Latest / CBT Live / Are Dealers Losing the Middle-Income Buyer? AI Car Deals, Fed Hike (09.23.26)

Transcript

Are Dealers Losing the Middle-Income Buyer? AI Car Deals, Fed Hike (09.23.26) · CBT Live

0:01
SPEAKER_03: What's changed since the first AI to AI car deal?
0:05
SPEAKER_05: And what does the Fed's latest right hike mean for dealers?
0:10
SPEAKER_05: All that and more coming up next on TBT Live.
0:30
SPEAKER_03: Hey everyone, and welcome into another edition of CBT Live, right here at the CBT Automotive Network.
0:35
SPEAKER_03: Today is Wednesday, September 23rd.
0:38
SPEAKER_03: I am Jim Fitzpatrick, joined by my partner, Bridget Fitzpatrick.
0:42
SPEAKER_05: Hello, everyone.
0:42
SPEAKER_05: Thank you so much for joining us today.
0:44
SPEAKER_03: That's right.
0:45
SPEAKER_03: So it I can't believe that we're talking about September 23rd.
0:48
SPEAKER_03: Where has this year gone?
0:50
SPEAKER_05: So next week is October.
0:52
SPEAKER_03: Did I say October?
0:53
SPEAKER_05: No.
0:54
SPEAKER_05: You said September, but you can't believe it's hard to believe that.
0:57
SPEAKER_05: Yes.
0:57
SPEAKER_05: As well as next week is going to be October.
0:59
SPEAKER_03: I know.
1:00
SPEAKER_03: That's pretty crazy.
1:01
SPEAKER_03: That's right.
1:02
SPEAKER_03: That's right.
1:02
SPEAKER_05: That's what happens.
1:03
SPEAKER_05: I know.
1:04
SPEAKER_03: It's gonna be it's gonna be a really, really good show.
1:06
SPEAKER_03: Um lots going on out there.
1:08
SPEAKER_03: I mean, President Trump banned uh CNN from the White House and then reached out to us and said we'd like CBT to take their place because really something.
1:19
SPEAKER_03: Wow, I didn't even know we were on the radar.
1:25
SPEAKER_05: A great show for you today coming up.
1:27
SPEAKER_05: We'll be joined by Chris Hudson, general manager of Mark Miller Subaru, to take a closer look at what he's learned since the first AI agent to AI agent car deal.
1:38
SPEAKER_05: And then we'll be joined by Dan Varoni, an economic growth strategist and author to break down the Fed's latest rate hike.
1:46
SPEAKER_03: That's right, that's right.
1:47
SPEAKER_03: That should be interesting.
1:48
SPEAKER_03: And uh obviously both you know, good good stories there.
1:51
SPEAKER_03: And uh I want to learn about this AI to AI.
1:54
SPEAKER_03: Yes, yeah.
1:55
SPEAKER_03: Um that's that's interesting.
1:56
SPEAKER_03: And then of course, it is interesting, yeah.
1:57
SPEAKER_03: I can't wait to see something to see.
1:59
SPEAKER_03: AI, and we're gonna go to that in a little while, I guess.
2:02
SPEAKER_05: But uh you know, I do have a couple stories.
2:05
SPEAKER_05: It was really kind of a slow news day and automotive, so I've got but I do have a couple things to talk about that we thought was interesting over here at CBT News.
2:13
SPEAKER_05: So Cox has a recent study um talking about buyers with household incomes over$150,000 account for 43% of new car sales.
2:23
SPEAKER_05: And in 2020, that number was 29%.
2:26
SPEAKER_05: So that's interesting.
2:27
SPEAKER_05: And at the same time, the share of new car buyers buying less than or making less than$100,000 a year has fallen from 50 to 36%.
2:37
SPEAKER_05: Um so yeah, it looks like car buyers are wealthier than they used to be.
2:41
SPEAKER_05: But what the numbers they didn't really provide here was are the information.
2:46
SPEAKER_05: What are those people under$100,000 doing now?
2:48
SPEAKER_05: Are they buying use?
2:49
SPEAKER_05: Are they holding on to what they have?
2:50
SPEAKER_05: Are they just not buying a car?
2:52
SPEAKER_05: Um, so that would be interesting to me.
2:54
SPEAKER_04: Okay.
2:55
SPEAKER_05: Well it's called right into it.
2:57
SPEAKER_05: I'm sure they probably have another study that talks about that.
3:00
SPEAKER_03: I think in a lot of cases.
3:02
SPEAKER_03: They're holding on to their cars, which is yeah, but uh but not necessarily.
3:05
SPEAKER_03: They're you know, it's just it's what's amazing to me is the$150,000 household.
3:09
SPEAKER_03: That used to be not long ago.
3:11
SPEAKER_03: When you were made when a household was bringing in$150,000 a year, uh that was a pretty good, pretty good gig right there, you know, for the family.
3:19
SPEAKER_03: Now it's like$150, yeah.
3:22
SPEAKER_03: You're broke at the end of the month.
3:24
SPEAKER_05: Right, yeah, for people now.
3:25
SPEAKER_05: It's you know, it's yeah, I hear you.
3:27
SPEAKER_05: Okay.
3:28
SPEAKER_05: So in other news, with group one, Conifer Management recently spent about$40 million more on group one automotive stock.
3:35
SPEAKER_05: It now reports a stake of nearly 13%.
3:39
SPEAKER_05: So Conifer Management has nearly 13% of Group One automotive stock.
3:44
SPEAKER_05: So yeah, I thought so too.
3:45
SPEAKER_05: And in November, Benjamin Hart, a member of Conifer's investment team, will be joining Group One's board.
3:51
SPEAKER_05: They added an additional seat for him.
3:53
SPEAKER_05: So um, yeah, I think they're gonna be expecting a lot from Group One.
3:57
SPEAKER_03: They're bullish on retail automotive for sure.
3:59
SPEAKER_05: That's the thing.
4:00
SPEAKER_03: Group one has been making some huge moves.
4:02
SPEAKER_03: I mean, they did that billion-dollar deal here in Atlanta with the Hennessy Automotive Group.
4:07
SPEAKER_05: And uh it's really with investments like this, it's just it's it's good news for the overall industry.
4:12
SPEAKER_05: So that's right.
4:13
SPEAKER_05: We'll take it.
4:14
SPEAKER_05: We will take it.
4:15
SPEAKER_03: Who's the sponsor, by the way?
4:17
SPEAKER_05: Our sponsor today is Capital One.
4:19
SPEAKER_05: I'm glad you asked.
4:20
SPEAKER_05: Let's talk about that.
4:21
SPEAKER_05: Navigator platform from Capital One gives you the solutions you need to drive leads, conversions, and results.
4:29
SPEAKER_05: You deserve a partner that helps you win in your market.
4:31
SPEAKER_05: Reach out to your Capital One representative to learn how Navigator Platform can help your dealership take the lead.
4:37
SPEAKER_05: Thank you, Capital One.
4:38
SPEAKER_03: That's right.
4:39
SPEAKER_03: Great, great company.
4:40
SPEAKER_03: That's right.
4:40
SPEAKER_05: Yes, like you said, what's in your wallet?
4:44
SPEAKER_05: So before we bring on Chris Hudson, we do want to make sure that we're saying it correctly when we talk about AI.
4:51
SPEAKER_05: So um, because recently someone's maybe trying to change the the l initials, AI to something else.
4:59
SPEAKER_03: So we have yeah.
5:00
SPEAKER_05: Let him take a look.
5:03
SPEAKER_03: Cut to the tape here.
5:04
SPEAKER_03: Go to the tape.
5:06
SPEAKER_01: Artificial intelligence being spoken of so much now.
5:11
SPEAKER_01: Here and after officially called superintelligence, changing the name, and that the use of the word artificial makes intelligence fake.
5:21
SPEAKER_01: It makes it sound fake, and it is not fake.
5:23
SPEAKER_01: It's actually amazing, but we have to be careful.
5:28
SPEAKER_01: In fact, it is exactly the opposite of what it purports.
5:33
SPEAKER_01: From this point forward, all of United States documents and hopefully the worlds will be changed to use the much more accurate term super as opposed to artificial.
5:45
SPEAKER_01: So it's super intelligence.
5:49
SPEAKER_03: There you go.
5:50
SPEAKER_03: Superintelligence.
5:52
SPEAKER_03: From this point forward.
5:54
SPEAKER_05: Yes, it will be on all government documents.
5:56
SPEAKER_05: Super intelligence SI.
5:58
SPEAKER_03: That's right.
5:59
SPEAKER_03: Along with the Gulf of America.
6:01
SPEAKER_05: Yeah.
6:02
SPEAKER_03: And Lake of America.
6:05
SPEAKER_03: So uh or Lake America.
6:07
SPEAKER_05: We will say AI today.
6:08
SPEAKER_05: We'll see where things go from there.
6:10
SPEAKER_03: I'm anxious to see what our next guest is going to say about this.
6:13
SPEAKER_03: Because now he's going to have to do a super intelligence car deal to a superintelligence car deal.
6:18
SPEAKER_05: Well, it's the same thing.
6:18
SPEAKER_05: It's just real, it's not fake like art of the case.
6:21
SPEAKER_03: It's got to be at a soup Subaru deal.
6:24
SPEAKER_03: I mean, that's like goes hand in hand, doesn't it?
6:26
SPEAKER_03: Oh my gosh.
6:27
SPEAKER_05: Never a dull moment.
6:29
SPEAKER_03: Maybe it's super intelligence.
6:31
SPEAKER_03: That's what we should rename it to, super intelligence.
6:34
SPEAKER_03: Right.
6:34
SPEAKER_05: That's what he did.
6:35
SPEAKER_05: Yeah.
6:36
SPEAKER_03: He renamed it.
6:37
SPEAKER_03: And uh I mean, you can see how the audience there at the UN came alive when he said it.
6:42
SPEAKER_05: They did.
6:42
SPEAKER_05: They were so excited.
6:43
SPEAKER_05: All right.
6:44
SPEAKER_05: And anyway, back in May, Mark Miller-Subaru made headlines when two AI agents completed a car deal, one representing the buyer and one representing the dealership.
6:54
SPEAKER_05: But we'll talk a little bit about that.
6:56
SPEAKER_05: But what we really want to know, what has happened since then?
6:58
SPEAKER_05: As we all know, a few months in AI in the AI world can really feel like a few years.
7:04
SPEAKER_03: That's right.
7:04
SPEAKER_03: So we want to know what Chris Hudson has learned since that first transaction and what they're actually using inside the dealership today, and how much he's thinking about the future of car buying and how much it may be changed in the in the future.
7:18
SPEAKER_03: So uh Chris is the general manager of Mark Miller Subaru in Utah and has been right in the middle of testing what I AI, now super intelligence, can actually do inside of a dealership.
7:31
SPEAKER_03: So, Chris, welcome to CBT Live.
7:33
SPEAKER_02: Hey, thank you for having me, Jim.
7:35
SPEAKER_02: Bridget, thank you very much.
7:36
SPEAKER_02: Good to be here.
7:36
SPEAKER_02: Sure.
7:37
SPEAKER_03: What first and foremost, what do you think of the president's comments?
7:39
SPEAKER_03: I saw you smiling a little bit while you were watching.
7:42
SPEAKER_02: Uh well, he definitely likes to name things, doesn't he?
7:44
SPEAKER_02: I mean, that's a fact.
7:46
SPEAKER_02: He loves naming things.
7:47
SPEAKER_02: But yeah, super intelligence is nothing really new.
7:50
SPEAKER_02: Um, I'd say that I'm not sure that we're there yet, but uh once we get there, that's what it'll be called.
7:56
SPEAKER_03: That's right.
7:56
SPEAKER_03: That's right.
7:57
SPEAKER_03: I uh it's amazing he didn't call it Trump intelligence just to kind of put his put his brand on there.
8:02
SPEAKER_03: That's right.
8:02
SPEAKER_03: That's an TI.
8:03
SPEAKER_03: That's coming.
8:04
SPEAKER_03: That's right.
8:05
SPEAKER_03: Or America intelligence.
8:06
SPEAKER_05: So for those watching that maybe missed um what we are talking about, can you talk a little bit about what that was the AI um agent-to-agent uh transaction that you did?
8:17
SPEAKER_02: Sure.
8:17
SPEAKER_02: Yeah, I what I was trying to do, I've always wanted to be in front of technology, starting with the you know, internet, uh moving through like business development centers.
8:27
SPEAKER_02: I've always tried to be in the front of what's the next thing.
8:30
SPEAKER_02: Um so whenever I figured out that I could actually build an agent to do things for me, I thought, well, as soon as people figure this out, they're gonna be building agents to buy cars for them.
8:40
SPEAKER_02: Because in all honesty, like how many people truly like the process completely?
8:45
SPEAKER_02: And I'd say like not many, right?
8:47
SPEAKER_02: That's right.
8:48
SPEAKER_02: So um as soon as that's an option, I figured, well, they're gonna do it.
8:51
SPEAKER_02: So I started building my own agent that I could maybe hand off to a relative or a friend and let them buy a car using it.
8:58
SPEAKER_02: Um, and whenever I did that, I I did some research and I found a company um named Car Edge that was actually already doing this.
9:06
SPEAKER_02: So I I reached out to them.
9:08
SPEAKER_02: Um, I I got a subscription and I went and shopped my own dealerships.
9:13
SPEAKER_02: So uh I was able to kind of watch both sides, and it was um really entertaining and also enlightening.
9:20
SPEAKER_03: Yeah, that's pretty cool.
9:21
SPEAKER_03: Yeah very cool.
9:22
SPEAKER_03: That's uh Car Edge's uh Zach and his dad, right?
9:25
SPEAKER_03: That's right, yeah, Zach and Rui.
9:27
SPEAKER_03: Yeah, we've had them on the show a couple of times, and uh very innovative young man there for sure.
9:32
SPEAKER_05: Yeah, for sure.
9:33
SPEAKER_03: Yeah.
9:33
SPEAKER_05: So with AI changing so quickly, um, like I mentioned, since that first agent-to-agent deal in May, is there anything that you believed four months ago that you don't believe today, or what's your biggest takeaway?
9:46
SPEAKER_02: Yeah, so well, we we went ahead and I I actually teamed up with Zach and he built um an agent that was on the buyer's side that was advanced a little further than where they're currently at right now.
9:58
SPEAKER_02: Um and I built uh basically a catcher's mit agent on the on the seller side, and we're able to do a digital handshake and actually uh agree to a deal based on the parameters of the buyer and the seller that went through the process and ended up completing in our dealership.
10:13
SPEAKER_02: So that was really cool.
10:14
SPEAKER_02: The only problem is the railway hasn't been built yet, so we kind of had to back up from there.
10:20
SPEAKER_02: So I'd say that was my biggest realization is that we had the vision and we see I see where we're gonna go.
10:27
SPEAKER_02: It's just building the framework to get there.
10:30
SPEAKER_02: Um, and that's that's kind of where we're at now, and and trying to build the the railway, if you will, um, for the agentic commerce to jump on.
10:38
SPEAKER_03: Yeah.
10:39
SPEAKER_03: And how far away do you see that happening?
10:43
SPEAKER_02: Well, um, the first steps are to build a network of dealers that are sharing their data with the models.
10:50
SPEAKER_02: Um, so we're we're working on that.
10:52
SPEAKER_02: It's the agentic dealer network.
10:54
SPEAKER_02: Um so we're bringing dealers on there so that uh agents will be able to go through and they look for the cleanest data.
11:01
SPEAKER_02: And I'm sure a lot of your listeners have heard of this before with like the GEO that everyone's working on for their websites now, so that agents can actually find them.
11:09
SPEAKER_02: Well, we're basically trying to put it out there on the network, put it out there for the models, the easiest possible way for the agents to find the dealerships.
11:19
SPEAKER_02: Um, and so it's just all about discoverability, and that's step one, and that's kind of the beginning of the railway.
11:25
SPEAKER_02: And then we move into the transaction, which is where we were um starting.
11:31
SPEAKER_03: It's very so interesting, isn't it?
11:33
SPEAKER_03: Really is the way the industry is going on this.
11:35
SPEAKER_05: It really is, and like we talked about it, it's it everything's happening so quickly.
11:39
SPEAKER_05: Um so right now, without that model being completely in place, where where do you see dealers being able to have their information so that people can find it on the AI platforms?
11:51
SPEAKER_02: Sure.
11:52
SPEAKER_02: So right now, um, if you were to go to like our website, for example, or if you were to go to any of your models and connect to the Agentic Dealer Network, you would be able to actually send a lead in using your AI assistant or your model.
12:06
SPEAKER_02: You wouldn't have to go to our website, you wouldn't have to um call in.
12:10
SPEAKER_02: You could actually consent for that information to be sent to us.
12:14
SPEAKER_02: Um, and at the dealer level, it goes in any um uh source that you want.
12:19
SPEAKER_02: For us, it goes into our digital retailing tools.
12:22
SPEAKER_02: We have a we have a process here that's um that's we we call it skip the salesperson.
12:27
SPEAKER_02: Um you can actually go through the entire process without without speaking with anybody unless you want to.
12:33
SPEAKER_02: Um so that's that's kind of the second part of this build is that you know railway to go through the process that removes the friction completely from the car deal.
12:44
SPEAKER_05: So recently we had David Spizak on and he talked about a transaction where an AI agent actually sold a car for a dollar.
12:51
SPEAKER_05: Where do you see the trust factor in in this right now?
12:56
SPEAKER_02: Yeah, well there if you if you give too much control to um your LLM, you definitely could find um some issues where that might happen.
13:08
SPEAKER_02: But um you're able to build the protocol to a very specific um uh transaction where that's not that's not possible.
13:16
SPEAKER_02: It's it's impossible for that to happen.
13:19
SPEAKER_02: Um if you build the protocol right, which is what we did with our DMC12, which was the first protocol.
13:25
SPEAKER_02: Uh so yeah, it's it if you were to hand it over to a an LLM and let it just kind of do its thing, it could potentially hallucinate.
13:34
SPEAKER_02: Um but but you can control the parameters.
13:38
SPEAKER_03: Okay, that's good.
13:39
SPEAKER_04: Yeah.
13:39
SPEAKER_03: I mean, when when he mentioned that deal to us, it it kind of you know had the industry going, whoa, wait a minute, we're gonna be looking at the selling cars through AI for a dollar, right?
13:50
SPEAKER_03: That's a that's a problem for sure.
13:52
SPEAKER_03: Yeah.
13:53
SPEAKER_03: So talk to us about um about AI now in your dealership.
13:57
SPEAKER_03: I mean, how how much are you actually using it to interact with your customers?
14:02
SPEAKER_02: Well, we we use it as many other um operators and dealers do out there in regards to service communication and sales communication.
14:10
SPEAKER_02: Um, we have it back up our receptionists, you know, a lot of the common ways that it's being used right now.
14:16
SPEAKER_02: Um, but where we use it, I think where it's the most fruitful is for our workflow solutions inside of the dealership.
14:23
SPEAKER_02: So what we did, um, and I'm sure that it's common knowledge that people are a little bit afraid of it, especially inside the workforce.
14:31
SPEAKER_02: They're worried about potentially losing their jobs maybe, or um, you know, taking things away from them that that they might um you know that might not make them as necessary.
14:41
SPEAKER_02: Well, that that is that is absolutely not the case.
14:44
SPEAKER_02: Um, and we wanted to prove that.
14:46
SPEAKER_02: So we we created uh what we called the frustration harvest internally.
14:50
SPEAKER_02: Um so we asked for people to air their grievances, you know, kind of uh you know, a little spin on the Seinfeld um episode.
14:57
SPEAKER_02: But so we we asked them to complain, and and they did, surprise, right?
15:02
SPEAKER_02: Um they sent us the things that they didn't like doing day to day.
15:05
SPEAKER_02: Um and we we we listened to them and we used different um internal tools and we used AI to fix those things and create workforce and work, you know, workflow solutions.
15:16
SPEAKER_02: Right.
15:17
SPEAKER_02: When we did that, we we marketed internally.
15:19
SPEAKER_02: We let them know, like, well, this, you know, we fixed this, it's made this individual's job easier.
15:24
SPEAKER_02: Um, and so we've been building these types of things.
15:27
SPEAKER_02: We've got, I'd say, over a hundred of these little workflow solutions running right now.
15:32
SPEAKER_02: Wow.
15:32
SPEAKER_02: Some bigger ones and some smaller ones, um, but just kind of removing the friction, you know, we're internally.
15:38
SPEAKER_02: And I think that's what AI is doing today for the workforce, and then also the you know, uh the the buying public.
15:47
SPEAKER_02: It's removing, it's solving for friction, right?
15:49
SPEAKER_02: Just uh like the Uber Eats model for you know cars is what we're working on.
15:54
SPEAKER_03: How much are your do you see your customers utilizing AI in the purchase process?
15:59
SPEAKER_03: Are they telling you or sharing with you that, hey, I went on to chat and you know, I asked where's the best price in Colorado to buy uh Subaru?
16:07
SPEAKER_03: And this is what they told me.
16:09
SPEAKER_02: Yeah, we're seeing it more and more.
16:10
SPEAKER_02: And I've actually seen some people bringing in their um their AI assistants and and and using them like in the finance office, for example, just using them at all all the time.
16:20
SPEAKER_02: Yeah, and the way I look at it is kind of like um the analogy would be the flashlight and the floodlight.
16:26
SPEAKER_02: So the cell phone gave us the ability um to use it in order to shine uh a beam of light on one particular thing at a time.
16:36
SPEAKER_02: It wasn't that easy.
16:37
SPEAKER_02: You had to go and do a little bit of research, you could get answers.
16:40
SPEAKER_02: Yeah, you can fact check one thing at a time, but it wasn't immediate.
16:43
SPEAKER_02: It took some time, you had to do your research to make sure that the data was right.
16:47
SPEAKER_02: Well, with AI, it's it's it's continuing to grow, obviously, and it's gonna become more like the floodlight, where you'll be able to see the entire process, and there won't be the data asymmetry that we currently are experiencing with uh our our guests, it's it's it's lining up.
17:04
SPEAKER_02: It will be data symmetry pretty soon.
17:06
SPEAKER_02: Okay.
17:06
SPEAKER_02: And that's what I I foresee, and I'm I'm trying to prepare as many dealers that'll listen, that that's where we're going, and and um the way of doing business is not going to um well, it's not gonna work forever.
17:19
SPEAKER_03: Yeah, it it seems as though some of the dealers that I talk to are still very much um uh on the fence about AI.
17:26
SPEAKER_03: You know, they'll they'll tell me that, well, I'm third-generation dealer and my grandfather didn't use it, my father didn't use it to run the store.
17:34
SPEAKER_03: We sell, you know, in excess of 200 cars a month, and you know, we can't get any more Toyotas or Fords or whatever they're whatever they're selling, and we just don't see the you know where this is gonna fit in.
17:46
SPEAKER_03: Yeah, they're making a mistake on this, right?
17:48
SPEAKER_02: Yeah, it's funny you say that, Jim, because that's kind of like the genesis.
17:52
SPEAKER_02: I think that's what gave me my uh kind of um reason for doing this is back in 2001, I built a website for the dealership that I was working for, and I took it to the uh owner of the dealership.
18:04
SPEAKER_02: And uh man, I hope he's not listening because he's out there somewhere.
18:07
SPEAKER_02: But uh, but I took it to the dealer and um I asked him, like, hey, I built the website, I've put our inventory on here, I'm getting some leads, and I think I can get more.
18:18
SPEAKER_02: Um, so do you think that this would be something I could start, which was like an internet department, you know, didn't really know that, but that's what we were doing.
18:25
SPEAKER_02: Sure.
18:26
SPEAKER_02: And um, he's like, you know, no, no, I don't think the internet's gonna do anything for the car business.
18:32
SPEAKER_02: You know, let's let's go invest in the double truck ad, you know, for the weekend.
18:35
SPEAKER_03: That's right, for the weekend.
18:36
SPEAKER_03: Right.
18:37
SPEAKER_03: That's right.
18:38
SPEAKER_02: So um, so yeah, that's that's what's happening again.
18:40
SPEAKER_02: It's just, you know, history uh doesn't repeat itself but it rhymes, right?
18:44
SPEAKER_03: Yeah.
18:44
SPEAKER_03: One one uh dealer that I spoke with that owns a number of dealerships and uh he's very well respected, said to me that in the course of the next 10 years, he felt as though that the we'd be able to cut or they'd be able to cut their workforce inside their dealerships by as much as 25% because of AI.
19:02
SPEAKER_03: Um, do you think that's possible, or do you think he's uh crazy?
19:06
SPEAKER_03: Or what where do you stand on a comment like that?
19:09
SPEAKER_02: No, no, I don't I I do think it's possible, but I don't think it's really what the public would truly want.
19:15
SPEAKER_02: Um you know, the the car for Carvana, for example, let's just look at their model.
19:22
SPEAKER_02: They they have removed all people really from the transaction.
19:26
SPEAKER_02: Well, the reason that they've done that is because that's basically their their move.
19:30
SPEAKER_02: They are providing the buying public with the experience that does not include the sales pitch.
19:37
SPEAKER_02: But I would argue that if we were able to overcome that stigma or we were able to overcome that perception and actually provide help, like a service that people would appreciate and see the value in, that they would want that.
19:52
SPEAKER_02: So I I would imagine I I completely believe we're launching um locally um October 1st, we're launching our skip the salesperson, keep the dealership um uh model.
20:03
SPEAKER_02: And I truly believe that once people realize that we mean it and that they are not going to go fall into a trap once they walk in, yeah, that uh we're gonna need more people because there's going to be a level of uh that experience that people are gonna want to realize.
20:20
SPEAKER_02: Um it'll just be a different, you know, a different strategy uh than most dealerships operate in.
20:26
SPEAKER_04: Yeah.
20:26
SPEAKER_02: But uh I I definitely don't see it removing people.
20:29
SPEAKER_02: It's just gonna make their jobs better and it'll make the experience better for the consumer.
20:34
SPEAKER_02: Sure, sure.
20:34
SPEAKER_05: So, Chris, you there are hundreds of companies that are creating AI for dealership operations today, and it sounds like you're engineering a lot on your own.
20:42
SPEAKER_05: What would you say the percentages of how much is in-house and how much is vendors that you're using?
20:48
SPEAKER_02: That's a great question.
20:50
SPEAKER_02: So we we have definitely um the the number is actually growing, but and I've mentioned this before on a couple of other shows, podcasts, that we're we're up over$100,000 a year that we've removed in expenses by removing removing some vendors.
21:04
SPEAKER_02: Um, and I have a lot of really good friends and respect a lot of the vendors out there that work with us.
21:10
SPEAKER_02: And I would say that's the thing that the key is the working with us part.
21:15
SPEAKER_02: Um our vendors are becoming partners.
21:18
SPEAKER_02: Um, we are building with them.
21:20
SPEAKER_02: So they provide us data, our data, which you know sounds kind of funny that they would provide us our own data, but they do, and we use our data to build vertical.
21:30
SPEAKER_02: So they basically they provide the platform and we build internally vertically with different customized tools that are specific to the way we do business.
21:40
SPEAKER_02: And that's a relationship I think is gonna continue to grow.
21:43
SPEAKER_02: I I think that's the way that the vendor environment moves forward.
21:47
SPEAKER_02: There definitely might be some consolidation, um, but um I I I don't think that this is like the uh the SaaS apocalypse.
21:56
SPEAKER_02: You know, that we we're still gonna need uh vendors, it's just that they're gonna have to.
22:00
SPEAKER_02: So they're gonna have to work with us.
22:01
SPEAKER_02: I mean, if we are sitting and waiting for two weeks to get an answer to something or to change a color of a button on a website, then we might start thinking about how we build this ourselves.
22:11
SPEAKER_02: Yeah.
22:12
SPEAKER_02: Very good point.
22:13
SPEAKER_05: Do you have an AI engineer on staff?
22:16
SPEAKER_02: We we do.
22:17
SPEAKER_02: Um we have uh it's our CTO.
22:19
SPEAKER_02: Um, me and him kind of partner up um and build things together.
22:23
SPEAKER_02: Um so and that that's that's another very important position.
22:27
SPEAKER_02: I would say I talked to a lot of my dealer friends and and and mentioned that that should be on their listings for job applications because you definitely need a partner in this.
22:36
SPEAKER_02: I I I there's no way that one person could do it all themselves, but the other part of it is there's there was no way that two people could have done it uh back in February.
22:45
SPEAKER_02: That's really when we kind of got started heavy into this.
22:48
SPEAKER_02: Prior to that, the models um weren't able to give us the results they can give us today.
22:53
SPEAKER_02: Today we can sit back and build multiple things at one time.
22:58
SPEAKER_02: Um it's pretty awesome.
23:00
SPEAKER_03: Yeah, that really is that is fantastic.
23:02
SPEAKER_03: And having one having a team member that's uh that's incredible.
23:06
SPEAKER_03: We do have a comment.
23:07
SPEAKER_03: Do you think customers will be comfortable letting AI act for them, or would most still want control over the final negotiation?
23:16
SPEAKER_02: Uh I I truly believe that um well there's a couple that's a that that's a good question because the negotiation part um I I believe once we really get that data, asymmetry is going to kind of as used cars have shown us, right?
23:32
SPEAKER_02: The used car market, that data is so um available that there's very little movement in a used car price on lots these days because of the data's all there.
23:43
SPEAKER_02: Well, as when when when the models continue to provide more and more and more data, the and it's it's currently the margins or the differences between prices between dealerships is is is decreasing now.
23:56
SPEAKER_02: Um that that negotiation is kind of more it's it's minor, the minor part.
24:01
SPEAKER_02: It's uh that that's sounds a little crazy, but it's definitely going that direction.
24:05
SPEAKER_02: I think it's more about the experience.
24:07
SPEAKER_02: It's it's kind of like um do you have a problem using Uber Eats to order your food?
24:12
SPEAKER_02: You know, um I know this is a bigger, it's it's a bigger um purchase, but um, as soon as you can sit back and say, hey, go do this for me, um, and then it comes back and says it says, Okay, I did what you asked.
24:24
SPEAKER_02: Now would you like me to do?
24:26
SPEAKER_02: Yeah.
24:26
SPEAKER_02: Um you're gonna be, I think people will accept that.
24:29
SPEAKER_02: It'll take time.
24:30
SPEAKER_02: Yeah.
24:30
SPEAKER_03: But uh we'll get there.
24:32
SPEAKER_03: Yeah.
24:32
SPEAKER_03: Some new technology, relatively new anyway.
24:34
SPEAKER_03: Right?
24:35
SPEAKER_03: I mean it's the at the level that we're using it now is new.
24:38
SPEAKER_03: Right.
24:38
SPEAKER_03: So Chris Hudson, general manager of Mark Miller Subaru, doing some really cool things.
24:43
SPEAKER_03: Chris, thank you so much for joining us here on CBT Live.
24:46
SPEAKER_03: Very much appreciate it.
24:47
SPEAKER_03: Definitely want to do a follow-up with you because you're moving at a pretty fast pace in the AI world, or should we call it the super, super intelligence world, the SI world, right?
24:56
unknown: Right.
25:00
SPEAKER_05: Thank you so much, thank you, Bridget.
25:02
SPEAKER_03: All right, take care.
25:03
SPEAKER_03: That's so cool.
25:04
SPEAKER_05: It is cool.
25:05
SPEAKER_05: I think we're gonna start talking to more and more dealers that are taking this on in the same way that this is.
25:11
SPEAKER_03: Yeah.
25:12
SPEAKER_03: And a good question that you had about is do they have somebody on staff there?
25:15
SPEAKER_03: Because I think we're gonna start seeing more and more of that in dealerships and dealer groups that can certainly afford that extra person.
25:22
SPEAKER_03: Because I'm sure an AI specialist or technologist is not cheap these days, right?
25:27
SPEAKER_05: No, I'm sure they're not, right.
25:28
SPEAKER_05: No, but they're it sounds like he's doing a lot himself as well.
25:30
SPEAKER_05: So it's like he's very knowledgeable on the engineering part of that, which is a very good thing.
25:35
SPEAKER_03: For sure.
25:36
SPEAKER_03: Well, the Federal Reserve raised interest rates last week for the first time in three years.
25:42
SPEAKER_03: For consumers, that can have a real impact on some of the biggest financial decisions they make, including when and how they buy a car, or even if they buy a car.
25:51
SPEAKER_05: That's right.
25:51
SPEAKER_05: And joining us live to break down what this means for consumers, businesses, and the economy is Dan Varoni, economic growth strategist, author, and founder and CEO of Potomac Core.
26:04
SPEAKER_05: Thank you so much for joining us today, Dan.
26:06
SPEAKER_03: Pleasure to be with you, Bridget, and with Jim as well.
26:08
SPEAKER_03: Sure, good to see you again, Dan.
26:10
SPEAKER_05: Yes.
26:10
SPEAKER_05: Yes.
26:11
SPEAKER_05: So this is an interesting move because the Fed is raising rates while also saying the economy is growing at a solid pace and consumer spending remains resilient.
26:22
SPEAKER_05: What does that combination tell you about the economy right now?
26:26
SPEAKER_00: So, interestingly enough, when you look at the overall economy, so we've got strong corporate profits, uh, we've got significant corporate investing, we've got small businesses investing, a lot of the investment is in uh technology and AI.
26:42
SPEAKER_00: Um we're gonna see strong corporate earnings again this quarter, likely strong corporate earnings all year.
26:49
SPEAKER_00: The PMI index was up again.
26:52
SPEAKER_00: Uh, so I think the state of the overall economy uh is strong.
26:56
SPEAKER_00: The Atlanta Fed uh today said that it they're anticipating growth for this quarter at a little over 5%.
27:02
SPEAKER_00: But at the same time, uh British, we have a tail of what I would call two economies.
27:07
SPEAKER_00: So then you've got the other economy where consumers are struggling.
27:10
SPEAKER_00: Uh they're struggling with the cost of uh goods, the cost of food, and clearly the cost of gasoline.
27:16
SPEAKER_00: So it it's challenging right now.
27:19
SPEAKER_03: Yeah, for sure.
27:20
SPEAKER_03: It it is challenging.
27:21
SPEAKER_03: Um let's bring this to the dealership level.
27:23
SPEAKER_03: Dealers are already dealing with affordability and high monthly payments.
27:27
SPEAKER_03: Of course, gas prices and insurance don't help any.
27:30
SPEAKER_03: But how much does another quarter point increase really matter to today's car buyer?
27:35
SPEAKER_03: And where do you expect dealers to feel it uh at all?
27:39
SPEAKER_00: So interestingly enough, for those who already have car loans, it's not gonna make a difference because car loans, generally speaking, are fixed.
27:46
SPEAKER_00: Right.
27:47
SPEAKER_00: But how does this change the psyche of potential car purchases?
27:51
SPEAKER_00: So essentially, uh car payments now on average are a little over$700 as it is.
27:57
SPEAKER_00: So the question is, will that quarter of a point uh prevent them from uh pulling the trigger, as it were, and buying a new vehicle?
28:05
SPEAKER_00: Or will they say, maybe I need to buy a smaller vehicle, maybe a used vehicle?
28:10
SPEAKER_00: So I think that's clearly what's on their mind.
28:12
SPEAKER_00: Could it slow the auto sales market?
28:15
SPEAKER_00: Potentially it could, and candidly, uh when when the Fed released its decision last week, uh uh I automatically and immediately came out opposed to it because it was strange to me.
28:27
SPEAKER_00: Because you've got an economy that's running strong.
28:29
SPEAKER_00: But here's the other side of it.
28:31
SPEAKER_00: If we have inflation at 3.4%, and one full percentage point of that is the energy price shock, then we're running at an inflation of 2.4%, only four-tenths of a percent off of the Federal Reserve's target.
28:46
SPEAKER_00: So why are we increasing interest rates?
28:48
SPEAKER_00: So for car buyers and and for dealers, I I think this is gonna cause some heartburn.
28:54
SPEAKER_00: Now, from a dealer perspective, uh, I think it's gonna force them to be a little bit more creative.
29:00
SPEAKER_00: But what I would encourage them to do, Jim and Bridge, is to remember that there is an incentive in the big beautiful bill, right?
29:06
SPEAKER_00: Uh for those who are purchasing cars that are made here in the USA, uh, there's there's a tax incentive for those taking out car loans.
29:16
SPEAKER_00: So I think they can emphasize that.
29:18
SPEAKER_00: Uh, I think they can point uh consumers to the right vehicle.
29:23
SPEAKER_00: Uh and the other thing is that uh car dealers also have the opportunity to really focus on their services business.
29:31
SPEAKER_03: Yeah, that's for sure.
29:33
SPEAKER_03: Did you find it um surprising that this new Fed chief that was appointed by Trump um after we saw over the last couple of years Trump's feelings toward uh Powell?
29:45
SPEAKER_03: Um, did you find it interesting that this guy, his first move and he he moves the rate up?
29:52
SPEAKER_00: So uh wasn't surprising.
29:53
SPEAKER_00: It was shocking uh because I was uh I was under the impression uh that uh the new Fed chair, Kevin Warsh, was gonna wait uh for the his test groups to report back.
30:04
SPEAKER_00: Um I thought that he would keep his powder dry.
30:07
SPEAKER_00: Uh the the other thing that he had said is that he was gonna be disciplined by trends.
30:12
SPEAKER_00: Uh and Jim, interestingly enough, that as I looked at the trends in the economy, that core and supercore inflation is coming down, it's trending downward.
30:22
SPEAKER_00: So that's why those things were a big surprise to me.
30:24
SPEAKER_03: Yeah, yeah.
30:25
SPEAKER_03: I think I think everybody was uh surprised at that move, you know?
30:29
SPEAKER_03: Yeah, very unfortunate.
30:30
SPEAKER_05: So um analysts are saying that there's gonna be potentially another hike in October, maybe even another one in December.
30:37
SPEAKER_05: What's your take on that?
30:39
SPEAKER_00: Uh I think uh on the basis of what uh the Fed chair Kevin Morse said last week, I think the odds are uh growing by the day that will happen.
30:49
SPEAKER_00: Uh and based on the feedback I had coming out of the Fed, they're looking at two additional increases beyond that.
30:56
SPEAKER_00: Uh and and my take on it is is that uh let's say for sake of conversation that the Iran conflict ends the or concludes at the end of October or the end of November, let's say, uh we're going to see two things happen.
31:11
SPEAKER_00: We'll see gasoline prices go down, and we'll see diesel prices go down.
31:16
SPEAKER_00: And what will follow that is we'll see prices of uh goods and and food go down.
31:22
SPEAKER_00: So that's my question.
31:24
SPEAKER_00: Why why would they why would they increase rates again if uh core and super core are headed downward?
31:33
SPEAKER_00: And then let's say that we see it an end to the uh conflict with Iran, we'll see those energy prices come down.
31:39
SPEAKER_00: I think it would be a huge mistake.
31:41
SPEAKER_00: Uh uh, they have a practice of what they call demand destruction, and essentially what that does is it literally uh prevents uh employers from hiring uh and it and it literally keeps people uh from buying because they're saying things have gotten too expensive and I I can't afford to do any more than I am.
32:01
SPEAKER_03: Yeah, for sure.
32:02
SPEAKER_03: Dealers uh see the economy in real time.
32:05
SPEAKER_03: I mean, they're on the front lines, they see credit applications, trade equity, monthly payment resistance, and whether people are are buying or just walking away from the whole concept.
32:15
SPEAKER_03: What would be uh what would you be watching inside the dealership right now that might tell us where the economy is headed before the government data does?
32:23
SPEAKER_03: Foot traffic.
32:24
SPEAKER_03: Foot traffic.
32:25
SPEAKER_00: It's all about foot traffic.
32:25
SPEAKER_00: Foot traffic, leads.
32:27
SPEAKER_00: Right?
32:28
SPEAKER_00: It's all about foot traffic.
32:29
SPEAKER_00: You know, what is the foot traffic uh inside the the car dealership?
32:33
SPEAKER_00: So uh it I'll be able to give you some real-time information.
32:36
SPEAKER_00: My wife's car is eight or nine years old.
32:38
SPEAKER_04: Yeah.
32:38
SPEAKER_00: Uh, and we've discussed the fact that she needs a new vehicle.
32:41
SPEAKER_00: So we'll go out shopping this weekend, and I promise to uh message you and let you know what the foot traffic is.
32:48
SPEAKER_00: That's right.
32:48
SPEAKER_00: But it's all it's all about the foot traffic.
32:51
SPEAKER_00: Uh that that will be the uh the early or odds-on indicator as to where things are going from a car dealer perspective.
32:58
SPEAKER_03: Sure.
32:58
SPEAKER_03: Well, you're talking with thousands of car dealers right now.
33:01
SPEAKER_03: What kind of car are you interested in?
33:03
SPEAKER_03: We'll give him your cell number and it will blow up.
33:06
SPEAKER_03: But uh no, just kidding.
33:08
SPEAKER_00: Yeah, that that's uh I I I will tell you uh interesting because our our oldest daughter and son-in-law are also uh in the market.
33:16
SPEAKER_00: Uh they've got three growing sons uh who are actively engaged in sports activities.
33:21
SPEAKER_00: So uh there there could be a purchase from uh uh both sides here.
33:25
SPEAKER_00: So yeah, I'll keep you in in in tune with with what they decide and what we decide.
33:30
SPEAKER_00: Sure.
33:31
SPEAKER_00: There you go.
33:31
SPEAKER_03: Let me ask you, uh just from a political uh standpoint, we're watching uh, you know, the media, the midterms are now six weeks away or less.
33:40
SPEAKER_03: Um and you know, do you remember uh Clinton's slogan when he came in or his running for office?
33:46
SPEAKER_03: He said, It's the economy, stupid.
33:48
SPEAKER_03: You know, are are we back to that again?
33:50
SPEAKER_03: Whereas if President Trump can get his hands around this situation, and unfortunately he's you know, he well, maybe fortune, depends on what side of the aisle you're on.
33:59
SPEAKER_03: He's suffering from a very, very low uh approval rating right now, and most of it has to do with this affordability issue and with consumers feeling the pain, whether it be at the pump or or groceries or whatever the case might be.
34:11
SPEAKER_03: Um, is it the economy stupid all over again?
34:14
SPEAKER_03: Is this 1992 all over again?
34:17
SPEAKER_00: So part of me says absolutely yes, but the other part of me who was inside a briefing with a a top political analyst and journalist last week, uh, will share the following with you that Republicans have got a billion and a half dollar, let me say that again, a billion and a half dollar cash advantage.
34:34
SPEAKER_00: Uh they've been investing heavily in voter registration and again in voter turnout.
34:40
SPEAKER_00: Uh they're focused on the target house districts and the target Senate races.
34:45
SPEAKER_00: So uh uh the advice I've been given by this person in particular is we need to wait another three weeks and see how these investments are are are bearing fruit or not.
34:56
SPEAKER_04: Yeah.
34:57
SPEAKER_00: Uh the the other part of that investment is going into ads.
35:00
SPEAKER_00: So I think probably three weeks from now we're gonna have a good sense as to whether or not that investment is paying off.
35:06
SPEAKER_00: So where will we see it?
35:07
SPEAKER_00: Clearly, we'll see it in the polls, uh, but I think that we'll see it in the early vote numbers as well.
35:12
SPEAKER_04: Yeah, yeah.
35:13
SPEAKER_00: It's it's gonna be close to watching.
35:15
SPEAKER_05: So dealers will be watching the foot traffic, but on the economic side, what's one economic number or trend that you think dealers should be paying more attention to between now and the end of the year?
35:26
SPEAKER_00: Uh another good question.
35:27
SPEAKER_00: Uh so uh it's wages.
35:30
SPEAKER_00: It's wages, right?
35:31
SPEAKER_00: So wages uh in the last jobs report were up 3.1%, and that if you follow the Fed's inflation number 3.4%, uh wages are not keeping pace with inflation.
35:44
SPEAKER_00: Now, if wages go up, I think that's a very good sign for dealers, right?
35:50
SPEAKER_00: That means that uh consumers uh will have some extra dollars to do things like uh buy a car.
35:57
SPEAKER_00: So it's for me, it always comes down.
36:00
SPEAKER_00: So things like wages and foot traffic, when you're a car dealer, those things really matter.
36:05
SPEAKER_00: Yeah, boy, that's for sure.
36:06
SPEAKER_00: That's for sure.
36:07
SPEAKER_03: Will you be financing that car at the dealership?
36:09
SPEAKER_03: Uh we want to get we want to get we want to be we want to get the paperwork ready for you, Dan.
36:17
SPEAKER_03: If you do, he's gonna be watching the rate very closely because he knows he's got friends in high places.
36:23
SPEAKER_05: That's right.
36:25
SPEAKER_03: Well, Dan Vironi, founder and CEO of Potomac Group Core.
36:29
SPEAKER_03: Thank you so much for joining us on the show.
36:30
SPEAKER_03: It's always great catching up with you, and I know our dealer audience is gonna get a lot out of your visit with us.
36:35
SPEAKER_03: So thank you so much.
36:37
SPEAKER_00: Pleasure being with you and have a great rest of your week.
36:39
SPEAKER_03: And happy car shopping.
36:40
SPEAKER_05: Yes, absolutely.
36:41
SPEAKER_00: We'll enjoy it.
36:42
SPEAKER_00: Take good care.
36:43
SPEAKER_03: All right, take care.
36:44
SPEAKER_05: You too.
36:46
SPEAKER_03: Well, great guy.
36:47
SPEAKER_05: Great information there.
36:48
SPEAKER_05: Yeah, no question about it.
36:49
SPEAKER_03: And he's in the market, he and his kids are in the market for our car.
36:51
SPEAKER_03: Look at that.
36:52
SPEAKER_05: I know.
36:52
SPEAKER_03: That just goes to show you, right?
36:54
SPEAKER_05: I know.
36:54
SPEAKER_03: Wow, that's fantastic.
36:55
SPEAKER_03: So yeah.
36:56
SPEAKER_03: So is there a newsletter that we that do we send out a newsletter to our how many do we send out?
37:00
SPEAKER_03: That's like almost 60,000.
37:02
SPEAKER_03: Some crazy two times a day, by the way.
37:04
SPEAKER_03: All right.
37:05
SPEAKER_03: So if you really want to stay in touch for the AM and the PM, oh, I'm taking your your picture.
37:10
SPEAKER_03: No, it's uh it's uh you got well, you got Sean Duffy there every single day that we show him.
37:15
SPEAKER_03: He's back again.
37:16
SPEAKER_03: So that's right.
37:18
SPEAKER_05: So be sure to head over to cbtnews.com for more great conversations like you like we had today, and also while you're there, be sure to sign up for our newsletter to get these great stories and so much more delivered straight to your inbox every day.
37:32
SPEAKER_03: I might add too to that that uh when you go over to cbtnews.com, and maybe some of you are on it right now, um, you will see that we produce about 12 different shows.
37:41
SPEAKER_03: If you click the the uh icon that says shows, um, they are all you know hosted by subject matter experts and experts in their field, whether it be finance or uh or or uh uh leadership coaches or BDC coaches or marketing experts.
37:58
SPEAKER_03: Uh you get you know sales training, you name it, and we've got a show to cover it here at CBT News.
38:05
SPEAKER_03: You got Adam Harberger there punching the screen there.
38:07
SPEAKER_03: But he can teach you both that's right, a little bit about jiu-jitsu and how to run a very successful FI office.
38:14
SPEAKER_05: Because he's a black belt in jiu-jitsu as well as the automotive business.
38:18
SPEAKER_03: The automotive industry, that's right.
38:20
SPEAKER_03: And uh we love him here.
38:21
SPEAKER_03: He does an incredible job, not just for us, but for all of his dealer clients.
38:25
SPEAKER_03: So but uh yeah, we've got a lot to offer here at cbtnews.com.
38:29
SPEAKER_05: Yes, thank you so much for being with us today, everyone.
38:32
SPEAKER_05: We look forward to seeing you back here again tomorrow at noon Eastern for another edition of CBT Live.
38:38
SPEAKER_03: Thanks so much.
38:39
SPEAKER_03: Hope you make it a great day.