New Normal Revenue, Steve Greenfield’s Elon Musk Hot Takes

Paul J Daly: 0:13

Good morning. It is Monday, June 17. We have Steve Greenfield in the studio today. We're talking about the new normal for revenue. The oldest Evie maybe 30 years ago. And Steve greenfields, biggest admirer of we're gonna bring in. Not on the show, but we're gonna talk about it well, you won't be surprised. Steve, welcome to the show today.

‍Steve Greenfield: 0:40

It's good to see you all. Happy Monday.

Paul J Daly: 0:42

Happy Monday. Indeed. We have a lot going on this year. We do have just so everybody knows some new episodes dropping. We've been doing this regularly. Since a soda count. We have a lot of content that is going to be released on the drip, we have a new Auto Collabs episode. Today compliance is the Green Lantern of the auto industry with Cheryl Nan's. She made this great illustration of compliance being like the Green Lantern superhero that everyone's like, what what does that actually use actually for? What do they do and she had some great stories in there. You can get that podcast by just searching Auto Collabs or going to

Steve Greenfield: 1:15

Reynolds version of Green Lantern or

Paul J Daly: 1:19

that's really fun. You know, Brian Reynolds version of green I'd never even watched that. So yeah, I think that's Oh, really,

Steve Greenfield: 1:26

I think the worst movie of all time.

Paul J Daly: 1:28

See, maybe. Oh, is it you want to you want to?

Steve Greenfield: 1:31

You want to cringe? I think it's his biggest regret is really bad. Oh, man.

Paul J Daly: 1:38

Okay, well, I'll be sure to skip that one. Also, we are dropping to a soda con session podcast today. These were recorded live to a live audience at a soda con. There's so much fun nearly 15 to 20 minutes. And these are some of my favorite and Kyle's as well because we didn't get to do the interviews, right. So a lot of guest hosts on here we have Joe Overby as a guest host, Glen Lundy, Kyle and I, Michael Cirillo, Elaine chicken, Lena chicken, Telly. So we have a lot of variety in there. And they're very, these are great, like walking the dog drive driving to work, play my 1.5 speed, they're done in like nine minutes, and you get a big variety. So a lot of podcasts content coming out right now. And if you go to a soda.com, there's a little podcast tab at the top right, that's the best way to like see everything that's going on. And there's like a little something for everybody. But we have a quick shot show you 12 minutes to get through three stories. And this is going to be a lot of fun, Steve. So I'm gonna read the story. And then you know the drill, we're gonna get your take on what's going on. So this is a one of one part one of five, that Automotive News is doing a series on this kind of like broad picture very good journalism here. But basically, this first piece is the booming revenue period during the pandemic is fading. Everybody knows that leaving dealerships to adapt to quote, new normal. In the article, it says which might look a lot like the old normal, which is marked by interest rates and rising inventories. They went on to go down and name five different organizations. Some are dealer groups, some are like Carmax Carvana. And basically this is some of the things that they're doing. So I'll read through them, and then see if you just give us your commentary on what you think bubbles to the top what you're seeing. So first one is Asbury auto, acquired by Larry they acquired Larry H. Miller and Jim Coons, integrating a lot of new f&i products across their stores to boost revenue as very generated 14 point 8 billion in revenue in 2023. And expects to complete a full integration of those two large groups by the end of the year. Auto nation is focused on diversifying operations with acquisitions like repair Smith, you know, repair on demand, or on site expanding also their e commerce parts business. They love auto nation parts.com and remade and selective with their mergers and acquisitions. Car Max, they've extended their goal to sell 2 million vehicles, they push that out to 2030. So they're being a little more realistic. They've opened five new stores. They also reported a 5.2% drop in vehicle sales and six of retail sales and 6.6 decline in wholesale sales. Carvana have been a little bit of a roller coaster over the last 12 months they reported a net profit with a 17% increase in revenue. And they've been focusing on leveraging their ADESA auction sites for growth turning him into reconditioning facilities. So and inspection facilities last one group one continued acquiring lots of high revenue stores and expanding internationally while divesting of their underperforming dealerships. So they expect to finalize the purchase of Lynch escapes UK retail operations in the third quarter of 2024. So a lot of deal like big notable groups doing taking different approaches. What do you make of this? Well,

Steve Greenfield: 4:47

and let the two weeks ago announcing that they're going to buy back shares because stores are over overpriced, right? So I mean, the biggest natural acquire of stores over the last few years is now saying rather than buy stores at this point, So we're going to buy back shares, and we're our share price that way. So yeah, interesting. I mean, the one, the one thing that really resonates with me for through all of that, Paul is the shortage of us vehicles, right. So not only did we have this shortage of new cars two or three years ago, which is coming through the pipe now, and affecting folks like our Mac's if they could acquire more cars, they would, you know, Carvanha is gonna have a shortage of these nice low mileage two to three year old vehicles as well. But the double whammy really is a lot of those consumers that paid above MSRP. Now the cars, regular depreciation schedules are coming back into the market, we're hearing from dealers, and they're way way underwater, like so much so that they're shocked and angry, they don't know who to be angry at, and they've got off a purchase of a vehicle because it's so much negative equity, it's really, really hard for dealers to roll that into the next purchase. So I think every single dealer, all the groups that you mentioned, are gonna be feeling this pressure of the shortage of us vehicles, which is going to keep prices high for some time. But you know, to get those really good quality, low mileage two to three year old vehicles just isn't going to happen for a couple of years until we get back to where we're selling new cars. Now, as far as of coming up. We'll be okay in two to three years from now. But in the interim, I think is going to be a lot of pain for retailers.

Paul J Daly: 6:19

Do you see Do you see these efforts to go into like deeper and f&i or deepen deeper into service products becoming the new norm.

Steve Greenfield: 6:28

So service is a little bit of a mitigator, you liquid automation stoneware harrismith, you know, when they made that acquisition, there was a lot of hype that we were gonna go to fully V, many of the automakers were proclaiming, we were going to go fully V and, you know, the, the service intervals on EVs, as you know, as well as I do, are a lot longer. And you know, you don't need oil, regular oil changes, etc, for consumers to come in. So how are we going to mitigate some of that, I think a lot of those potential headwinds have gotten gone away. But service is still 50% plus of a dealer's profit, and they've got to make sure that they capture the vehicles and operation, especially because they had fewer vehicles sold during during COVID. So I think that, um, you know, that there will be folks, Ed Roberts is a great example of really innovating around bringing service to the folks in the local community via via events, mobile repair vans, and I think that you're gonna see a lot more innovation. And they're just going to have to really make sure that the profitability makes sense visa vie, getting the consumer to bring the vehicle in, or using a valet service to bring a vehicle in to the service space,

Paul J Daly: 7:34

we're also seeing, I think, a lot more technology deployed or developing for service scheduling, fixed ops, you know, optimization. So it'll be interesting to see how these new AI technologies are also leaning into the service side of the business in a very similar way. They're leaning into the sales side of the business, it feels like to me like there's a balance happening there for the first time in a long time. Yeah,

Steve Greenfield: 7:58

I think I think we're starting to see a new wave of innovations across both variable ops and fixed ops. But fixed ops has largely been neglected. You don't have to talk about that compared to the amount of innovation that's occurred on on, you know, when getting getting a deal or one incremental sale, whether it's a new or used vehicle. And I'm excited, like we've got a few companies that are doing exceptionally well that we've invested in on the fixed upside, and we're continuing to see a nice level of innovation on the fixed upside. Yeah,

Paul J Daly: 8:25

that's always good for everybody. Speaking of things that are good for, well, maybe not everybody, segue, but they're good for at least one person. Tesla shareholders have affirmed Elon Musk's multibillion dollar compensation package ensuring his position atop the world's most financially speaking or like, share value speaking most valuable automaker, however, Tesla is facing some legal challenges on this 2018 stock option deal. But the company is now valued at 48 billion. This was a we talked about this a little last week. So basically, he celebrated with some onstage antics did some quintessential kind of Elon Musk dance, including, you know, but he's now talking about these other things like visions of billions of humanoid robots. $30 trillion valuation for Tesla basically said, you know, we can we think we'll sell a billion of these things, it costs us you know, we'll sell it for 20,000 They cost us 10,000. To make this all gets everybody excited. The model Y is still the top selling vehicle in the world, arc investor who is very bullish on Tesla's future, they say the share price could hit $2,600 by 2029. Currently, the price is around $180. And they talked a lot about the proposed Robo taxi business comprising 90% of the company's value. So we have like this robo taxi 90% of the value of humanoid robots and AI. One shareholder said old Elon has returned. So you had a comment on this, some commentary in a LinkedIn post and also in your A weekly insight report which if you don't get it, you should go to automotive ventures.com and get it comes out every Monday morning. Basically, it said Tesla's core business is faltering and Elon Musk's hype has barreled past the boundaries of outright fantasy, damaging the customer company's reputation and entangling it in legal battle. So you obviously have some thoughts and opinions on this give give, give us the CliffsNotes

Steve Greenfield: 10:24

Yeah, I mean, it's hard to be reaching for Moon or Mars in his case, when you the the poor business is really suffering and it is right now. Right. I mean, we've seen month over month declines in Tesla volume, he announced I think, as of last week, or the week before the model Why is not getting refreshed this year. So you know, the best selling car in the world as of last year, isn't getting the refresh that was due, and your sales will suffer? Right. I mean, Glenn Mercer recently came out very astutely and said, the biggest driver of market share increases is a model refresh, not surprisingly, and all of the Tesla product is pretty long in the tooth, except for the cybertruck now, and cybertruck sales have been a little bit lackluster. So, you know, never never bet against Elon, I think it was interesting for those that haven't listened to the actual recording of the shareholder meeting. Um, it's worth listening to that because he says things like, you know, we're going to need more than one of these optimists who robots for every human on the face of the earth. And you know, if we can make them for 10,000, and sell them for 20,000. And we sell something like a billion of a billion, a billion robots a year, a billion. And we should be able to do a trillion of profit a year. And to your point, you know, he backs into the math and says, if we're worth 20 to 25 times a trillion dollars in profit, then Tesla could be worth, you know, 20 to$25 trillion. Just based on Optimus alone, forget Ark invest and the autonomous vehicle. So I mean, the most, you know, the most pricey stock right now is in Vidya, an apple that, you know, just north of 3 trillion to think that Tesla is going to be worth 20 to 25 trillion within a few years, based on optimist sales is like it's out there. But I mean, you can't bet against this guy. You cannot bet against this guy.

Paul J Daly: 12:14

Yeah, I mean, I think so much of it is managing the, like, I've read, I read the biography this year, and it was very revealing and like, how the inner workings and I always wonder, like, how long can that sustain? Because if you pull Elon out of Tesla, like there is no there is no Tim Cook. Right? Like that's apparent. You know, we were talking about Tesla, you know, like maybe partnering with dealers Hague wrote this thing last week, you know, open letter to Elon Musk and my perspective on that is like, like not in a Steve Jobs world, which was like, in my mind, like the Elon Musk, like you need a Tim Cook, who would come in with Tesla and understand like, there's broader profitability that aren't so you know, based on these dreams and aspirations. But that article, you posted it, you put it at the very top, your, your top admirer, I think, is finally revealed in this comment you put at the top of your newsletter. And here, do we have it? We're gonna put it on the screen. And this is Tony Lai, and he says you are an embarrassment. Steve Greenfield. Turns out you don't know much about this pay package deal. People are fools listening to you, which I think I'm the only reply to that comment. I was like, so I listened to Steve, I guess I'm fully you know, well, thanks, Paul. You're

Steve Greenfield: 13:24

my one supporter. I, I respect the Open dialog that present but it's also funny What's about while I was gonna pluck out the good ones and post them on the newsletter. Yeah, I

Paul J Daly: 13:37

know. So we really appreciate that. We appreciate the work you're doing. We appreciate you. Thanks for coming on the show making little time on a busy Monday morning to give us some of your thoughts. Hope you have a great week. Thanks, Paul. Good senior. All right. We'll see you here bright and early tomorrow morning everybody have a good Monday.

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