In this fourth episode of Presidio’s Podcast, Full Throttle, Damian Mills, CEO of Mills Automotive Group, talks with host Jason Stein about the current state of the retail industry, the effect of rising interest rates and the future of buy-sell activity for the Mills Group and the market in general.
In this fourth episode of Presidio’s Podcast, Full Throttle, Damian Mills, CEO of Mills Automotive Group, talks with host Jason Stein about the current state of the retail industry, the effect of rising interest rates and the future of buy-sell activity for the Mills Group and the market in general.
Is that consumer resiliency, does that still at this point surprise you?
Well, it doesn't surprise me, um, because of the amount of demand that had artificially existed in the pipeline for quite some time. Um, I think when you when you look at the demand that that has existed, and you combine that with the current nuances of inflation, I will say that, to some degree, that piece of it is, is surprising. I think that, you know, when you look at the fact that there was so much demand already pent up into the pipeline, I expected as did many others based on information that was supplied to us throughout the industry, that we'd have a consistent year. But you just, you know, it's an ever evolving and changing dynamic every single day. So, you know, we're a consumer driven industry and I think the entire economy is indicative of the the consumer demand that exists in various different areas.
This is Full Throttle, The Presidio Group's automotive industry podcast. I'm your host, Jason Stein, Presidio's Marketing and Communications Advisor and host of Sirius XM's Cars and Culture on business channel 132. On a monthly basis, Full Throttle serves as the industry's meeting point for great conversations with leaders across the automotive world. On this month's episode, a return to the retail world of four or five years ago may be just around the corner. The question is, do most dealers remember how to operate in those less heady times? I'll talk to one man who certainly does. Damian Mills, CEO of Mills Automotive Group. Utopia. That's one word to describe the last three years of business if you're an auto dealer, whether you were selling a full-size pickup or maybe selling your entire dealership, retailers could practically name their price and get it. But while the Buy Sell market for dealerships doesn't show any signs of slowing down, the name your sales price for any vehicle has come and gone as the supply of vehicles have nearly reached pre-pandemic levels. And that on lot inventory means dealerships need to pull out that playbook once again to do the thing that comes so naturally, for most, which is sell. But will incentives return in droves? Will vehicle prices level off? Much of this depends on the attitude of the OEMs and their desire to keep the factories humming. CEO Damian Mills of Mills Automotive Group have decades of experience managing these questions. While Mills doesn't expect to return to 90-day supplies, he knows the consumer has more choices today than at any time in the last three years. Mills shares his thoughts on the market, his appetite for adding to his 20 store group, as well as his first few months on the job as Chairman of the National Association of Minority Automotive Dealers. It's Damian Mills on Full Throttle, the Presidio Group's automotive industry podcast.
This is Damian Mills, and this is Presidio's podcast, Full Throttle.
What a pleasure to welcome you on to Full Throttle. Damian, how are you?
I'm doing good. Thank you for having me.
Well, thank you for being part of the program. And let's just start with your own view on the state of the industry, kind of where we are right now, what you're seeing, and then I do want to get into some some topics that are that are certainly top of mind for you. But as we, as we go into Q2 now here of the year, what's your assessment of the auto industry from a retail perspective?
Well from a retail perspective? Obviously, there are some some headwinds, you know, right now with the banking, the uncertainty in the banking industry, obviously, it's kind of reminiscent of what we saw back in '08 and '09 as it relates to some of the other things that we saw back then. I think the business is pretty consistent. It's been it's been pretty good. You know, we're starting to see the used car market return and, you know, the consumer is pretty resilient. However, there are some headwinds, you know, the, the inflation, the interest rate situation, the, you know, for the first time in a very long time, going from floor plan pickups to floor plan expenses, as inventory begins to get back to some degree of normalcy. You know, definitely a different dynamic right now, but the consumer still seems to be resilient and the industry still seems to have the wind at its back. We just have to stay, we have to stay focused. And we have to return and make sure that we that we return to the basics and the basics of blocking and tackling in the industry as things continue to change.
Is that consumer resiliency, does that still, at this point surprise you?
Well, it doesn't surprise me. Um, because of the amount of demand that had artificially existed in the pipeline for quite some time. Um, I think when you when you look at the demand that that has existed, and you combine that with the current nuances of inflation, I will say that, to some degree, that piece of it is, is surprising. I think that, you know, when you look at the fact that there was so much demand already pent up into the pipeline, I expected as did many others based on information that was supplied to us throughout the industry, that we'd have a consistent year. But you just, you know, you it's an ever evolving and changing dynamic every single day. So, you know, we're a consumer driven industry. And I think the entire economy is indicative of the the consumer demand that exists in various different areas.
And when you think about your own retail operations, so you say, blocking and tackling, what is it that the industry needs to remember now, after this two to three year period of of abnormal activity, you know, kind of the utopian activity that's existed so far,
I think, remember how we how it was before utopia. I think that it's evident that we, you know, this is one of the most dynamic industries, I think, of all retail. And I think when you, when you look at how we evolve, and we adapt to change, it's unprecedented. I think that making sure that we get back to the basics of what the industry once was, even though it's gonna be, you know, even though it's better, probably, than what it wants was. I think we have to recognize that now it's not, while the demand is there, I think the consumer now has more choices. Instead of having one or two on a lot, there's 20 or 30. So, you know, with that comes the nuances of making sure that we we get our people prepared for that new reality, which was our reality three years ago, two years ago.
Yeah, going back to the days of 18 and 19, which seem so far away, Damien. It's not so it's not as easy to sell, or back then it wasn't as easy to sell cars as it has been over the last couple of years. Where do we go in terms of inventory level, do you think? Where do incentives go? How does how does the world change? Does it revert back from that perspective? Or do we stay in this new world order to some extent?
You know, what, Jason? That's a great question. I think there's going to be a handle on incentives until there's not. People are going to keep a 45 day supply until they're not right, that, you know what, the minute we have one more car than we need to sell the numbers. I think that, you know, what, until one OEM steps outside of the bounds, because they, they they want to continue to keep their plants running. I think that's going to be probably the start of something. I mean, you know, one of the things that we've done, if you look at over the past two years, in addition to the lack of supply, I think that we've had drastic price increases across the board across every OEM. I think the first thing that you have to probably look at what you know, how does that come back to normalcy? You know, what do we know? Are they going to immediately put rebates on the hood? No, I don't think so. But do I think that there's going to be subsidized leasing, subsidized interest rates, I think to make the to keep the average transaction price where where it is right now, but make it just as affordable as it was a year or two ago for the consumer probably makes more sense but and it also keeps the margins intact to some degree for for the OEMs. But do I think it's going to return to, I don't think it'll ever return to the 90 days. Do I think it'll return to more than what we see? And what folks tell us? Absolutely.
It's gonna have to, because at some point, there'll have to be one more car and, you know, there'll be a 46 day supply, it won't be 45.
And then we'll have to, you know, address that behavior at some point, it'll be, you know, what, we got to put an incentive on the hood to spur getting a customer, you know what to come in. So, it'll be, it'll be that way until it's not. You know, I don't know if that makes sense.
Yeah, no for sure. We've talked on this program a lot about affordability. And actually, we talked about it three or four months ago, as being a concern, then. And that was before interest rates increased multiple times. And before a consumer's car payment increased substantially, relative to the last few years. Is that a concern for you? It obviously must be.
Yeah, absolutely. I think when you look at the average, the average amount that a consumer is having to spend of their disposable income, I think I think, you know, when you when you when I watch the, the financial shows, and they talk about, you know, consumers disposable income and how, you know, a lot of a lot of the banks were sitting on so much deposit, deposit dollars. And I guess through the beginning of the third quarter of this year, they're forecasting that, that it's going to be back to pre pandemic levels. I think that's when you're probably going to see, you know, what things kind of ebb and flow back to once once consumers, consumers, normal saving patterns are back to a normal level, you'll probably see some type of behavioral shift. But you know, what, I think that we're gonna have to keep keep a close eye on that, because at the end of the day, some of these vehicles are up 10-15% From what it was two years ago, and probably closer to 10 than 15. And I think that that obviously has, has to be addressed in some way.
So let's talk a little bit about the buy sell space. And what you're seeing. And Damian, you're a long way from 2004 when you bought your first dealership, that Ford store in Smithfield, North Carolina, and now you've grown Mill's Automotive Group to 20 dealerships in four southern states. In fact, last August, Presidio group help you acquire three stores in Hampton, Virginia from Tysinger Motor Company, a Mercedes, Audi, and Hyundai Genesis dealership. So you've always had a big vision, you've you have said that that you're always looking at new opportunities. Where is the Mills Automotive Group as it relates to buy sells?
Well, you know, what, we've kind of taken a wait and see approach obviously, there's a lot more activity in the, in the space right now, a lot of deals come across our desk, my desk, and but, you know, we're working, we're working through some things and looking at opportunities. And when the right opportunity avails itself, you know, we're a balanced organization now we have representation among domestics, imports and luxury brands, in high growth markets and for that were very, very appreciative and, you know, excited about about what's ahead. And, you know, we we're always looking at opportunities, but they have to fit. And when I say fit, not only fit from a brand strategy, but also fit from a geographic strategy as well. So, but but overall, there's a lot of activity, a lot of buy sell activity, I think. And as I think as the industry continues to evolve, we'll be getting I think we'll see consistently that happen in the marketplace.
Are you seeing prices softened to some extent?
Um, no, no. I think I think when people factor in the last two years, again, utopia, right, and I think that just making sure that you know, when you combine the cost of funds, in addition to the normalization of margins, and, and, you know, things of that nature, it kind of gives you a, you know, an idea of where you need to be, and what type of brands you want to you want to seek out. And that's why it's important to us to have synergies, it's important to us to make sure that we, you know, where we can get some costs, savings and efficiencies, we look to do that. And, and, you know, what, and we look to partner with the best brands possible.
You are just a few months into the beginning of what is a two year term as Chairman of the National Association of Minority Automobile Dealers? How's it going so far? Learning?
Yeah, what, you know, what learning, we, you know, I've always been amazed at how resilient our dealers are. And it's, it's a, it's an honor to serve the members of NAMAD. I'm learning that there's a lot that goes on in our industry, that, you know, that we need to stay ahead of. That, you know, our members, and our, our prospective dealer candidates that are looking for opportunities, you know, helping to create, create opportunities for both sides of, for both sides of those, those parties. And, you know, getting to know and getting to see the OEMs that are really and truly committed to diversity, not just in words, but in deeds. Not waiting for some social activist movement, to have an epiphany of the importance of diversity, but doing it because it's the right thing to do not because someone forces you to. And I think that, that, to me resounds, you know, most of the most, I will say committed OEMs, are consistently committed across all leadership bands. And then there are others that are consistently inconsistent as it relates to their commitment, and they wait for the next, the next opportunity that might force their hand. But I'm glad to say that there are more that are committed than there are, you know, not committed. It's just, you know, being able to, to work with the leadership of these OEMs and look at the opportunities that they create, not only, you know, within, within their individual organizations, but the peer pressure that it creates across the board, when it comes to their competitors as well. So very, very exciting time. And very necessary.
I asked you what you learned, just here in your brief stint as chairman, but I also want to ask you a more broad question. Finally, what you've learned in the time that you have acquired the stores that you have, and your story is a remarkable one, you were 29 and a general manager of a Dodge dealership owned by Asbury when the opportunity to buy a dealership under Ford Motor Company's dealer development program, and that deal required a sizable investment. And hey, was 65% less than you, a married father of three, were earning at that time, but you took the plunge. So when we look at now, as you go into your incredibly, almost the end of your 20th year doing this, what have you learned?
Well, I've learned that to not take anything for granted Jason, to always be thankful. You know, I'm a great man of faith. And I think when I look out across how far I've come, I stand on the shoulders of so many. Be it my parents, be it the dealers that have gone before me, that paved the way that allowed me to do what I do every day. Rarely do you get anywhere in this life, in and of your own true making. It either went before you or you know, you may not have seen it, but you experience you know, the blessings of a lot of hard work of a lot of other people. I think the other thing is is understanding that your assignment in life is your assignment, but it's not just about you. So it is a responsibility that we also give back to make the way better for the next person behind us. And so, you know, when I started this journey 20 years ago, I probably thought, you know, I can sit here and tell you it was about me wanting to, I wasn't thinking the same way I'm thinking today, I think I've matured into that role, right. But I'm blessed. And I'm appreciative that I've learned along the way, the importance of relationships, the importance of being grateful for every opportunity, and not taking yourself too serious, but also understanding the responsibility that comes with doing what we do, and giving, doing my best to give 100% every single day and and then creating opportunities for other individuals as well.
Wonderful, well said, we wish you all of the best of luck here in your first year as Chairman of NAMAD and also well into your your two year term. But thank you so much for being on Full Throttle. Very much appreciate your thoughts, Damien.
Likewise, thank you so much, Jason.
Thanks again to my guest Damian Mills, and thanks for listening to Full Throttle. Come back to us again in April for our next interview on this platform. Suggestions? Email me at Jason@flatsixmedia.com. And to learn more about The Presidio Group, go to thepresidiogroup.com or follow us on LinkedIn. Thanks again for listening.