In this transcribed blog of the Used Car Dealer Podcast, Zach interviews Paul Daly & Kyle Mountsier of ASOTU, two experts in the automotive industry. They discuss the future of digital retail, direct-to-consumer models, the BEV market, Carvana, impact of high prices and interest rates and other timely automotive topics.
Zach: Zach here and we have two exciting guests on the podcast today, Paul Daly and Kyle Mountsier, the co-founders of the ASOTU, the Automotive State of the Union, which provides forward thinking content and community for dealers and industry innovators. They host podcasts, clubhouse sessions, conferences and it's very high-minded content for the auto industry. Guys, Thanks so much for joining me on the podcast today!
Paul: Yeah. Awesome.
Kyle: Thanks for having us.
Zach: So, Kyle, Paul, I'm sure many of our listeners, they've seen your content on LinkedIn and I want you to just give the audience members who haven't heard about you guys a little bit about how both of you got into the auto industry.
Paul: That's what we always get in this situation. If you don't call on one of us, we're both kind of just quiet. I got into the automotive industry a little over 20 years ago as a service advisor. Actually, I had never been to a dealership before. I met someone who owned a small Chevy store in Oswego, New York, which is right up by Lake Ontario. He was looking for a service advisor.
I told him I didn't know anything about cars, and he said, "I don't need someone who knows about cars, I need someone who knows about people. I have techs who know about cars." So he hired me as a service advisor. I fell in love with the business. I just loved all the moving parts and the customers moving in and out. I love the smell of the shop and the detailed department. And I just really fell in love with the whole thing within a year.
That same year, I started my first business in 2003, so 20 years ago this month actually, and it was a business that refinished wheels and did cosmetic reconditioning for dealers. I just started making mistakes and built that business to be a regional business in the Northeast, from Philadelphia up through upstate New York, Connecticut, Massachusetts. I did that while I was building a marketing agency. That business ended up getting acquired by Dent Wizard International, and somehow, we're doing what we're doing today. That's just the entrepreneur's journey, but I really just fell in love with the industry from the back side of the industry and then the vendor side. Now, I just scoot my way around and fly around and just try to weasel my way into every corner I can possibly get into in the automotive industry. That's a great way of putting it.
Kyle: So, my journey was a little bit different. I came through the variable ops side of things. I had a music degree, which is the perfect degree to get for coming into the auto industry. I started a job as a salesperson in Pensacola, Florida. I worked my way quickly through different layers of a few different dealerships and had the opportunity to be a salesperson, finance director, new car director for a large Nissan store, and business development training director. I ended my franchise side of the business a little over a year and a half ago. I was working mainly in the marketing and operations side of the business and caring for the Us Group in that way. I had 13 years on the retail side of the business and really saw this passion open up in my heart through that for the broader industry as a whole. I started creating some content and next thing you know, Paul and I are getting together and dreaming up ways to really shift the culture and perception of the retail auto industry through the things that we do every day now. That's my brief history, but yeah, from music major to media company. That's going to be a book someday.
Zach: So many people just fall into the auto industry one way or another. And Paul, I have a follow on for you. So, what learnings did you take from your first successful auto industry exit? And have you applied them to a ASOTU?
Paul: Yeah, I think some of the biggest learnings are that it never goes like you think it's going to go, and that's still true even to this day. How would you apply those to the auto industry?
I think it's just kind of a straight line; the market in the industry changes, and you just can't control what's going to happen. And I know it's kind of like a broad application of advice, but the truth is that there's always something in your control that you can change. We hear some of the very best dealers saying this today. They say, "Just because there's a recession or talks of a recession going on around you, it doesn't mean you have to participate in it." You know, if numbers are down, you can still make sure that your numbers are the best, and there's always something operationally that you can improve that doesn't have anything to do with the external forces being put on your business. So, you know, when you start a business and you kind of bootstrap it from the ground up, you are pretty self-reliant from the get-go. Like, there's no one to blame, there's no one to lean on, and there's no bucket of money to keep you afloat. And what that does is just teach you how to control what you can control and largely not focus on the other stuff. You focus on the threats that could really put you under. But you know, nine times out of ten, the intention that you put on what you're controlling on a day-in-day-out basis is actually going to track you to where you want to go. So, I mean, that's really the journey of an entrepreneur that makes it through or builds a business that's worth something to somebody else because you've done that enough. And I think the industry is just in a spot now that the best dealers and the best operators that we're seeing are ones that are like, "Yeah, I don't care what's going on out there. I pay attention, and I know, but I focus more on the things that are happening every day that I can actually control and influence."
Zach: And Kyle, so ASOTU was born out of the pandemic. How did the idea come together? Talk about the evolution of the brand, and I saw you even have swag now on your website.
Kyle: So, you know, it all started with Paul back in the pandemic before, really. Paul and I knew each other, and he was kind of building this community for really close to a year and a half prior to us really sitting down and saying, you know, we had each other for 6-9 months. And at that point, after a year and a half of building community around some streaming events and then a couple of live things, we looked at it and we said, "Okay, this is actually the opportunity that we have together to continue to press into the community."
Initially, it was, "Hey, we're just gonna go from like a weekly email to a daily email." That was the initial thing. We were just going to start instead of just touching base with a broad community of people across the industry weekly, we're just gonna do it daily. Give them a place to call home, give them a place to really kind of see what's going on in the industry, and keep their eyes up and hands in the dirt at the same time. And then that led us to go, "Okay. So if we've got this community and this community all believes something better about the industry than maybe it historically has been seen by culture, the way that people have done business, then we can take that community and allow it to be interacting in different ways."
And so that's when it was really clear to us that this was the ability to take that community and show the rest of the industry, "Hey, this is the type of culture, this is the type of innovation, this is the type of forward-thinking community involvement, all of those things that we believe that are the best parts of our industry." And so we show that as the cult, and then it's also the ability to say, "Hey, look at the rest of the culture. This is really, really the heart of the auto industry. This is the best. This is what it means to buy and service your car with a franchise auto dealer with any auto dealer." And so if we can do both of those things through a formalized business, then we know that we've succeeded.
And so that kind of turned into, "Okay. So if it rests on an email, then it allows us to do larger events and more podcasting and communicate in ways and places that people are most likely to both find community and find content in a way that allows them to be a part of the culture shift in the perception shift of the retail auto industry." So that's kind of the background.
And then we're just like both Paul and I, you know, he had a marketing agency, and I'm a marketer at heart. And so we're always thinking brand, and when you mention the swag, it's like, "Hey, look, nobody wants to wear anybody's logo out there except for Nike, right? Yeah, Nike, Adidas, and then everybody else, right?" And so our thought is like, "Okay, we're going to create swag that has a statement that says something about someone that isn't just like ASOTU across the chest or something like that." So you'll see, we've got a shirt that says, "A lot of people love cars more than you." We've got a mug that says, "Early mornings are for troublemakers." And it's all stuff that just has a statement about the way that community interacts. And so, yeah, we do swag. Yeah, it's like, "Yeah, you know, I feel like that's our barometer. Like we know we're doing things right? When people want to buy the swag and every week when orders come in, we're like, and we're not pushing it right? Like people came and connected with what we're doing around the themes of why we're doing it. And for us that's like someone's willing to wear it on their body, right? Like for us, that's like, that's how we know we're doing it, right?
Zach: Nice! And Paul, speaking of branding, what do auto dealers and when I talk auto dealers, let's not talk about large dealer groups more like single stores, what do they get right and wrong about building their dealerships brand online.
Paul: It's a big, big question. So I think one of the coolest opportunities that exist, you said, you know, think about smaller dealers, not large groups. The bottom line is the playing field has been totally leveled when it comes to brand building in this day and age we live in. Small dealers used to have to rely literally on their local affiliations, regional groups, and their OEM to build a brand for them, and they no longer have to do that. Now, every single small dealer, whether you have 50 cars on your lot or 500 or whatever it is, you can actually take proactive action right now because of social media and creative tools available, and services like Fiber, to build a brand, regardless of anyone else's opinion. So, I would want to start there and say, what you're getting right or wrong, you're getting it wrong if you're not taking advantage of what I just said, right? The ones that are doing it wrong are the ones that are just not moving, the ones that are doing it right, realize that they can define what it is that they're about. Not like what their OEM is about, but what they specifically are about and what unique selling propositions they have to offer. They can talk about that in the context of the community that they live in and serve and then they make content that puts all of that together. And, oh, by the way, we sell cars, right? People know you sell cars and when they're in the market, they're gonna look and they're gonna see prices and payments, we're gonna be able to target them with that. But the ones that are thinking broader than that, Kyle and I say they, they become the mayor of the community, they celebrate the community, and then they align themselves with the best interest of every community, and they understand that it takes a great community to have any great small business and they talk around those things. So the ones that are doing right are the ones that are thinking that way, the ones that are doing it wrong are the ones that just aren't taking advantage of the fact that they have every tool they need to build their brand.
Kyle: Yeah, I'm gonna, I gotta say one other thing is a lot of people think that brand is all about, a lot of dealers are all about what they can provide to the customer and they normally start with anything. That's how many, how much, how big, how long, right? Are like the four questions, how many cars do we have? How much can we save you? How big is our dealership? How long have we been in operation? And that is like a massively detrimental thing to your ability to stand out. And so what Paul was just explaining is like, what about you connecting to your local business ecosystem is different than anybody else? It's not your digital retailing tool. Anybody can do that. It's not, you know, that you got 500 cars because anybody can go buy 500 cars and put them on a lot. You know, it's more about what, what uniquely and what unique ways do the people in the context that you have served the community. And that's, that's why I think a lot of people get the check bags, there like we gotta do branding, throw a logo on your DR tool, your digital retailing tool and that's not, that's not brand. Yeah, it's a great, great clarification.
Zach: And Kyle, you mentioned that big buzzword, digital retail. We all heard that in the pandemic, real hot topics in the industry as well as online car shopping. How do you see dealers changing post pandemic in terms of DR and online car shopping?
Kyle: Yeah. Well, I've always encouraged this from, gosh, when Roadster started in the early 20-teens, I think it was to never allow technology to drive your process. And so I think the really savvy dealers are going, "Okay, we decided to let technology drive our process, or even if we did that, we didn't let it drive all the way down into our process, right? It only assumed a portion of our process or our people management." And so I think that the really savvy dealers are asking themselves the question right now, is digital retailing the end-all-be-all, or do I need to reimagine my retailing ecosystem and whether or not the tools, the people, and the processes that I have wrapped around all that actually serve the customer in the way that I want to?
So I think that there are a lot of dealers that are kind of reassessing that right now, like, "Oh, I threw digital retailing the tool on the website, maybe during the pandemic or post-pandemic or maybe even before that, and I'm either just getting glorified leads or I'm not engaging with it, or customers aren't converting because I haven't put focus around creating processes around it." And they're stepping back, going, "That's not exactly what I thought it was gonna be." And so my encouragement is like, go back to the drawing board, begin with process, begin with the people that you have to build that process, and then discover the technologies out there that can support the process that you want to serve your customer with, whether that be online or offline, and how do those integrate? And I think that the really savvy dealers are going to do that more often instead of just going, "We've got, you know, you can basically have digital payments, we have digital retailing, you calculate your payment online, we have that. We have that, right?"
Zach: Yeah, exactly. So you guys often share interesting perspectives on current auto market trends. I want to get your thoughts on some hot topics and we could switch between Paul and Kyle for the next couple of questions. So I'll start out with you, Paul. One of the biggest fears for franchise dealers is the direct-to-consumer model. What do you think about the model for new car dealers? Is it brand-dependent on whether it makes sense or not? For instance, Tesla, what are your thoughts?
Paul: Can you clarify? Is it brand-specific whether or not it involves Tesla? What do you mean by that?
Zach: Well, what I mean by that is maybe some OEM s it might make sense to have that direct to consumer model like Tesla who has had that, you know, from the start fruits.
Paul: Okay, I understand. So from a dealer perspective, I would say the best thing you can do right now is be the very best operator with the most leverage you possibly can have because that means whatever happens, whatever comes down the pike, the more influential you are and the better operator you are, the more likely you are to have a seat at the table in the conversation. You can't stop the conversation from happening.
So that would be my advice to dealers. The consumers should be able to decide how they want to buy a car. And I think the burden is on dealers to prove that they are the best way to sell and service a car, period. And I think if the consumers actually believe that, they will advocate for that model.
And I think, you know, I believe it's our belief at ASOTU, like the more we can promote that and the more dealers we can have that are exemplary operators and exemplary citizens in their communities, people will actually advocate for them. We don't see that a lot right now because of the stigmas and because of some of the bad practices that have happened and still go on in some places.
So when it comes to direct to consumer, I think the only way that survives is if consumers really want it. And I happen to think that dealers as a whole have a big hand in turning the consumer's mindset to advocate for them through Kyle.
Zach: Next question. I was reading the KBB brand watch report and curious about your thoughts on the future of the EV market, the battery market, Tesla's increasing discounts, multiple price slashes in the last couple of months, search volume slightly less on TVs than pandemic, and the lack of nationwide infrastructure for charging.
Kyle: Well, it's quite clear that legislators are pushing a narrative right now, and OEMs are then taking to that narrative of an EV or an electric future. I think that right now we may have hit a little bit of that first ceiling from the consumer perspective, right? Whether that be an affordability issue, access to charging networks, or even just access to information, there might be a potential desire to acquire an EV or even a plug-in hybrid, but access to information and education is lacking.
So, I think that the future is headed that way one way or the other. The question is, how quickly do we get there, and whether or not the consumer is able to drive the market, or legislation and OEMs are able to drive the market. Our argument is that, hey, we should definitely let the consumer be a little bit more involved in where the market goes. But I think that the reality is it's headed that way.
I think we may have hit a little bit of a dip line on the early adopters, and the question will be, can the OEMs, incentives, and infrastructure catch up in enough time to get that next layer of adoption in the model? But there are still, gosh, so many questions to be answered in rural areas or high congestion areas like a large city and charging networks and access to power. What it may or may not do to power grids in some of those larger areas, there's still just a ton of questions to be answered. And I think consumers have a lot of questions to be answered.
So, as far as dealers are concerned, just I would say, I know it's coming, and begin educating your people and the consumers around you. Even if it's not something that your brand is leaning heavily into already, I think that's just kind of the mindset you have to be in.
Zach: So next question, this is a fun one. Paul, Carvana stocks down 95% in the last two years. What are your thoughts on the future of the brand? And what about the vending machines? You know, they're starting to actually sell some of those because they can't be fully utilized.
Paul: Thoughts on the brand Carvana has built. There's some he's like, hold on, let me get my tippy toe shoes on. I have to put my desk to standing for this.
Carvana has done an amazing job building a brand that has a lot of positive consumer sentiment behind it. And as much as within the auto industry we tend to share and circulate the stories of the times they get it wrong, right. Because we know as dealers, it's a very difficult and complicated business to operate, and as they start to get mired down in some of the logistics of title processing and things like that, I think from the consumer standpoint, they don't care as much about that, and they just have a lot of positive sentiment when it comes to Carvana. And so if the brand doesn't continue, it's because they just operationally can't keep up, which is what the indicators are showing. They've over-indexed on used car inventory, and I just, you know, someone asked me the other day, you know, they're trying to trade out of a vehicle that they're in, and they were like, "Well, I went to Carvana and I got a price, and that's the best price I'm going to get." I was like, "That was probably true about seven months ago." I was like, "But not anymore." But that just goes to show you that's a peek inside of like, just a regular old consumer's mindset that Carvana is going to do them, you know. So, like, I think they have a lot of great brand sentiment. If they can't operationally keep up, which the jury's out on that, you know, like, no one can decide on that. The stock market certainly can't decide on that. If they can keep up, there's a positive sentiment that they've got. Whether or not they can keep up, is yet to be seen. The vending machines, they're gonna make real estate decisions based on the vending machines. You know, I happen to think there are probably some really great auto groups around the country that can take advantage of some of those sales, and because there's really not much else you can do with them.
Zach: So, Kyle, in the new vehicle world, prices maintain historically high levels. So you're seeing the average new car price over $46,000. And it sounds crazy just to say that the average interest rates have climbed to around 6.5%, plus another just unbelievable data point. What sort of impact do you see this having on the auto marketplaces as we continue in 2023?
Paul: Well, I mean, it's very clear that rates are going to continue to rise. You know, we're kind of around another jobs report, and it looks like the jobs index is gonna go up again, which means that most likely the Fed is going to continue to raise interest rates. It feels so bad to be disappointed about that, isn't it? It's incredible, isn't it? It's absolutely incredible. And then the next piece of that is, I think we have a very interesting market where you have really about 40% of OEMs that are seeing an inventory bloat right now where dealers are reporting, 'I have too much, I'm telling them no.' Already then you have the middle 20% that are like, 'Hey, my OEM seems to be getting it right. I've got the right amount of ground stock, the right amount of incoming, I've got a good day supply,' and then you have another 40% that is literally waiting on the OEM to still provide supply. I mean, Toyota is a manufacturer right now that still has under a five-day supply overall in the market. So you go from a Stelantis dealer that's getting over 100-day supply to a Toyota dealer that's a five-day supply. So I think that's going to do two things. One, it's going to impact brand loyalty because of affordability. So some of the brands that may have still an issue getting new vehicles might see a brand loyalty issue because of discounts or rebates or incentives that other brands are able to, or maybe not able to, afford but, you know, requiring of themselves to see inventory move. And then you're going to see that similar change on the used car market, right? Because similar to how we've seen over the last two years, right? Low volume of new car inventory, higher prices in used cars, and so you're going to see some of those trends happen in used car availability pricing. And you're going to see prime buyers probably staying loyal, staying with manufacturers that maybe have a low day supply. And you might see a market that maybe needs to rest on affordability, look toward manufacturers that have a high day supply or pre-owned vehicles that are dropping in price, but we're already seeing pre-owned vehicles rise in price again through tax season. So I think we're still going to see a high-priced market in the majority of the market, and a high price used car market in the majority of the market for a good portion of this year because some of those manufacturers have reported that they're still not going to have high-volume inventory until 2024. So the ride is not over as it comes to pricing and affordability anytime soon in my opinion.
Zach: So the question for both of you, kind of getting to the last question, what is most exciting about the future of automotive retail for you guys personally? We could start with Paul, then Kyle.
Paul: I say the people, the people are the most exciting thing. Sorry, I robbed yours. I know you're probably thinking in that direction but the kind of rising tide of energy from just a fresh perspective inside the auto industry. I mean, I've been in it for 20 years and the folks that I know that have been in it for 50 years are saying the same exact thing. There is a renewed focus or maybe a focus like never before on the people's side of the business. And what I mean by that is focusing on the culture within the store and how that culture can spill out into the rest of the community in a positive way. And I think that because automotive is in every corner in every community across the country, that automotive is in a very unique place to be a beacon for the rest of the retail world and how it can actually be done because cars are such a functional part of people's lives versus, you know, like some other like a clothing retailer or something like that. I think that there's this really magic formula that's brewing and that's what I'm most excited to see really revolutionized in the next 10 years.
Kyle: Alright, because Paul stole where I was going to head, I'll head in a different direction. It's kind of like my number two, and I'm really excited as a technologist and someone that loves to see technology pressing the boundaries on what we can do, how we can create efficiencies to free up people to do the things that they do best. There has been, you know, maybe the last 2 to 3 years, a renewed focus on bringing enterprise-level tech back into the auto industry. You know, we were extremely early adopters of systems like DMS. We were a little late to the party of the CRM, and we've kind of been behind the game for the better part of about 25 years at this point. As far as tech is concerned, we really followed telecom, and this and that, you know, telecom in the US was very early adopted, right? But you see other parts of the world where they only adopted telecom at the wireless stage.
Well, telecom has had to come forward a lot and now the auto industry is starting to talk about things like CDPS and edge computing and APIs and connected retailing and online-to-offline transaction mapping, and all of these types of things that I think the auto industry kind of let loose a little bit for the better part of 25 years and allowed legacy tech to creep in and get a foothold and not allow other things in.
And so we're going to see this kind of renewed free-up of emerging tech and really tech entrepreneurs looking from outside auto and looking at auto as an attractive way to re-engage tech. You know, some of the companies that you've seen just in the last year really break in, and some of the companies that I saw at NADA that you would have only expected to see at the enterprise level, even Salesforce has taken like their fourth shot at it again. And we'll see the...they still got some problems coming into auto. But, you know, I think we're gonna see that, you know, gosh, I know three dealership groups that have moved to Hubspot that have gone to Salesforce, right? That's just things you haven't heard about, you haven't seen in the early 2000s. So I'm excited about that narrative.
Zach: So lastly, I want you guys to give the audience some of the exciting things coming down the pipeline. So, do I know you have a couple shows upcoming, you're doing a raise, you have a daily email. So I don't know whether it's Paul or Kyle, but tell us and the audience about how they could subscribe to your newsletter. Where are the upcoming shows?
Paul: So I will say that being in the Florida NADA and just having person after person come up to us personally or some of our team and our head writer and talking about how our daily email that goes out is the first thing that they read every single day, and it's something that actually gets them energized and teaches them about what's going on. So I would say that one of the most exciting things we have going for us is that the email list is growing really strongly and the open rate is super strong. So I hope that everyone listening will just get on the email list and just read it for a day and see if that's not an oversell of it. You can just go to asotu.com and just subscribe really quick, just an email address and see if it vibes with you like it does with us. Off of that basis, the community kind of spreads out through social media content on LinkedIn pages. There's always a lot of great conversation going on, but we like to be in and around the people as much as possible. So we're always on the ground at dealerships and we're, I mean, what do we talk about first? So we're doing just a couple of things this year, live events. Let's talk about live events.
Kyle: How can people actually be on the ground with us and experience this firsthand? So there's really five opportunities this year to be in person with Justice. Do you know we'll be at other events like Digital Dealer and Used Car Week and Reuters events, so you can catch us if you follow us on social media email, you'll know where we're at, but for ASOTU - Arlington, Texas on April 5th on May 2nd will be in Tampa, Tampa Florida on June 13th or 14th will be in Atlanta. I can't remember if it's the 13th or 14th. We're really close to booking that one, so we'll be in Atlanta. And all three of those events are, we're bringing the live tonight show on the road. So we've got a full band, we're doing them in the theater. It's an hour and a half quick show. Everybody in the dealership is invited. It's not just for managers, it's for everyone in any type of dealership role. It's at night. So if you're local to the city, it's easy to get there, easy to get off work and come at 6:30 to 8. That would be a really cool event. And then our big event is ASOTU Con in September in Baltimore, September 25th to the 27th. That's a standalone event where we will have, you know, 1000 or so people across the industry experts. We're going to bring in some speakers from outside the industry. You can keep up, we'll be announcing some things this month on that. Asotucon.com. And yeah, you want to check that out. That is all the vibe of ASOTU right there.
Zach: Nice. Sounds exciting. Jam-packed, and it's been excellent having both of you on the podcast, great content. Thanks so much for joining me today.
Paul & Kyle: Thanks for having us, Zach.