For our 17th episode of Full Throttle, we are joined by Jeremy Beaver, CEO of the Del Grande Dealer Group (DGDG) in the San Francisco Bay Area of California. Topics of discussion include EV demand in the Bay Area, changes in the market over the past year, and much more. Subscribe and don't miss our future automotive industry interviews!
0:00 Intro
3:03 An Assessment of 2023 in the Auto Industry
5:00 Electric Vehicle Demand in the Bay Area
8:00 Demand for Gasoline Vehicles
11:52 The Decrease in Dealership Profits in 2023
16:33 Lessons and Opportunities Post-Covid
For our 17th episode of Full Throttle, we are joined by Jeremy Beaver, CEO of the Del Grande Dealer Group (DGDG) in the San Francisco Bay Area of California. Topics of discussion include EV demand in the Bay Area, changes in the market over the past year, and much more. Subscribe and don't miss our future automotive industry interviews!
0:00 Intro
3:03 An Assessment of 2023 in the Auto Industry
5:00 Electric Vehicle Demand in the Bay Area
8:00 Demand for Gasoline Vehicles
11:52 The Decrease in Dealership Profits in 2023
16:33 Lessons and Opportunities Post-Covid
Welcome in to Episode 17 of Full Throttle, the Presidio group's automotive industry podcast. I'm your host, Jason Stein, Presidio's Managing Director. O n a monthly basis full throttle serves as the industry's meeting point for great conversations with leaders across the automotive world.
In this market, it has really been pretty different because, one as we went through COVID in 2020 and 2021, of having a shortage of these new cars, or even into 2022, and that was really a supply and demand kind of metric that was there, and then moving into 2023 with a lot higher interest rates of these vehicles, but then supply becoming you know, in some areas greater than then demand and some of these EVs, it really has come to, you know, understanding what the value proposition is of this EV buyer.
Technology comes in all shapes and sizes, but how long does it take to make an impact? And what incubators are the best in order to determine that a new technology can work in the real world? Jeremy Beaver and the Del Grande Dealer Group have been trying to measure those results for years, considered by many to be at the forefront of auto retail tech, Jeremy and the DGDG team are continually testing the limits on new advancements. It helps to be a neighbor of the foremost tech companies in Silicon Valley, of course, and that California tech environment breeds a mentality to test the waters and the boundaries in the industry. DGDG has been experimenting for a long time, and others have taken notice. So where are they today? As questions swirl around EVs, auto tech and the industry as a whole. And how has the changing consumer influenced DGDG's plans. Today on Full Throttle we dive into the opportunities and challenges of the tech auto retail world with a first mover. Jeremy is DGDG's CEO and he's a driving force within his team. Knowing that the expectation of his guests in the self described mecca of tech is to push the envelope on new ways and new experiences. DGDG has a culture within their organization which encourages constant change. They're going to move with the change, be fast and adapt the organization around those changes. It's a mantra of always getting better, no ground rules except to stay on the forefront of modern retailing and strive to be the best and not just in automotive. So what can we all learn today from DGDG? Well, today he shares his story on full throttle.
Hi, this is Jeremy Beaver. And this is Presidio's podcast Full Throttle.
We've been in so many different places with so much different great material thanks to him, not me. But what a pleasure to have you on the podcast. And what a pleasure to be with you again, Jeremy.
Jason, thanks for having me. Gosh, we've we've traveled the United States together and had some great times. So thanks for letting me join today.
No, you're welcome. The pleasure is all mine. And I guess we start off with how we're ending the year and some interest, I mean, what uh, every year in the auto industry has its own ups and downs. This one might have its greater share of ups and downs than most. What's your assessment? Give me Give me your view on on where we've landed?
Gosh, well, I think your your you got the king of all the media. So this could probably be you know, a couple of books in the last couple of years here in the automotive industry and 2023 is going to follow suit. So, you know, while it's still a really, really good automotive industry from a supply and demand, things are changing at a very, very rapid pace, especially here in the Bay Area, the heart of Silicon Valley, when it comes to electric vehicles a supply of new we are we are on our toes all times here at DGDG.
So EVs. Let's start there. I know you're a little more insulated than the rest of the country. And there's been a tide, that's for sure turned. We've seen it turn this year, has the tide turned in Northern California?
Yeah, it's been. It's been crazy to say the least. I think this is the heart of EV in the entire United States is our county of Santa Clara County, highest EV penetration in the entire country. And so we've been living this, not only with all of our OEMs, but a very, very highly competitive Tesla market. It seems that a lot of the consumers and the demand really, really starts here when it comes to EVs. And we've seen that trend for a while. And it used to be at least from a macro standpoint, people looking for their third car and using that carpool lane with all that traffic out here in California. But we have really seen it continue to go go into what their second car is or even their main car an EV and it has really taken by storm here in the Bay Area with over 40% EV penetration here in the last county quarter when we're coming to to EV sales in the Bay Area.
So Jeremy, when you read the headlines about Americans not wanting EVs, you must just say well, that's not me.
Yeah well, they definitely want them or they definitely want them here in the Bay Area. And I think that's also you know, it's not only green, but it's kind of the cool car here, when it comes to using the carpool lane and, and sustainability for our environment, which is really critical. But there's still a lot of, you know, kind of unknowns, I think there still is a lot of unknowns around range anxiety, still with people that didn't have EVs before, they're still charging infrastructure and networks that are available. There's also you know, cost of these vehicles. And you know, that range has been pretty extreme over this year, when it comes to again, a lot of the OEMs and, and Tesla changing pricing, you know, quite a bit over the year. It's a very volatile kind of marketplace when it comes to EVs. And so we have sold a lot more than we've ever seen before, but it has, you know, been kind of riding that wave through 2023.
Have you seen consumers change over the course of this past year,
Yeah we really have for the us in this market it has really been pretty different because, one as we went through COVID, and 2020, and 2021, of having a shortage of these new cars, or even into 2022. And that was really a supply and demand kind of metric that was there. And then moving into 2023 with a lot higher interest rates of these vehicles, but then supply becoming, you know, in some areas greater than then demand and some of these EVs, it really has come to, you know, understanding what the value proposition is of this EV buyer. And so, you know, what is the cost of the monthly payment? What is the cost of the lease? How far are people driving? Where are they going to charge? Gas in the Bay Area, you know, while dropping today had been, you know, pretty expensive through the year. And so what we're seeing is, you know, the people that have always wanted EVs or been really interested, they're continuing to be on that EV trend. For those that were thinking about EV, many of them are now becoming first time adopters in that new EV because the cars are really, you know, there's, they're more proven or it's at the right price point and some people are still really on the fence. And they're really going some of those hybrid technologies still, which we're seeing in some of the OEMs or they're just kind of holding off on that purchase because, you know, the world is an expensive place today. And so they're still trying to figure out as well. And so we've kind of taken a car market and taken it into you know, different silos now on where people are in their journey and so, we have found in the industry a lot of things do happen here first in Silicon Valley or in California and continue to spread. I think, when I use big numbers of where EV and and you know, alternative powertrain percentages are here. I don't think that's what everyone is experiencing in the United States. So we're trying to figure out here and and see where it goes as it spreads throughout the entire country.
Yeah, it's fascinating. And what about gasoline sales?
Yeah, I think, you know, we have seen such a shortage in ICE cars over the years, that it still remains relatively strong from that demand. And so when you think about, you know, vehicles that still get really good gas mileage, or vehicles that are, you know, still maybe large SUVs and trucks, which are really big segments in the industry, still, people are still looking for those vehicles, the high demand cars are still very, very high demand, think of cars like Denalis, and Escalades and you know, specialty trucks and all of those different items. They're very, very critical, because those are vehicles people need every single day. We are seeing a little bit of change in the in the smaller vehicle, so you know, again, maybe someone who is looking for a small sedan may switch over to that EV world, but if they don't, then they're still you know, very active in vehicles like Hyundai Elantras and Kia Fortes in those those different kind of ranges. So we're, we're very bullish still in the automotive kind of retail demand. But it is definitely ever changing with inventory demand and kind of, you know, macro conditions here in the Bay Area.
I know you've probably seen the report that Presidio put out in December. It's its first quarterly report that really looks at everything from profitability, to technology and something that was coined a term coined in there called the great normalization. And Presidio President George Karolis talks a lot about that about about those normalizing trends and and the barometer of kind of where we are and where we might be going forward. Are you seeing this great normalization?
Yeah, well, first of all, I know this is the Presidio podcast but man, I read that this week, and what an amazing piece of material that Presidio put out, by the way, like, it is so spot on in so many different areas. And again, you know, we we live in a different area, than, you know, maybe different parts of the country, but really just a general insight and you know, where things are experiencing in the automotive, I thought, I shared it with our entire leadership team. I said, this is an unbelievable read. So well, well done to the team there,
Wow Thank you
and I think we are starting to see, you know, again, we felt this over the last six months have normalized new car margins of you know, very a lot of volatility in the used car market, you know, really a sourcing mechanism of trying to make sure that we can source and acquire the right used car inventory that can create the right margins, we're still seeing people continue to go back to normalize miles driving, which increases RO count. So strong fixed operations still there. But at the end of the day, again, while we you know, the car dealers have historically always figured out, there are some extreme pressures that we believe are going to come to the industry over the next couple of years. And whether that's regulations, whether that is EV supply, whether that is just general supply and demand, cost of these businesses continue to rise when you think about just general inflation and cost of personnel and buildings. And, you know, there are some pretty large headwinds that I think are going to be experienced. And that's when the strong, you know, really batch it down and continue to, you know, get better in their areas and some people may say, Hey, I don't want to go through another cycle. And you know, the industry has always been kind of an ebb and flow, it's, it's been, you know, every between seven and 10 years, there's been an upturn and a downturn and COVID kind of reset that a little bit. And so I think what we're experiencing today is, you know, call of nor more of a normalized market as we get into 2024. And the ones that are, you know, very engaged, high use of technology, have good cultures, and really have, you know, a mindset of, you know, what we call a warrior mindset is really, really critical to be at your best.
You probably saw the data in there, that was also the extension of the partnership with NCM Associates. And there was a talk and Automotive News actually picked it up as well today, pre tax profits for the average dealership, slipped by nearly a fifth and gross profit per new vehicle tumbled 26% through the first nine months of 23. Is that what you're feeling and hearing and seeing as well?
Yeah, I think we're experiencing that and maybe a little bit more in certain areas and certain cars just because of the bay Bay Area. And, you know, I think for us, by the way, that was going to happen, I think, you know, being in the industry for so long and watching trends and using the data resources, you know, through companies like NCM and, and all of our different partners, you know, The new car margin was not going to be sustained at them at the margins that they've had over the last couple of years. And so the more that we understand where it's going and what normalization looks like, the better we are to be prepared for the future. And so for us at DGDG, that has been a critical piece of focusing on what we call the controllables, which are expense items, normalization of these margins, how do we grow the proper, you know, income levels that we need in each one of our areas between new, used service, and parts and finance and so, yes, we are experiencing all of that and more in a very, very high cost area. And so I think what everyone is trying to find is, where is that new normal going to live? And so maybe it's not at pre pandemic levels yet, but where does it kind of live from that base value to where we are now? And how fast does that continue to maybe slide is the right word. And so we're very, very active and engaged in trying to figure out those models and be proactive, not reactive.
Part of the survey talked about the propensity of dealers to either buy or sell their stores, their, their their willingness. And I'd love to know, where were you sit on that subject?
Yeah, I think for us, we are still a very growth minded organization. Again, we have 17 dealerships here in the Bay Area, just about 1100 team members. And so selling 25 to 30,000 cars a year, we have been able to grow a really, really cool brand that's out here taking care of our team and taking care of our guests with a extreme high use of technology. DGDG in the industry has been known over, you know, probably the last decade of being a technology leader, we build a lot of our own technology in house, we partner with startup tech companies out here to really use data visualization and business behavioral tools to really be at our best. And so we believe there is still economies of scale that we can have by growing our footprint here in the Bay Area. With that being said, you know, we're necessarily not just collectors of the dealerships to just to have to have and so they need to work and fit into our model. And so we don't have to grow. But we think we're gonna have some pretty cool opportunities to grow over the next couple of years by, you know, continuing to train our team, having opportunities and then inputting our technology, which really should have this, you know, growth capability in, you know, those new acquisitions.
What do you like on the technology side? What's interesting to you right now?
Yeah, I think, you know, some of the some of the largest things that we talked about today is the use of data just in general, right, and the use of so many multi systems in the dealerships, it's not really hyper efficient, like other businesses are. And so how do we make car buying and servicing as easy as everything else you do in your life? So how do you pick your favorite brand? How is it so seamless when you go to Starbucks and order a coffee, and it's there, and now, we're not ordering coffee at the car dealerships but the concept of using one, you know, single point tools is really, really critical. We've worked really hard over the last couple of years through data aggregation we have built a data lake through unstructured and structured data, that we use a lot of reporting tools to help streamline our business. And we believe tools like that will create more efficiency in the day to day operation. How do we make it easy for our sales team, our service team, even our back offices team to do their job, as opposed to doing this one to one manual work, which we're so used to in the automotive industry. It's a really, really critical piece today, to sell a car or service a car, most teams log into one to five to 10 different systems to do their job, we think that there is an easier or faster way. And that will not only provide a better or world class guest experience, it will also be easier for our team so that then we can retract, retract and retain a better customer experience, team member as we move forward.
And I've got to believe that the lessons that you've learned, you mentioned COVID, earlier, but the lessons learned post COVID. And the opportunities of understanding the guest and their own experience of what they want now versus pre COVID has just got you thinking about technology incredibly differently now.
It is. And I think that when you think about the just technology here in the Bay Area, again, you know, I talk a lot of stuff just because we're sitting in this kind of Mecca of technology. It's what our guests just expect, and they're used to doing everything online, they're used to having everything on their phone, they want really streamlined experiences, they want to make sure that you know what they're seeing online is what actually happens in store and so it really is just kind of a culture of location. And you know, the way that Sean and I have, you know, really built this business is you know, we also have a culture within our organization which is change is going to happen, we're going to move with it and we're going to be very fast to adapt that DGDG and so that has been kind of our mantra as we move forward on a concept of always getting better. We don't really set the ground rules and the standards here in Silicon Valley we're trying to still you know, catch up with all those modern retail technologies and everything else you do and so at DGDG we just absolutely want to be our best and, and be known more in that area than you know against you know, not that our local car dealers we got all of our friends and we we share you know a lot with all of our partners, but we are really striving to be one of the most modern retail brands not necessarily just in automotive.
Well, you said it earlier, Jeremy, it happens first where you are. So we're gonna watch you very closely because whatever you do, we know it will eventually trickle across the country.
Yeah, well, I think that's maybe some good and bad with California and you know, there's there's some some beautiful things about being here in this state and, you know, the weather is great and but it's, it has its challenges as well as everyone on this on this podcast knows, but we believe that this is for us. This is what we do every day and work really hard to hopefully provide that experience for all.
Well thank you so much. It's always insightful to talk to you and to get your perspective and to get that cutting edge view of of what's going to happen. So Jeremy Beaver, thank you for being on the program.
Awesome. Thanks, Jason. Have Happy Holidays and best wishes to you.
Thank you
Thanks again to my guest today on Full Throttle Jeremy Beaver and thanks for listening to the program. Come back to us later in the month for our next interview on the platform. Suggestions? You can email me JStein@thePresidiogroup.com and to learn more about The Presidio Group, go to thePresidiogroup.com or follow us on LinkedIn. Thanks for listening.