of had this like you know Anonymous Twitter account where I was just tweeting um you know just trying to stay sane be a little creative uh but really just sharing kind of my thoughts and it blew up like crazy right so I I I don't remember when I launched a Twitter account exactly I think it was like early2 for anybody just on audio uh he's got almost half a million followers on on X which is the equivalent of 50 billion followers on Instagram pretty much no it's a big big yeah I mean it was it was definitely very like you're right it's it's very difficult to today it's completely much more difficult I would say even unless you're putting out slot but I mean like high quality followers is a very tough thing to do you got to put Insight but that's essentially what I was doing I was just sharing my knowledge and experiences that I've gone through and then after we ended up we ended up closing down the business completely this was like you know like I said 18 21 24 months later I said I don't exactly know what's in store for my next thing but I do know that there's a thirst for this knowledge right when I launched this account people didn't understand what the hell is going on with prices and inventory was all over the place and it wasn't just consumers it was dealers themselves as well yeah and so I said there's something here and so I formed a B2B Media company and um and we can talk about like I went down the holdco route and you know all that stuff that Sean pory spoke about on your podcast the other day as well we can talk talk CH chat about that as well but that was essentially how I fell into this business so I went from like a traditional family business to a venture back tech business right raised like $60 million and all that hoopla and now we're like a bootstrapped media brand it's completely different things but it's been a fun fun learning learning experience yeah yeah so one of the reasons I wanted to have you on uh now is just to get a sense of of you know really on the consumer side how are how are people behaving in the market what are what are the deal you know you guys get a lot of data from dealers that are you know in your community and I think it's a good signal of of sort of how consumers are feeling it's obviously sort of this like shaky time broadly in the market but uh how are dealers doing broadly what what is you know consumer sentiment looking like uh and then I want to kind of get into some individual Brands and and you know potentially ask you about the EV market and some other stuff as well as uh later I'd I'd love to get your thoughts on on the war between you know platforms like bring a trailer and cars and bids and all that stuff but maybe start with a kind of a market update uh what's happening uh sort of on the ground today yeah so look the market has been I would say very consist consistently improving and just becoming more Pro consumer right it's we're definitely in more of a buyer market today although it's still very divided like if you go to a Toyota dealership they are still at like 30 plus day supply which is roughly half the the level of Supply they should have uh for you know current demand and so Toyota and Lexus are sort of the anomaly here i' say the majority of the brands out there are over supplied right now which is simply a good thing for consumers um because it means you have more negotiation leverage and means that Brands will put more incentives on these vehicles so that they'll they'll sell them faster um and I would say they're roughly like 30% oversupplied so it's not you know these numbers are not low um we're sort of in this phase right now where it's the incentives are only going to keep getting better because the reality is the inventory is out there and it needs to move now it is spring season which is typically a pretty good time of year um for dealers right people get it most people are getting their tax refunds and whatnot and they're going they're shopping so there there has been a bump in business over the last couple of weeks but you know other than that I mean I don't expect the spring bump to last that long it never really lasts that long and um you know it's a very temporary thing look a nutshell go ahead oh yeah when is the best time to buy a car if you're a consumer and like are there any like tricks to getting a good deal it feels like a very opaque process that question look yes you you might get luck out if you go like you know end of month end of quarter because there's these things called stair step programs where you know it's like hey you sell I'm just making it up 100 cars uh you'll get an extra you know x amount of dollars as a dealer right so if I'm trying to get that stair step you know if I'm trying to unlock that um uh you know that that benefit from the deal from the automaker then I'm going to maybe even sell a couple cars at a loss at the end of the month because I want to hit my number now many manufacturers have moved away from those many dealers don't even participate in them um but yes I mean in theory you could do that I would honestly tell you that a better way would simply would be to Simply see what brand right now is most oversupplied now you might not like that answer because maybe you don't want to drive a uh you know an infinity or whatever you know is the most oversupplied at that current moment but reality is like that's where you will have the most negotiation leverage as a consumer yeah that makes sense that makes sense uh What uh you know Tesla as a stock has been down tremendously uh over the last month even I think it's down like 35% um as you know at the same time we're seeing more than ever on the roads uh but there there obviously you know the stock pressures in part you there's probably a political angle there's a uh you know broadly the sort of moat they had around EVS has been eliminated as other manufacturers have have entered uh what what do you see in store for you know Tesla I know they're they're verticalized so you know there's not like Tesla dealer owners on your platform but what is the future of the Tesla brand in the near term uh in your view uh are you see sales performance you know continuing to slide or is there you know John has joked joked a lot on the show obviously you know completely joking that like they should come out with a gated manual transmission with a combustion engine naturally aspirated V12 ideally in the Roadster the Roadster has been delayed so so much let's just put a carburated V12 in there let's get the Kosh engine in there look I think first if you look at e in general right the SW the this the pendulum swung too far over the last couple of years so these manufacturers went you know had all these crazy proclamations right we're going to do x amount of EVS you know or whatever X percentage of our production will be EVs and sales and the problem was that EV demand simply was way behind y so you like Ford was the prime example um where they were kind of make producing all these vehicles and people didn't want them right now demand has been growing very consistently and and linearly like it hasn't gone exponential like their demand is still growing if you look at simply you know how many EES are being sold but relative to the supply that was produced and what was out there didn't make any sense so what happened well all these crazy incentives started happening and the all the Legacy automakers started to sell all their EVS but again they didn't sell them because there was the demand out there was oh wow this is such a great car I want it they sold it because wow the price is so incredible this is all I can get or maybe this is simply the the cheapest monthly payment in the market I think we forget like how you know consumers are are are practical right like I have a budget and I need to fit into my budget and if an EV is going to get me within my budget I will consider an EV I don't care like the average American doesn't care if it's an EV or a gas or it runs on freaking water right they need to to be able to afford something so I think that's kind of what happened in the big picture over the last couple of years now look there's no doubt about it that Tesla has some of the most incredible technology um I don't think that the I don't think the actual interior is anything um you know extravagant it's actually pretty basic and and in many cases SAR but the tech is incredible the driving is amazing um I love driving Teslas and and I know that you know many dealers that I I personally know Drive Teslas themselves um many do it just because they want to you know see what it's like others just do it because they genuinely enjoy it and so I I think that there's the EV Market has been very volatile it's you know the the swings have been very um just very rough up and down uh I I can't say like I'm too concerned long term I still think that it's going to continue Rising very slowly I think dealers that put focus on it and and make the Investments to serve more EV customers will do well obviously it's Market dependent you know if you're in the mid Midwest it might be 10 me behind because they simply don't drive as many EVS out there um but in general I think it's a it's still a smart investment Tesla stock price is just it's so hard to know right because like what is even driving that is it like the Elon political like you know um like overhang I mean there's so many factors going into that price the price of that stock and so it's really hard to tell uh what's next for it but I would I would sort of kind of you know quiet out Den noise and I still think that we're EVS are going to continue Rising albeit a lot slower than anyone has predicted expected because that's just how you know consumer adoption takes time outside of Tesla who's on a tear and who's in trouble in terms of the big car brands right now um well you know I actually just had um one of Nissan's top Executives on the my podcast today his name is um um I forget shahani is the last name I forget the first name but long story short is Nissan is in trouble um or they've been in trouble recently right they've been really losing a lot of money Vana honey that's what it was so they basically Nissan has sort of been the culprit here um and you have to understand the auto business is very it's you know it it just it cycles and it comes and goes so like if you look at 21 it was like Ford was in the spotlight like they were in The Penalty Box then the last couple of years it's sort of been stellantis right Chrysler Dodge G pram um you know now it's sort of Nissan because they over supplied their vehicles dealers are not making any money on them there's way too many dealers for the market share that the brand has and on top of all that because the over Supply because they put all um because they've been selling these you know wholesale to like rental car companies and whatnot all the consumers are left with lower residual values right so now your the veh the Nissan that you purchase is worth a lot less so you're you're pissed you don't want to buy another Nissan I think loses value very quickly so they're prob they're one of the brands that's really struggled recently um and all that you know sort of accompanied by a sales decline uh but they are you know they have new leadership in place and you know the hope is that they're going to kind of come out of it um I I think that their leaders are very convincing and have just like I said haven't spoken to V on the podcast I mean he he sounded like he he knows what he's doing I mean the guy's been around the block worked at Toyota uh very very smart and sharp but it's it's not an easy thing to get out of I mean do they have the resources to really get uh to get claw back a significant amount of market share so that the brand is sustainable or will they have to do some merger like they tried to do with Honda which it didn't really work out and because of that they actually ended up switching CEOs at Nissan corporate uh so that's one of the brands that's that's struggling pretty bad um you know Infinity is included in that as well it's it's Infinity is under the umbrella but for the most part I would say like that they're probably the the biggest uh the biggest corporate right now in the market talk about the durability of the dealership model you know your audience a lot of people that are working in the industry working at dealerships obviously uh but you know you you had a a you know SMB dealership then you had a venture backed you know online you know Car Sales platform something about cars it feels like the sort of final boss of e-commerce and that you know with a car you're going to spend a lot of money it's one of the most expensive purchases outside of your home and so it's really nice to just go to the deal you know I like going to a dealership even if I'm not actually you know necessarily in Market just because it's fun to look at cars and and and stuff like that but you know do you see 50 years from now are we still going to dealerships to buy cars my personal bet is yes because I would rather even if even if an online platform says yeah we'll we'll send you the car they'll put it up on a truck you can drive it you can buy it there if you want it I'd still like to go and just see more inventory right and experience you know more Vehicles so what's interesting is I mean I learned so much selling cars online like strictly online first of all I learned that uh online car buyers by a large percentage are subprime car buyers right subprime consumers they can't otherwise get approved anywhere else and this is sort of their last resort carvana Carmax have built such a great mouse trap that it's attracted customers who are also not subprime right and I would bet you that if you looked at a graph from when they started till today and just how their customer mix evolved I would guarantee that you know it started out a lot more subprime than it is today um but you know that's an example of a brand that's evolved so look the dealership is evolving there's no doubt about that and if you're a dealer that doesn't think that your head is in the S um people what we learned through covid and after covid is that people still want to interact in person uh with a dealer and it's not for the purposes necessarily being with the dealer but rather you might be making a large purchase you know you want to go in you want to talk to someone you maybe want to test drive that thing I mean there's several things you want to do uh in person and so the dealer is simply going to continue evolving just to meet the needs of the customer there's certain things that the dealers are going to do which I think are very durable such as service the service department is the highest margin uh profit Center in a dealership because you know for those that don't know how dealerships work right you have many different profit centers you have Parts you have new car sales use car sales service service is the highest margin um you know Revenue streaming a dealership and that is simply something that you know won't go away you're always going to need to get the vehicle serviced somewhere even if it becomes more fleets right if we have all these autonomous vehicles on the road they're going to need to be serviced somewhere or you know if it's sort of like turo where people are actually acquiring fleets that will need to be serviced somewhere so service is a very I think it has crazy kind of stting power and it's it's not going to go anywhere and the margins are strong I think new cars is It's Tricky right because if you look at Supply levels right now of new cars in the market we're not right we're not quite at 2019 levels yet but we're we're inching up um many dealers are already breaking even on new cars you depending on the brand some are taking losses um and so new cars has never been like a real profit center right it's a commoditized product the good thing about new cars for dealers is that it brings the customers back right so if you lease a new vehicle then they come back to you for service right maybe they trade in their vehicle then you sell it as a used car right you get another client and so the dealership is going to continue evolving AI is completely shaking up things now um I would say for the better if anything for dealers because they're simply able to offer a better experience offer more targeted products and services for customers waste less time consumers are getting a more consistent experience so AI has definitely been doing a lot of good but it's just moving all so quickly and we don't really know if dealers will become you know kind of new car fulfillment centers eventually and just you know then you'll also do service there and maybe buy some used cars or what that future really looks like I don't think the dealership model is going away other than the fact that lobbying is super strong and all that like let's put that aside for a second even though it's a super important one I simply think that manufacturers sometimes underestimate what it takes to be a successful retailer you know they do they really want to carry all that balance sheet risk on on or inventory risk on their balance sheet I mean there's many considerations and it's been you know tried many times and frankly Tesla is the only one that has really done a great job at it or sure maybe rivan as well but there's been other plenty of examples um on the Legacy side that they simply have not been able to do it successfully with launching like a d2c or something direct consumer or something like that on the service side are there exciting robotics companies that you think are going to get meaningful Traction in the service departments of these stealerships I imagine you know we we cover the the robotics companies the 1xs the uh the figures the Tesla Optimus things like that uh do you know I'm not convinced that humanoid robots are going to be the ones in the sech sort of service Bay doing the work but maybe it's they already are they already well not doing the work so I actually invested in a company called Robo tire which went out of business so that wasn't a good one um but they were literally replacing tires on um they were repl placing tires on vehicles in like I think firestones or something I guess the economics didn't work out there but there's a company now uh robotics company and I shouldn't say now I'm pretty sure they're public already they're part of a bigger company called richtech um which I had them on my podcast and they're literally transporting um they're literally transing Parts in the service center right from the parts counter to the techn and this is live you can lit see Rich Tech robotics it's pretty incredible but again saves a ton of time think about it to technician you know these These are skill trades maybe you're making like 50 bucks an hour I don't know how much you're making like and to go each time grab the part I mean it's it's it's extremely inefficient and so these robots now are in service centers uh transferring Parts um I would say uh you know I I'm I'm a fan of like the whole um you know vertically integrated kind of low NPS high margin I think I think Keith Rob boy is the one that was spoke about is I think um but you know asking yourself like what is the uh you know what part of the business has the lowest NPS and the highest margin that's right for disruption and it's pretty crazy how true that is because if you look at the car business the lowest NPS in our business um you know net promoter score is actually service right so the service department and it's use car auctions surprisingly Now Auctions are dealer to dealer right and those are also extremely both are high margin businesses um now if you look what's happening on those two fronts we're seeing a lot of just attempts at disrupting those two different businesses so on the auction front you're seeing all these kind of um auction substitutes that have spawned up over the last couple of years you actually mentioned um a couple right there bringer trailer uh for example I wanted to get your kind of opinion and by the way that's not new bringing Trail they've been around for a while they' they've gotten a lot bigger um but just to kind of finish my thought there so the point bottom line is like you're also seeing a lot of disruption service now where all these AI companies are trying to create tech for dealership service departments to make them more efficient more profitable the better customer experience and so I think that that's going to kind of work itself out over the next couple of years that makes sense uh talk about the used online used car Marketplace specifically around Collectibles I don't have a good read right now on market share between you know I've had success on bring a trailer uh everybody every car enthusiast you know looks at the platform and they're like somebody needs to disrupt this right it's it's uh got a great community and this sort of Rich data and history but um actual exper yeah it feels very dated cars and bids has a sort of amazing YouTube driven marketing engine and Doug deuro what is who's winning there right now do you feel like cars and bids uh is gaining a real foothold it's it's once you actually get it working it's like the best business ever because you don't have to hold inventory and you're just clipping fees over and over and over yeah uh but it's certainly highly competitive you know it's crazy that you said that it feels like it's aging because I just spoke with a dealer maybe like three days ago who just discovered selling on bring a trailer right like let that sink in not like it's like it's crazy how adoption in this industry with you know these auctions I it just takes time because people are you know are s under waste things are working um and these auctions are like the original Network effect right if you think about the auction is all about how many people can you get can you get a the highest concentration of the right type of dealers right the right buyers to purchase now again bring a trailer is consumer facing as well so that's different um but you still need that really you know High concentration of of of the right Choppers to to buy so look my take is that um I think I don't know the specifics behind uh cars and bids today because it's it's evolving and bring a trailer I can tell you like anecdotally I hear about it the most from dealers um take it for what it's worth it just you know if I tell you what's the buzz it's I I always hear dealers mentioning bring a trailer bring a trailer um I think that it's going to uh it's like it's unclear to me how the these Brands not bring a trailer but like the upand commers that came after like cars and bits it's just unclear to me how they how how they could um maintain their margin long term and avoid really losing their business to the bigger players like the bring a trailer in the market uh because I just don't see like you can only pump so much demand from your you know having a having an audience is great because you're able to you know send over demand and and community and all that to your product but that's not sustainable at at a certain point you have to kind of you know the business has to stand on its own feet and you know that might get you started I don't know how far that takes you so I think the real question is you know are they able to really solve a problem in the market in in a unique way long term I I don't know like I haven't bought cars and bands I've played around with the product um but I just I don't know if there's enough if there's if there's enough demand for all of these because they they're not the only ones there's other ones that have popped up it's sort of like go ahead the re the real Network effect would bring a trailer for those that aren't familiar is it it has the longest standing you know most active community and if you're a collector and you have a unique car you want to get it in front of the biggest possible audience to get the best possible price and bring it trailer has so much leverage that people will sign up their car to sell and it won't even necessarily be slated for auction for months sometimes and so cars in bids has an opportunity to say hey we'll list your car next week but then the challenge is if they don't have the same level of you know collectors on the platform you're just not going to get the best price and so they technically offer the same service but they offer a worse service because they won't necessarily get the the best price so it's still just a fantastic go to market strategy to seed a marketplace with a huge YouTube audience but yes there's the question like how do you grow from there like you are kind of T constrained he only has a few million viewers and only so many of those can actually convert onto the platform but I mean he's done a great job just going full send and every single video I would say the biggest physical auction or traditional auctions what they've done is you know they've integrated other businesses now I'm not telling you here that they've kind of given up on margin on the sales front but you know they become they become lenders right so they floor your cars a line of credit um they do other services as well uh which helps you kind of you know build a mode around your business um but it's it's just it feels like every Automotive YouTuber that gets an audience runs to like launch this you know auction Marketplace and I just don't know how many of those will really have staying power long term or if you know it's gonna end up being kind of like a winner takes all or Winner Takes most we will see we we'll have to check in with you in a couple months and see how it's yeah anytime uh anytime there's Big C news it' be great to have you back on to break it down uh and this is fantastic thank so much now you guys you guys are doing great work seriously you guys are definitely cutting through the noise and I can tell you um it gave me a lot of like early CDG Vibes when I like you put up that like breaking news stuff the other day and like that's how I got started people just started sending me [ __ ] they're like oh by the way this dealer is out of business and I just started posting that people were calling me like the Gossip Girl of Automotive which I never wanted to be but um it's uh it's it's this thing where like all media in the future in my opinion or the winning media will be like expert-led media which is sort of what you're doing here um you know you're in the game you're bringing people that are in the game to talk about things that are relevant to them so I think it's really great and um it's exciting well thank you so much for joing for stopping by great to hang we'll talk soon we'll talk to you later what a background very setting the bar on backgrounds totally oh yeah yeah I mean fantastic clearly know Joe both pred last week yep uh you you can tell like the early stage Builders who aren't just on the podcast circuit constantly you know you get a little bit more plain background but they come with a different set of insights you know that's true that's true so we got like