WEBVTT - Cox Automotive Analyst Erin Keating; Plus, Lamborghini Coffee? 0:00:02.520 --> 0:00:10.560 Bloomberg Audio Studios, podcasts, radio news. I'm Matt Miller and 0:00:10.600 --> 0:00:12.799 I'm Hannah Elliott, and this is hot Pursuit. 0:00:20.120 --> 0:00:22.960 All right, we have a guest that you, I think 0:00:23.000 --> 0:00:26.040 recently have interviewed. Yes, for your day. 0:00:25.960 --> 0:00:31.560 Job, for my day job writing about automotive things. Aaron Keating, 0:00:31.640 --> 0:00:35.480 who is the executive analyst for Cox's Automotive, is going 0:00:35.479 --> 0:00:39.560 to join us. And she's so informative and articulate about 0:00:39.560 --> 0:00:43.080 what is really happening on the underside of the automotive market. 0:00:43.360 --> 0:00:46.599 I thought she should come on and help us understand 0:00:46.600 --> 0:00:48.400 what's going on with these high prices. 0:00:49.000 --> 0:00:51.920 Yeah, I'm pretty excited to talk to her. She knows 0:00:51.960 --> 0:00:54.240 a ton about the industry because she has so much 0:00:54.240 --> 0:00:55.880 experience and so many different. 0:00:55.920 --> 0:00:56.600 Used to work it out. 0:00:56.680 --> 0:01:00.760 Ye positions, Yep. My first car was an auty by 0:01:00.760 --> 0:01:04.040 the way, the first car that I bought myself, Right, 0:01:04.080 --> 0:01:08.240 My first car was my mom's baby blue Volvo two 0:01:08.280 --> 0:01:12.319 forty station wagon. I put thousands of miles on it 0:01:12.360 --> 0:01:15.399 without ever changing the oil, and then at like two 0:01:15.640 --> 0:01:17.600 fifty the motor just seized. 0:01:18.600 --> 0:01:21.160 You know, I did that with the accurate legend. When 0:01:21.200 --> 0:01:23.319 I was in college, I didn't really know, you have 0:01:23.400 --> 0:01:24.400 to like check the oil. 0:01:24.760 --> 0:01:26.279 Yeah, I didn't really get that at the time. 0:01:26.520 --> 0:01:28.679 I didn't get that. No one told me. No one 0:01:28.720 --> 0:01:31.280 told me. And yeah, the same thing happened to me 0:01:31.360 --> 0:01:34.960 with my white accurate Legend with a phone in it. Unfortunately. 0:01:35.160 --> 0:01:37.560 Wow, cool car though, with the phone in it. 0:01:37.720 --> 0:01:40.839 Yeah, it was my uncle's. He was a corporate lawyer. 0:01:40.920 --> 0:01:43.319 He was like the only car guy in my family. 0:01:43.360 --> 0:01:45.800 He was cool. He's still alive. 0:01:45.920 --> 0:01:49.920 I fondly remember the first days of car phones. My dad, 0:01:50.040 --> 0:01:54.000 also a corporate lawyer, got one and it was in 0:01:54.080 --> 0:01:57.160 like a briefcase. Yeah, and I thought it was like. 0:01:58.080 --> 0:01:58.920 The curly cord. 0:01:59.120 --> 0:02:01.080 Yeah, yes, yeah. 0:02:00.880 --> 0:02:02.760 I thought it was extremely cool. 0:02:03.720 --> 0:02:05.600 It was pretty cool. I never had anyone to call, 0:02:05.680 --> 0:02:08.079 but I was always like I could call someone. 0:02:07.840 --> 0:02:09.840 If I wanted to in case of emergency. 0:02:10.320 --> 0:02:13.600 But yeah, that volvo into a lot of grateful dead 0:02:13.600 --> 0:02:17.520 shows and co and then didn't go to anymore. But no, 0:02:17.639 --> 0:02:21.360 my first car ever. When I first started working for Bloomberg, 0:02:21.480 --> 0:02:24.000 by the way, twenty five years ago this. 0:02:23.960 --> 0:02:27.120 Month, wild congratulations, I. 0:02:28.680 --> 0:02:32.000 Took my first paycheck and some money that I'd saved 0:02:32.080 --> 0:02:35.200 up in college for a down payment on an Audi 0:02:35.680 --> 0:02:40.200 A four station wagon because I'm not an idiot with 0:02:40.440 --> 0:02:45.520 a two point five liter TDI motor that I mean, 0:02:45.520 --> 0:02:48.000 it had one hundred and eighty horse power, but still 0:02:48.600 --> 0:02:51.280 I could pretty easily get it up to two hundred 0:02:51.639 --> 0:02:53.760 kilometers an hour on the Autobahn because I was in 0:02:53.800 --> 0:03:00.600 Frankfurt and it was like my Schemobile for the perfect 0:03:00.720 --> 0:03:02.520 next five years. It was such a great car. 0:03:02.800 --> 0:03:06.600 That's a really good choice, like very makes a lot 0:03:06.639 --> 0:03:08.680 of sense, very practical but also cool. 0:03:08.880 --> 0:03:13.640 Yeah, a stick shift obviously, you know, three pedals. It 0:03:13.760 --> 0:03:17.600 had like suede strips in the seats to hold you 0:03:17.639 --> 0:03:20.120 in place, kind of sporty. 0:03:20.320 --> 0:03:22.280 You know what color was it? 0:03:22.720 --> 0:03:27.120 Dolphin gray? I they didn't really have many choices. Yeah, 0:03:27.200 --> 0:03:29.880 you know it was like three different shades of gray 0:03:30.040 --> 0:03:32.560 and then a bluish gray like what is this? 0:03:32.560 --> 0:03:34.840 This is pre married Matt obviously. 0:03:34.440 --> 0:03:35.080 Yeah, yeah, no it. 0:03:36.800 --> 0:03:37.000 Yeah. 0:03:37.080 --> 0:03:41.960 It was my first time, like you know, really living 0:03:42.120 --> 0:03:45.440 in my own apartment away from home, a real job 0:03:45.800 --> 0:03:50.280 after the record store, you know, and uh like a 0:03:50.320 --> 0:03:50.720 grown up. 0:03:51.440 --> 0:03:55.600 Yeah, I remember those days that I had, and it's 0:03:55.600 --> 0:03:58.640 just such a fun feeling for me, it sounds like 0:03:58.680 --> 0:03:59.120 for you it was. 0:03:59.320 --> 0:04:03.960 That's such a it was amazing. My first cell phone, 0:04:04.480 --> 0:04:07.880 you know, like with a monthly contract. Wow, and text 0:04:07.960 --> 0:04:11.680 messaging was like the newest thing. No one could believe it. 0:04:12.240 --> 0:04:15.400 I remember using the first BlackBerry that I ever had 0:04:15.400 --> 0:04:15.880 in that car. 0:04:16.080 --> 0:04:17.400 Is that a company BlackBerry? 0:04:17.680 --> 0:04:23.559 It was actually BlackBerry gave me a model to test 0:04:23.600 --> 0:04:28.679 out before they started really selling them. And my friends 0:04:28.720 --> 0:04:31.640 couldn't believe that you could send and receive emails with 0:04:31.720 --> 0:04:36.279 this cell phone. It was just amazing. That was before 0:04:36.680 --> 0:04:43.720 three g. Let's talk about new cars with our guest, 0:04:44.120 --> 0:04:48.200 Aaron Keating. She is out in San Diego at a 0:04:48.240 --> 0:04:51.919 Toyota event driving the Forerunner, the new for Runner. What 0:04:52.000 --> 0:04:54.279 a hot car, What a hot truck. 0:04:54.360 --> 0:04:55.960 Man. If you had that in high school when I 0:04:56.040 --> 0:04:57.039 was in high school. 0:04:56.760 --> 0:04:59.320 Oh yes, you were cool. I had a buddy who 0:04:59.360 --> 0:05:01.160 had one in college. It was sweet. 0:05:01.640 --> 0:05:02.039 Yeah. 0:05:02.080 --> 0:05:04.400 Aaron Keating from Cox Automotive. 0:05:04.440 --> 0:05:08.000 I have to say, the whole idea for this conversation 0:05:09.240 --> 0:05:12.640 with Aaron Keating, who is the executive analyst for Cox Automotive, 0:05:12.640 --> 0:05:16.159 I hope I got that right. Erin and of course 0:05:16.360 --> 0:05:21.360 Cox Automotive owns Kelly Bluebook, but Erin also has quite 0:05:21.400 --> 0:05:24.960 a long career in the automotive industry, and she has 0:05:25.000 --> 0:05:29.200 worked for automakers, with automakers and now she's an analyst. 0:05:29.200 --> 0:05:30.960 And what I was getting to is I called her 0:05:31.040 --> 0:05:35.600 last week because I really wanted to understand pricing. We've 0:05:35.680 --> 0:05:39.280 just seen all of the new average transaction pricing numbers 0:05:39.279 --> 0:05:42.679 come in for twenty twenty four and it was so 0:05:42.760 --> 0:05:44.919 insightful to talk to her about that. I said, you 0:05:44.920 --> 0:05:48.159 should come on the podcast and enlighten us both. So Erin, 0:05:48.200 --> 0:05:53.279 We're so happy to have you, of course, thank. 0:05:53.120 --> 0:05:55.520 You, thanks for joining. Yeah, you know, it's funny. I've 0:05:55.520 --> 0:06:01.839 been focused on pricing as well because with the threat 0:06:02.279 --> 0:06:06.880 of twenty five percent tariffs against Canada and Mexico, I 0:06:06.920 --> 0:06:10.440 saw an estimate that new car prices could rise by 0:06:10.520 --> 0:06:14.200 another three thousand I think that was Wolf Research that 0:06:14.279 --> 0:06:16.840 put that out, and so I looked back at Bloomberg 0:06:16.880 --> 0:06:20.480 Intelligence data, which I guess you must have the similar 0:06:20.520 --> 0:06:24.400 similar data, and saw that the average new car prices 0:06:24.440 --> 0:06:27.520 have gone up from I think it was thirty three thousand, 0:06:27.720 --> 0:06:35.000 five hundred in twenty fifteen to forty eight thousand, eight 0:06:35.120 --> 0:06:38.760 hundred in twenty twenty four, so a forty six percent 0:06:38.839 --> 0:06:42.000 increase already. And then the threat of another six percent 0:06:42.120 --> 0:06:44.240 on top of that seems crazy. 0:06:44.839 --> 0:06:48.599 We'll be crippling. And we think that's a fairly low number. 0:06:48.640 --> 0:06:52.240 Could be depending on which models we're talking about and 0:06:52.279 --> 0:06:53.920 how many you know. Again, I think Hannah and I 0:06:54.000 --> 0:06:56.680 were talking about the fact that tariffs, you know, will 0:06:56.680 --> 0:06:58.960 be impacted also just on how many times the cars 0:06:59.080 --> 0:07:02.719 or the component trees going back and forth across the borders. 0:07:02.839 --> 0:07:04.440 You know, we don't yet know how they're going to 0:07:04.480 --> 0:07:08.000 solve for that challenge. If a part is going from 0:07:08.040 --> 0:07:11.200 here over to Canada or down in Mexico and getting 0:07:11.760 --> 0:07:14.520 put into a component, and then the component as a 0:07:14.680 --> 0:07:17.360 unit is being sent back over here or being assembled there, 0:07:17.400 --> 0:07:19.720 you know, if that's where it will add to the 0:07:19.760 --> 0:07:22.960 cost theoretically, you know, you'd hope that they'd think through 0:07:23.000 --> 0:07:27.560 that logistically, but how do they track the sheer logistics 0:07:27.760 --> 0:07:30.640 needs in the supply chain to manage that complexity. 0:07:31.240 --> 0:07:32.400 I don't have a ton of confidence. 0:07:32.440 --> 0:07:35.920 And let's talk about pricing though in general, because it's 0:07:35.960 --> 0:07:40.000 been a big issue, you know, especially during the pandemic. 0:07:40.920 --> 0:07:43.880 They just took off not just new cars but used cars. 0:07:44.680 --> 0:07:49.880 Is it just me or do automotive products just take 0:07:49.960 --> 0:07:52.040 up a larger share of our income now than they 0:07:52.040 --> 0:07:53.720 did ten twenty years ago. 0:07:54.960 --> 0:07:57.320 No, they for sure do, and there's a lot of 0:07:57.360 --> 0:08:01.480 reasons that they do. And there's the cost of ownership. 0:08:01.520 --> 0:08:04.440 Even though a lot of people Kelly Bluebook and other groups, 0:08:04.480 --> 0:08:06.200 you know, look at total cost of ownership, it's a 0:08:06.200 --> 0:08:08.440 little bit tough for consumers to understand because most consumers 0:08:08.480 --> 0:08:10.600 will look at their monthly payment. That's what's really helping 0:08:10.600 --> 0:08:13.679 them make their decision. But that monthly payment, which includes 0:08:13.760 --> 0:08:16.680 insurance and things like that, those prices are also blowing up. 0:08:16.760 --> 0:08:19.040 So it's not just even that the car itself is 0:08:19.040 --> 0:08:21.240 more expensive and taking up a bigger share of your wallet. 0:08:21.800 --> 0:08:25.600 Ancillary expenses that you have around that have also been rising. 0:08:25.960 --> 0:08:28.880 So it's not your imagination. It is happening. 0:08:29.600 --> 0:08:32.400 And I know we spoke about the reasons for this. 0:08:32.480 --> 0:08:35.760 I mean, this is not some arbitrary thing that automakers 0:08:35.760 --> 0:08:38.160 are deciding we would like to make more money there, 0:08:38.160 --> 0:08:40.720 We're going to up our prices. Can you just run 0:08:40.760 --> 0:08:42.560 down it's going to be a repeat of what you 0:08:42.640 --> 0:08:45.679 told me, But there are so many complicated factors. Can 0:08:45.720 --> 0:08:48.600 you run down for our listeners what goes into the 0:08:48.640 --> 0:08:51.680 pricing structure of why car is priced a certain way. 0:08:53.080 --> 0:08:56.960 Absolutely, and you know you mentioned Matt about COVID and 0:08:56.960 --> 0:08:58.880 how the cost went up. Yes, there was a supply 0:08:58.960 --> 0:09:04.000 and demand challenge within the market that did help increase prices. 0:09:04.040 --> 0:09:06.240 So some of that, some of that pricing did go 0:09:06.360 --> 0:09:09.680 up based on a supply and demand pure economics. But 0:09:09.880 --> 0:09:11.440 over the course of the years, I think what a 0:09:11.440 --> 0:09:14.520 lot of consumers don't necessarily understand or want to face 0:09:14.520 --> 0:09:17.199 about themselves as consumers, especially in the US, is that 0:09:17.520 --> 0:09:19.480 we're very picky in the US. I think I was 0:09:19.520 --> 0:09:22.320 working with one of my guys in Kelly Doulbook recently 0:09:22.440 --> 0:09:25.880 to see we have over six hundred and thirty variants 0:09:25.920 --> 0:09:29.360 of vehicles in this country, six hundred and thirty so forever. 0:09:29.400 --> 0:09:31.319 I mean, you know, I'm here right now at the 0:09:31.760 --> 0:09:35.320 Forerunner launch and they have nine different levels of the 0:09:35.360 --> 0:09:38.160 Forerunner itself coming out just for the twenty twenty five edition, 0:09:38.679 --> 0:09:44.320 nine different variants and within that remember colors, interior, exterior, 0:09:44.400 --> 0:09:49.160 trim packages. These things get really expensive to have to 0:09:49.160 --> 0:09:51.640 come up with the right production planning to get the 0:09:51.679 --> 0:09:54.679 right amount of each type of vehicle that every American wants, 0:09:54.840 --> 0:09:57.400 and they want it just so and so the complexity 0:09:57.400 --> 0:10:00.520 that we've demanded as consumers in US certainly put the 0:10:00.559 --> 0:10:05.600 pressure on manufacturers to build to our specifications, so to speak, 0:10:05.800 --> 0:10:08.160 and that's done and planned, you know, as we know 0:10:08.240 --> 0:10:10.920 two to three years out from the product cycle. So 0:10:11.200 --> 0:10:14.280 those complexities start to pile on pricing, which is why 0:10:14.320 --> 0:10:16.600 you see a lot of companies trying to go towards 0:10:17.800 --> 0:10:20.280 you know, platforms that could be agnostic across a couple 0:10:20.320 --> 0:10:23.280 of different models and so forth. So the complexity, I 0:10:23.280 --> 0:10:25.199 think is a really big one that we just don't 0:10:25.200 --> 0:10:27.800 give enough credit to and the consumers, you know, to 0:10:27.840 --> 0:10:31.360 be a little harsh, don't take enough responsibility for why 0:10:32.120 --> 0:10:32.960 the cost has. 0:10:32.880 --> 0:10:34.280 Been driven up by a lot of that. 0:10:35.000 --> 0:10:38.959 Certainly, compliance and regulation complicates the cost structure of things. 0:10:39.280 --> 0:10:39.520 You know. 0:10:39.800 --> 0:10:42.679 We know that even the most recent regulations that are 0:10:42.679 --> 0:10:45.080 coming through around the breaking being able to you know, 0:10:45.120 --> 0:10:47.080 your card needs to build a break over sixty miles 0:10:47.080 --> 0:10:49.920 an hour. Every new feature that we are putting into 0:10:49.960 --> 0:10:53.160 the complexity of the US market specifically, I've talked a 0:10:53.200 --> 0:10:55.000 lot about this with people who are looking at the 0:10:55.080 --> 0:10:58.080 Chinese market and saying, you know, the Chinese can somehow 0:10:58.080 --> 0:11:00.360 build cheaper cars just remember that a lot of the 0:11:00.360 --> 0:11:04.160 markets are selling those cars into don't have the regulation 0:11:04.240 --> 0:11:06.760 that we have for safety purposes and so forth in 0:11:06.800 --> 0:11:09.560 the America, in North America, and so therefore the home 0:11:09.559 --> 0:11:12.240 alligation requirements can become more expensive. 0:11:13.360 --> 0:11:14.600 So that's another reason. 0:11:15.120 --> 0:11:17.800 But we were also moving towards this transition with the 0:11:17.880 --> 0:11:21.720 power trade, and right now electric vehicles are not profitable 0:11:21.760 --> 0:11:23.359 for most auto manufacturers. 0:11:23.600 --> 0:11:28.080 You know what, I hate electronic parking brakes. I miss 0:11:28.080 --> 0:11:30.280 a handbrake in a lot of vehicles, and I think 0:11:30.760 --> 0:11:34.480 many fans of cars, like people who really love vehicles, 0:11:34.760 --> 0:11:38.160 miss the handbrake and don't like the button the electronic handbrake. 0:11:38.320 --> 0:11:39.920 Is that a regulatory thing? 0:11:40.559 --> 0:11:42.000 That's a good question, Matt. 0:11:42.320 --> 0:11:44.240 I can't imagine it is, because there's still plenty of 0:11:44.320 --> 0:11:46.880 vehicles that have the push brake for your foot. 0:11:46.679 --> 0:11:47.440 You know, the pedal brake. 0:11:48.320 --> 0:11:48.839 That's true. 0:11:48.880 --> 0:11:52.199 Yeah, So I'm not sure that the handbrake would have 0:11:52.240 --> 0:11:55.079 been thrown in there, but we want it, I would imagine, 0:11:55.080 --> 0:11:57.480 and I can't say this is for sure, but I 0:11:57.520 --> 0:11:59.360 would imagine we got rid of the handbrake because we 0:11:59.360 --> 0:12:04.080 wanted more space for bigger cup holders, and we wanted space, 0:12:04.160 --> 0:12:06.280 you know, women started asking can we have a space 0:12:06.679 --> 0:12:07.600 for my purse to. 0:12:07.600 --> 0:12:09.199 Go in between that center console. 0:12:09.360 --> 0:12:12.560 You know, there's there's different trade offs that a lot 0:12:12.600 --> 0:12:15.600 of manufacturers had to make based on again our very 0:12:15.640 --> 0:12:17.760 pickiness of the types of things that we want in 0:12:17.760 --> 0:12:19.240 our peoples. And you know it's not all that. But 0:12:19.280 --> 0:12:21.920 to your point, for those of us that are enthusiasts, 0:12:22.760 --> 0:12:23.480 we miss them all. 0:12:25.080 --> 0:12:27.600 You know what I think is has been And tell 0:12:27.600 --> 0:12:30.880 me if I'm wrong, Aaron, But my impression of some 0:12:30.920 --> 0:12:35.320 of these programs, like the Black Badge program and the 0:12:35.440 --> 0:12:38.960 Night series program Rolls. Royce has their Black Badge, Mercedes 0:12:39.000 --> 0:12:42.000 has a Night series that kind of group together some 0:12:42.040 --> 0:12:46.600 sort of special customization and in a way that makes 0:12:46.640 --> 0:12:49.560 the buyers feel that they are special and they can 0:12:49.600 --> 0:12:52.559 reflect their own personality in the cars. Is that the 0:12:52.640 --> 0:12:56.880 way that automakers are balancing being able to give customers 0:12:56.920 --> 0:13:00.280 something that feels special and customized, but also trying to 0:13:00.600 --> 0:13:03.960 manage efficiencies and the way that they implement some of 0:13:04.000 --> 0:13:06.840 these special touches for lack of a better word. 0:13:07.600 --> 0:13:09.599 Sure, I mean, you're talking of course about brands that 0:13:09.640 --> 0:13:12.920 are very high luxury and so you know, their profit 0:13:13.040 --> 0:13:16.040 margins are a little bit bigger and allow them to 0:13:16.080 --> 0:13:20.120 do a little bit more customization or create more specialness. 0:13:19.559 --> 0:13:20.280 In their products. 0:13:20.400 --> 0:13:23.520 But we're seeing that also carried down down market into 0:13:24.160 --> 0:13:27.440 more affordable lineups as well. So for sure, I think 0:13:27.480 --> 0:13:31.000 it's a matter of helping customers to feel more special 0:13:31.120 --> 0:13:32.600 especially in the luxury market. 0:13:33.280 --> 0:13:34.760 The more you go down market, it's. 0:13:34.679 --> 0:13:38.840 Likely that people are believing that the younger generation wants 0:13:38.880 --> 0:13:43.240 that type of specialization. And you know now that you 0:13:43.360 --> 0:13:48.640 can yeah, customize your environment anywhere you are, I think 0:13:48.720 --> 0:13:50.760 that they're and I'm not sure it's true. I'm not 0:13:50.840 --> 0:13:57.080 sure that the next generation needs that type of specialness, 0:13:57.120 --> 0:13:59.920 but I think we've all convinced ourselves, given the proliber 0:14:00.640 --> 0:14:04.000 of all of our connected devices, that we need those 0:14:04.040 --> 0:14:07.160 types of things everywhere. And you know, maybe if we 0:14:07.160 --> 0:14:09.240 didn't give them to people in vehicles, we'd still be 0:14:09.280 --> 0:14:11.200 dealing with cars that were a little bit more affordable, 0:14:11.240 --> 0:14:13.640 and probably everyone would still love like. 0:14:13.679 --> 0:14:16.720 Windows that you have to crank to roll up rather 0:14:16.800 --> 0:14:18.480 than right exactly. 0:14:18.760 --> 0:14:22.040 I've got my nineteen eighty three BMW three eighteen. 0:14:21.760 --> 0:14:23.680 N and it's got its stitch shift and roll. 0:14:23.560 --> 0:14:26.600 Down windows and non power steering, and I am teaching 0:14:26.600 --> 0:14:29.200 my children to embrace you know, this is what a 0:14:29.240 --> 0:14:30.120 car used to feel like. 0:14:30.320 --> 0:14:33.520 That's awesome. I think part of that is a padding 0:14:33.560 --> 0:14:38.880 margins because I noticed recently Harley Davidson now charges if 0:14:38.880 --> 0:14:42.080 you want black finishes instead of chrome on you know, 0:14:42.120 --> 0:14:44.960 your forks and your exhaust and so forth, they charge 0:14:45.000 --> 0:14:47.880 you one three hundred fifty dollars extra. That's not because 0:14:48.160 --> 0:14:51.440 it costs them more in Milwaukee to put black finishes 0:14:51.440 --> 0:14:53.960 than it does chrome finishes. It's because they know everybody 0:14:54.040 --> 0:14:56.320 wants the black finish and it's an opportunity for them 0:14:56.360 --> 0:14:57.720 to raise your price. Yeah. 0:14:57.760 --> 0:14:59.920 Absolutely, for sure. I think you're dead on there. 0:15:00.240 --> 0:15:03.120 I mean, the manufacturers have to look for ways in 0:15:03.160 --> 0:15:05.800 which to keep the profitability at a reenable level for 0:15:05.840 --> 0:15:07.520 them to be able to continue to move into the 0:15:07.520 --> 0:15:10.720 next generation again of power trains and so on and technology. 0:15:10.800 --> 0:15:12.640 That for sure, if there's an area where you think 0:15:12.680 --> 0:15:17.160 that there's consumer demand for a specific specialization that you can, 0:15:17.440 --> 0:15:20.120 you know, charge a premium price for that, of course, 0:15:20.160 --> 0:15:23.440 will always help them with their margin market numbers. 0:15:23.720 --> 0:15:26.200 One thing that you mentioned we spoke about that I 0:15:26.200 --> 0:15:30.800 thought was so interesting is how you really emphasize that 0:15:31.400 --> 0:15:35.160 the more expensive cars are gaining ground. I think you 0:15:35.440 --> 0:15:38.720 said that cars that cost at least eighty thousand dollars 0:15:39.040 --> 0:15:43.560 increased thirty seven percent in December compared to the previous year, 0:15:43.560 --> 0:15:46.040 and the average price of a vehicle in that segment 0:15:46.160 --> 0:15:49.840 was over one hundred thousand dollars. So that to me 0:15:50.080 --> 0:15:53.560 says and I think you touched on this, people either 0:15:53.640 --> 0:15:56.600 want the most expensive all of the options, or they 0:15:56.640 --> 0:16:01.960 want a very very basic minimum move and not not 0:16:02.000 --> 0:16:04.080 sure this middle ground. Is that what you're seeing? 0:16:05.440 --> 0:16:09.640 Yes, and yes for luxury, for sure, we're seeing that 0:16:09.840 --> 0:16:12.440 all the bells and whistles are now just an expectation, 0:16:12.560 --> 0:16:15.200 and so typically people will go for the higher trims. 0:16:15.560 --> 0:16:18.120 I think it certainly continues to speak to the vibrication 0:16:18.240 --> 0:16:21.400 of our market. Also, you know, we've seen this trending 0:16:21.440 --> 0:16:22.960 for the last couple of years, and so the rich 0:16:23.040 --> 0:16:27.840 keep getting richer and it is becoming less less affordable 0:16:28.000 --> 0:16:31.360 for lower to mid income. But we did see, you know, 0:16:31.400 --> 0:16:33.760 inflation did drop a little bit for the lower quintile. 0:16:34.520 --> 0:16:35.520 I think last year we. 0:16:35.480 --> 0:16:40.520 Got to a gap of over twenty percent gap where 0:16:41.840 --> 0:16:46.160 the lowest income quintiles we're feeling inflation at as high 0:16:46.200 --> 0:16:49.520 of a twenty two percent rate versus the highest income quintiles, 0:16:49.760 --> 0:16:52.320 who were you know, floating there around the three percent. 0:16:52.440 --> 0:16:55.360 So it really does depend on what part of the 0:16:55.400 --> 0:16:57.720 market you're in, the income quintile you're in, with how 0:16:57.760 --> 0:17:02.080 inflation actually feels to your budget. So those lower trim 0:17:02.160 --> 0:17:04.800 cars are going to always be more attracted to individuals 0:17:05.480 --> 0:17:07.880 that really just need a mode of transportation as opposed 0:17:07.880 --> 0:17:10.200 to looking for a car that they're you know. 0:17:10.160 --> 0:17:10.840 Loving and living. 0:17:11.560 --> 0:17:14.000 Luckily for them these days, even the lowest trim of 0:17:14.040 --> 0:17:17.800 most models are really superior cars and great. 0:17:18.080 --> 0:17:19.400 Great modes of transportation. 0:17:19.520 --> 0:17:22.120 You know, you're really hard pressed to find a car 0:17:22.200 --> 0:17:25.840 that's just a complete you know, like their bones, not 0:17:25.960 --> 0:17:28.680 worthy of having. But that's I mean, part of the 0:17:28.720 --> 0:17:32.040 reason you see interest in China is because you know, 0:17:32.080 --> 0:17:33.920 they reportedly can build a car. 0:17:33.840 --> 0:17:37.000 For fourteen thousand dollars and again one seconds some alligator. 0:17:37.000 --> 0:17:39.520 For the US, it will be different, but there's. 0:17:39.320 --> 0:17:42.760 Also a very healthy US market. And you know, I 0:17:42.760 --> 0:17:45.320 hate to keep bring up Harley Davidson, but I've been 0:17:45.400 --> 0:17:48.359 kind of obsessed lately, and to be fair, you know, 0:17:48.359 --> 0:17:50.480 they sell forty five thousand dollars bike. So we're talking 0:17:50.480 --> 0:17:53.720 about the same price level, but I've heard that they're 0:17:53.880 --> 0:17:58.199 reducing their models offering and taking out some of the 0:17:58.280 --> 0:18:02.480 mid tier price options because they just say, look, if 0:18:02.480 --> 0:18:04.520 you can't afford to step up to the big boys, 0:18:04.880 --> 0:18:06.199 we want you to buy used. 0:18:06.800 --> 0:18:08.239 And yeah, is that? 0:18:08.400 --> 0:18:10.240 I mean? I for a long time, I know Portia 0:18:10.320 --> 0:18:13.040 has been a big supporter of their used market. It 0:18:13.080 --> 0:18:15.119 makes a lot of sise to me. Does that Do 0:18:15.119 --> 0:18:16.640 you hear that from executives as well? 0:18:16.880 --> 0:18:20.240 You know, I haven't heard that specifically from executives, but 0:18:20.240 --> 0:18:21.320 it makes perfect sense. 0:18:21.760 --> 0:18:21.919 You know. 0:18:21.960 --> 0:18:23.639 The only challenge, of course now that we're going to 0:18:23.680 --> 0:18:25.040 have in the next year or two is that we're 0:18:25.040 --> 0:18:26.040 actually running. 0:18:25.840 --> 0:18:27.840 Fuel on fumes here. 0:18:27.680 --> 0:18:30.080 With used cars, because we did miss that gap of 0:18:30.119 --> 0:18:34.720 about ten million units during the supply chain snarl and 0:18:34.800 --> 0:18:39.480 the COVID crisis, and so interestingly enough, we are going 0:18:39.560 --> 0:18:41.840 to face a little bit of a crunch and used 0:18:41.880 --> 0:18:44.720 cars and use cars may in fact get more expensive 0:18:44.760 --> 0:18:47.880 because of the supply demand issue there. But definitely we've 0:18:47.880 --> 0:18:51.240 seen a lot of manufacturers hold on to their CPO programs, 0:18:51.280 --> 0:18:53.200 and more than that, a lot of them, as you've seen, 0:18:53.280 --> 0:18:56.600 are starting to put even older vehicles into their CPO programs. 0:18:56.640 --> 0:18:58.280 It used to be held, you know, CPO used to 0:18:58.280 --> 0:19:00.760 be relatively held for the one to three year old vehicles, 0:19:00.760 --> 0:19:02.320 and now I think bomb that goes up to ten 0:19:02.400 --> 0:19:03.720 years to keep a. 0:19:03.640 --> 0:19:04.920 Car in the Certify pre owned. 0:19:05.640 --> 0:19:07.679 Yeah, a couple of manufacturers are doing that, so one 0:19:07.760 --> 0:19:11.800 hundred percent. It is always good for dealers and automakers 0:19:11.840 --> 0:19:13.680 to have a healthy used market, for sure. 0:19:20.720 --> 0:19:23.679 Let's talk about the new vehicles. As we enter a 0:19:23.720 --> 0:19:27.040 new year. You're out there looking at the new four Runners, 0:19:27.080 --> 0:19:29.880 So yep, what do you like? What's exciting? 0:19:31.600 --> 0:19:32.360 Well, I will. 0:19:32.160 --> 0:19:34.760 Say, having just driven this Forerunner, it is amazing. I 0:19:34.840 --> 0:19:36.679 forgot how much I love them. I've had two of 0:19:36.720 --> 0:19:39.520 them in the past, and honestly, talking about budget, I 0:19:39.560 --> 0:19:43.040 drove the SR five today, the lowest of the trims, 0:19:43.119 --> 0:19:46.200 and it was fantastic. So I'm excited about that. I'm 0:19:46.200 --> 0:19:48.439 excited about them coming out. This is I think the 0:19:48.480 --> 0:19:51.840 sixth generation, and so they don't they don't come out 0:19:51.840 --> 0:19:54.560 with them too often totally revamped and it's still the 0:19:54.560 --> 0:19:55.800 same old good fore Runners. 0:19:55.800 --> 0:19:56.600 So I'm excited about that. 0:19:57.480 --> 0:19:59.840 The back windows still does the back windows still go down. 0:20:00.320 --> 0:20:02.040 Not only does it still go down, that but they 0:20:02.080 --> 0:20:04.520 told me it's on for a permanent it will always 0:20:04.600 --> 0:20:06.040 be a power back window. 0:20:06.200 --> 0:20:09.760 Yes, I love that fantastic. I love that truck. I 0:20:09.760 --> 0:20:12.280 mean it's I think it's sort of underrated. You know, 0:20:12.440 --> 0:20:14.679 people don't mention it a lot when you're talking about 0:20:15.040 --> 0:20:18.800 you know, SUVs, and one of the issues has been 0:20:18.800 --> 0:20:21.800 that it's chronically underpowered, like they always offer it with 0:20:21.840 --> 0:20:24.600 that yeah three hundred horsepower V six and I think 0:20:24.640 --> 0:20:26.920 it's yeah, now it's a four right. 0:20:27.880 --> 0:20:31.120 Yeah, they're going up to I think the top line. 0:20:31.160 --> 0:20:33.159