#618 - 🥨🦺🍪 Increase, In-Vest, and Invent

TOGETHER WITH

Welcome to Thursday, friends!

Where we do it all again. Because cutting corners is for foot races and ketchup packages.

Enjoy another day and…

Keep Pushing Back
-Paul, Kyle, Chris & Kristi

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BUSINESS

Time for Business

We know Lithia & Driveway aren’t ALL dealerships, but they are a publicly reported set of dealerships, so seeing their numbers is a thermometer under the tongue of the US industry in some ways.

We seem to have caught the market in a down moment today, but the only constant is change over there on Wall Street, so don’t take it personally.

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Dealership Vibes

Lithia & Driveway marked a historic high, with its fourth-quarter 2023 revenue reaching $7.7 billion, up 10% from the previous year. 

• Net income, however, dipped by 13% to $216M, with earnings per share slipping 14% to $7.74

Franchise Dealers' service lanes saw an increase in January. Repair Order Volume increased 2.7% from December but was down 1.3% compared to January 2023. 

• Repair Order Revenue climbed 3.3% over December and 4.3% year over year. 

Wholesale values dipped about 0.9% since January and are down 13.8% year over year. 

• Wholesale supply stands at 27 days. Higher than last year but below 2019 levels. 

• Despite this, auction unit sales have increased about 9% YOY in January. 

• Prices across vehicle types have declined by double digits with EVs losing 16.1% while non-EVs lost an average of 12.8%.

 📉 At the time of writing, Lithia Motors Inc. is down 0.60% in the market.

Vending Machine Deliveries

Carvana has introduced same-day vehicle delivery in Sacramento, doubling down on the convenience of online car buying and selling. Local customers will receive their vehicles within hours of purchase. Private sellers will have drop-off options too, so there is a chance this marketplace expansion will draw private sellers away from buy centers and into Carvana's orbit. 

📉 At the time of writing, Carvana Co is down 5.08% in the market.

Toyota's Investments

Toyota is making significant investments in their future, but maybe not ALL the investments they could make in the future. 

The company is pumping $1.3B into Kentucky for the production of its new SU-EV (SUV + EV) as part of its shift toward sustainable transportation. It's part of a $17B investment plan in US electrification within their philosophy of "building where they sell." 

However, the company has put wage negotiations in Japan on hold. Toyota wants to secure the talent for its ambitious global and future plans, and the labor union wants to secure the compensation those talented folks need. Here's hoping all parties return to the table in good faith soon. 

 📉 At the time of writing, Toyota Motor Corp is down 0.20% in the market.

Ford's Price Cuts

Ford is snipping the price of the 2023 Mach-E as the "make EVs profitable" campaign continues across the world's brands. 

• With cuts up to $8K, some Mach-Es are available under $40K now. 

• The adjustment places the Mach-E in a better position to compete with Tesla amid slowing demand, but it doesn't do much for the overall pricing question or charging concerns.  

📉 At the time of writing, Ford Motor Co is down 1.01% in the market

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LAD’s reports tell us about retail auto’s today. For example, seeing that Carvana is getting into deliveries tells us something about retail auto’s tomorrow.

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DATA & INSIGHT

Semiconductor Showdown

Semiconductor chips are essential for the basic functioning of a wide array of gadgets and systems, from electronics to medical devices to cars.

Since the necessity of these chips exploded, the struggle between the United States and China to be the best on the market has become a high-stakes drama with some hefty implications for retail auto.

Let’s break down the tech tussle:

🍪 Chips on the Move — Despite U.S. sanctions aimed at keeping high-tech NVIDIA chips from China's grasp, they've managed to make the leap (rumor has it, NVIDIA's crafting chips specifically for China and skirting just below the radar of America’s restrictions).

🥩 Raising the Stakes — In response, the U.S. isn't just sitting back; they're dialing up the heat on export controls in hopes of cutting off China's access. They are also accelerating efforts to boost domestic chip production through initiatives like the CHIPS Act.

🔄 China’s Counter-Counter-Move — China has been on a massive equipment-buying spree with the hope of reducing foreign dependency.

The potential impact for dealerships:

😥 Inventory Jitters — Less access to advanced chips could throttle back the production of the latest models, meaning customers might have to wait longer for that smart new ride.

🐡 Puffed-Up Price Tags — Chip scarcity could drive up costs, making cars more expensive. And that's a conversation no dealer looks forward to having with a customer.

🦾 Ingenuity on the Line — The advanced features that get buyers buzzing—from safety systems to electric vehicle capabilities—rely on these very chips. A shortage could slow down the roll-out of the next big thing in car tech.

AROUND THE ASOTU-VERSE

Will Guidara at ASOTU CON 2024

Unreasonable Hospitality is full of wonderful moments that highlight all a person can mean by “great customer experience.” If you’ve read the book or heard somebody else talk about it, we don’t need to tell you that hearing from Will in person will be a highlight of any servant leader’s career.

Grab your ticket to ASOTU CON 2024 now and let’s get great together!

Quick Hits

• Under a new plan, the Biden administration plans to cancel $1.2B in student debt for more than 150K borrowers. 💸

• Some Cybertruck owners are reporting that their stainless steel exteriors are already beginning to rust. 😡

• Have a weird day with ChatGPT? It wasn’t just you, the system had a teeny-tiny mental breakdown. 🤖

History

• 1959: Lee Petty wins the first Daytona 500. 🥇 

• 1980: The U.S. hockey team, composed in great part of college players, defeats the defending champions and favorites to win the gold medal Soviet Union squad by 4-3. 🏒

• 1997: Scottish scientists from the Roslin Institute in Edinburgh announce they have successfully cloned an adult sheep named Dolly. The sheep was born in July of 1996, and Dolly was the world's first cloned mammal. 🐑

Another day, another ASOTU email read. Look at you. If your New Year’s Resolution was to get more informed about the world and retail auto’s place in it, you’d be almost 2 full months into killin’ it.