Auto Care ON AIR
"Auto Care ON AIR" is a candid podcast dedicated to exploring the most relevant topics within the auto care industry. Each episode features insightful discussions with leading experts and prominent industry figures. Our content is thoughtfully divided into four distinct shows to cover four different categories of topics, ensuring collective professional growth and a comprehensive understanding of the auto care industry.
The Driver's Seat: Navigating Business and the Journey of Leadership
To understand organizations, you need to understand their operators. Join Behzad Rassuli, as he sits down for in-depth, one-on-one conversations with leaders that are shaping the future. This show is a "must listen" for how top executives navigate growth, success, and setbacks that come with the terrain of business.
Carpool Conversations: Collaborative Reflections on the Road to Success
Hosted by Jacki Lutz, this series invites a vibrant and strategic mix of guests to debate and discuss the power skills that define success today. Each episode is an entertaining, multi-voice view of a professional development topic and a platform for our members to learn about our industry's most promising professionals.
Indicators: Discussing Data that Drives Business
This show explores data relevant to the automotive aftermarket. Join Mike Chung as he engages with thought leaders in identifying data that will help you monitor and forecast industry performance. Whether global economic data, industry indicators, or new data sources, listen in as we push the envelope in identifying and shaping the metrics that matter.
Traction Control: Reacting with Precision to the Road Ahead
Every single day, events happen, technologies are introduced, and the base assumptions to our best laid plans can change. Join Stacey Miller for a show focused on recent news from the global to the local level and what it may mean for auto care industry businesses. Get hot takes on current events, stay in the know with timely discussions and hear from guests on the frontlines of these developments.
Auto Care ON AIR
Investment Banking's Influence in the Automotive Aftermarket
Discover the essential role that investment banking plays in the automotive aftermarket industry with "Indicators" host, Mike Chung, and his esteemed guest, Bill Della Giustina, Senior Vice President of Jefferies. Bill offers a fascinating glimpse into his journey within this unique sector, shedding light on how his team navigates the complexities of everything from dealerships to salvage yards. You'll gain insights into the invaluable services provided by investment bankers, including business sales, financing, and mergers and acquisitions, while understanding the critical importance of industry knowledge and fostering robust client relationships. Bill also candidly discusses the resilience of the aftermarket industry in 2024, emphasizing its ability to weather economic fluctuations due to its non-discretionary nature.
Uncover recent trends and innovations shaping the future of the automotive aftermarket. We discuss how companies are adapting to the evolving landscape, with a spotlight on the rising significance of attachment rates and the burgeoning influx of private equity investment in salvage yards. The shift towards e-commerce in the industry, driven by pandemic-induced changes in consumer behavior, is another critical area of focus. Learn about the balance required between brick-and-mortar and online channels, as the growth rate of online purchasing stabilizes while continuing to expand steadily in the coming decade.
Looking ahead, explore the anticipated growth dynamics of the aftermarket industry with an impressive projected growth rate of 6-7%. Delve into the potential impacts of tariffs, the push toward electric vehicles, and the ongoing presidential election on the industry. We discuss how these elements might influence supply chains and consumer pricing, highlighting the necessity of scenario planning. As the conversation unfolds, we examine the current public markets, financing opportunities, and the expected rise in mergers and acquisitions activity in 2025—navigating the layers of uncertainty that the election year may bring. Join us for an enlightening episode of Auto Care ON AIR, where we remain committed to providing valuable insights and supporting professionals in the auto care sector.
To learn more about the Auto Care Association visit autocare.org.
To learn more about our show and suggest future topics and guests, visit autocare.org/podcast
Welcome to AutoCare OnAir, a candid podcast for a curious industry. I'm Mike Chung, Senior Director of Market Intelligence at the AutoCare Association, and this is Indicators, where we identify and explore data that will help you monitor and forecast industry performance. This includes global economic data, industry indicators and new data that will help you monitor and forecast industry performance. This includes global economic data, industry indicators and new data sources. Thank you, Thank you, Welcome to another edition of the Indicators podcast. I'm pleased to introduce Bill Della Giustina, Senior Vice President of Jefferies. Bill, so great to have you on the show.
Speaker 2:Thanks, mike, I appreciate me being here.
Speaker 1:Yeah, and thanks again for making the time to be with us. So tell us a little bit about your background and how you got into investment banking in the aftermarket.
Speaker 2:So I sit in the Jefferies Automotive Aftermarket team up in Boston. There's about 19 of us that are fully dedicated to all things automotive aftermarket. So how we define the world is effectively from when a car hits the dealership to the day it hits the salvage yard and everything in between. So that includes service, maintenance, distribution, you kind of name it. I started my career in banking about 13 years ago, sort of fell into it a little bit, moving into. I was living in Chicago at the time and when you're in that part of the country you kind of effectively one option which is industrial banking and automotive is a big part of that and kind of fast fast forward joining Jefferies several years ago. It is, you know, the preeminent group within the aftermarket. You know we live and breathe this space every day and you know we actually, you know we have a great time doing it, so we love it.
Speaker 1:That's fantastic, and Jefferies does not just do automotive aftermarket, though. You have other industries that your organization covers.
Speaker 2:Exactly, we're about 5,000 employees globally. We are kind of the leading sort of pure play investment bank on the globe. So you know how we differentiate ourselves is that we lead with, you know, industry knowledge first and foremost to our clients. So you know guys like myself who live and breathe the aftermarket. You know we're bringing that perspective to our clients, helping them sort of navigate the capital markets waters and really that perspective, you know, and sort of submersion in the industry is really what sets us apart from others, gotcha.
Speaker 1:So when you talk about services that investment banking, investment bankers provide to the automotive aftermarket, I think about financing, deal structuring, mergers and acquisitions.
Speaker 2:I'm not a banker, so yeah, deal, structuring mergers and acquisitions. I'm not a banker, so, yeah, yeah, yeah, I think that's a good you know summary. I mean, what we do a lot is, you know, sell businesses right. So we sell. You know, if you're looking to sell your company that you've built over the years, I think it's important that you have a banker that you hire and you trust to kind of find the right home for that. So that's one of the things that we do.
Speaker 2:Certainly, financing you that so that's one of the things that we do. Certainly, financing, if you have to raise capital, whether that be through equity or debt financing, we can help with that. And then just sort of on the buy side as well. So we spend time working with companies to help buy other companies. So kind of being a facilitator of transactions is kind of a more simple way to put it. And I think, going back to the industry, knowledge and kind of the connectivity that we have is, you know, understanding what our clients do, who the right parties are to you know, be the investors or the acquirer or you sort of name it. That's a lot of value we can bring.
Speaker 1:And just one last question on that. The first part you mentioned selling companies, I think, about valuation and in particularly in the aftermarket space. It could be a family-owned shop. It could be similarly a dental practice, right when it's a sole proprietorship, a small partnership, where maybe it's time to retire but you want to sell that business on. Perhaps your children don't want to take it on. So it sounds like that is part of that falls under that umbrella right, Absolutely so.
Speaker 2:we see that daily with folks looking for a succession plan. You ran your shop or your quick loop shop or your repair shop for 20, 30 years.
Speaker 2:Maybe, your kids went off to college. They became investment bankers themselves or doctors or whatever, and they're not coming back home to run that shop. So you definitely find folks looking to exit that way and that's sort of part of the transaction. And I think what's important is making sure that's the right home, because if you've sort of built this business and having the trust into that next owner is important.
Speaker 1:Absolutely Well. Thanks for that overview. And if we think about the aftermarket in 2024, how has it been performing?
Speaker 2:Well, listen, I think the aftermarket is doing what the aftermarket does, which is not going to light the world on fire, but it's very steady. It's a non-discretionary market compared to sort of other industries and it's been in some ways a challenging year. It hasn't grown at the rate that it had in 21, but it also hasn't declined like you've seen a lot of other industries. So it's sort of been steady. Eddie, is you start to see kind of you know nominal growth rate this year, which is good? I mean, I think a lot of companies have been sort of flattish over the last. You know, 23 was a tough year, kind of the end of 22, when we sort of kind of hit this really tightening consumer market. You know folks have still going to have to repair their vehicles, maintain their vehicles to get to work and you know to do whatever they need to do. So that's kind of where that non-discretionary nature comes in.
Speaker 1:I was just going to ask about that. You said non-discretionary, because it is something that we, as consumers, if, presumably if you have a car, this is work that you have to get done.
Speaker 2:You have to get it done Exactly. We joke we're aftermarket bankers, we're not automotive bankers. And we joke about that is because you know, if you think about the OEMs and kind of the traditional supplier world much more cyclical In the aftermarket, you know it's all about that kind of that routine maintenance. It's getting your tires, getting your oil change, you know whatever repair that needs to happen, that is sort of a force. You're going to keep your car longer than if you're getting into a new vehicle. And then you also see that in valuations you start to see more steady and higher valuations in the aftermarket because it is less cyclical, it is more predictable.
Speaker 1:And so, when you mentioned, 22 into 23 was difficult, and some of the indicators that I'm thinking about are inflation, consumer confidence, high interest rates, uh, disposable income being relatively flat, yep, am I barking up the right tree?
Speaker 2:that's. That's absolutely right. I think when you saw interest rates increase significantly, you know if you look at auto new purchases it's off prime lending, right. When you see those rates increase folks aren't going to spend that kind of money to buy a new car, right? So what they're going to be forced to do is to maintain and continue on driving the vehicle that they have. So that's certainly important.
Speaker 2:Inflation pressures, you know, when we saw in 22, the rates of containers starting to drive and the supply chain disruption coming out of COVID that drove prices up not just in the auto parts industry but kind of across the board. You know typically container rates pre-COVID were. You know typically container rates pre COVID were you know two to $3,000 container and our clients were paying 25 to 30,000. And with that sort of, you know that pricing pressure gets passed on to the consumer. And then you start to see wage tightening, right, so you've got a little bit less discretionary income. But going back to the aftermarket, you know you're still gonna have to maintain and repair. Now what you did see is sort of tightening so making sure that it's only the necessary repairs. That had happened in sort of 22, 23 and lagging into 24. But you're starting to see some green shoots now, where the consumer is starting to get into a better place, exactly, and how are you seeing that in the data?
Speaker 2:Is this something I think about? Perhaps delayed maintenance, for instance. Is that one of the data points that you and your team watch? Delayed maintenance, for sure, those intervals, and then they stretched a little bit further in 23. But at some point, you know, delayed maintenance can have a pretty material negative effect, right, if you don't take care of your car on a proper, proper schedule. So that's certainly getting pulled forward, I think you know.
Speaker 2:One of the other data points is more anecdotal is you know, let's say you know, in 21, if you need, you know two new tires, right, you go into the tire repair shop. They probably could upsell you on four right this year it's effectively I'm going to just pay for those two tires. But I think in the other part of the aftermarket that's a little more non-discretionary. We call it the enthusiast side. You're starting to see some uptick. And 22 and 23, those were tough, challenging years, but you're starting to see more growth this year, which kind of indicates for us is that some of the more discretionary purchases consumers are starting to loosen up and spend.
Speaker 1:That's interesting because when I think about the consumer's wallet, say for automotive expenses, you've got gas, you might have a car payment and car insurance, we know, has gone up at a higher rate than inflation. So hearing that the discretionary purchases is perhaps buoying the market is encouraging.
Speaker 2:Yeah, and listen, I think the other point too is the average age of the vehicle on the road is continuing to increase. And listen, I think the other point too is the average age of the vehicle on the road is continuing to increase, right, and so, as you have that, you know folks have to spend more money to kind of continue to maintain that vehicle right All while new car and used car prices have certainly lifted over. Certainly skyrocket, exactly.
Speaker 1:Exactly.
Speaker 2:And with the interest rates where they're at getting you know financing on that, it's a very hefty car payment. So I think consumers are certainly thinking twice whether I want that new car or can I get another year or two out of the current car that I'm driving.
Speaker 1:So, in terms of looking at the overall aftermarket and the aftermarket performance, you've highlighted that it's been improving. It's steady. We're past this difficult period in 22, 23. What other indicators do you and your team look at to sort of make that assessment?
Speaker 2:Yeah, I mean, listen, I think you also look at vehicle miles traveled. I mean, I think you guys do a great job with the factbook every year, putting out a lot of the data, and I think you know we're grateful to be a part of that process with you guys. But as we look across sort of the spectrum, I think definitely sort of the consumer wallet is important, as I kind of mentioned. On the non discretionary side. You know, looking at kind of maintenance and looking at same store sales comps right, and you can get some of that from the publicly traded companies out there as well, kind of how they're performing when we sit, we get a lot of insight as well from private companies. And looking at the same store sales comps from a service perspective, you're certainly seeing kind of a nice uptick in this back half of 24. I think you know the first half of 24 is probably a little soft, but the indicators that we're seeing is that folks are coming in to get their repair and maintenance and whatnot.
Speaker 1:And that's a great transition to kind of going from the forest to the individual trees that same store sales comp I might have mixed up the words there, so forgive me, but as you alluded to SEC filings quarterly earnings reports for perhaps the public companies and I could see that extending into, say, service providers too right, whether you're a single shop, a multi-shop operation, but like what other data points do you and your team look at for assessing an individual company's performance?
Speaker 2:Yeah, I mean, listen, I think part of it, depending on what the subsector would be. But going back to your earlier point, mike, around inflation there was a lot of price increases, so a lot of companies grew from their income statement perspective on price. Right Now there's this analysis that we use, which is price versus volume. So what's really driving the growth in your business? Is it because you're charging more and you're selling the same amount of whatever widget or whatever part, or are you actually selling more parts, right?
Speaker 1:It's like the unit sales versus parts Exactly, and that's a really good indicator to sort of start to see unit growth.
Speaker 2:When you see the unit growth, that tells you that hey, then overall market's also growing right, or you're taking share from a competitor, versus just from a period of time where we saw most of that growth was driven by price, right, right.
Speaker 1:Thanks for that insight, and two things that I can think of are, as you alluded to, if your growth is driven by price growth, and how much of that is attributable to inflation, and then even from a service provider I suppose your units that you're looking at could be number of X services performed, whether it's routine maintenance or something perhaps every three or four year. Type of maintenance.
Speaker 2:Yeah, exactly, and on the independent repair shop world and just service in general. I mean one of the things that they also one of the challenges still remains is sort of labor challenges, right, and the shortage of techs. You know you start to see a shift in COVID, with folks either leaving that workforce to join a different industry or what have you. So the continuation of recruitment and training continues to be a super important part for a successful service provider.
Speaker 1:That's a great point because, as we talked about the services that your group provides, as you're evaluating a company, if they're going to acquire, if they want to sell themselves, what are some of the other kind of data points or trends that you've seen perhaps over the last year or two with regard to, if, it is okay, we're doing a good job service wise, but perhaps the training, the technicians, perhaps other themes that you've seen?
Speaker 2:There's other themes, I think in terms of training. It's also we use sort of attachment rates, right. So being able to come in and let's say, you go into a quick loop shop and you want to get your oil changed, well, that technician that's working on your vehicle might. Hey, here's your air cabin filter. Would you like that?
Speaker 2:Or whatever your new filter and so forth. So I think you're starting to see ancillary services, what we call attachment rates, from sort of the core service that you come into for increase, and that's another trend that you start to, for, you know, increase and that's that's definitely. That's another trend that you start to see the uptick with with companies too interesting.
Speaker 1:And then one last thing before we get to the e-commerce study that your team worked on with us is earlier you talked about the automotive aftermarket, spanning, to say, the salvage yards, sure, and you highlighted average age of vehicles increasing. I think it was 12.6 years as of January 1st this year. Is that a sector that perhaps has that slowed? Perhaps?
Speaker 2:I would actually say there's a lot of private equity money going into the salvage world these days. Why is that? I think you're finding that the cost of repair continues to increase. Right, and having OE graded parts pulled off of old vehicles and then resold into the market at a more reasonable price A insurance providers like that as a cheaper alternative and as the consumer, having a cheaper alternative but also having an OE graded part is an attractive value proposition in addition to sort of the traditional aftermarket.
Speaker 1:That's interesting and really great to hear kind of the innovative ways that can be, innovative innovations that can be implemented to satisfy the consumer and the ecosystem at large, yep, yep.
Speaker 2:And then you know you mentioned e-commerce. You certainly have seen a shift over the last few years and sort of more folks buying online right, especially with the likes of amazon and ebay and walmart. Um, you definitely have this sort of consumer preference to buy online, even in the independent installer, right, looking to shop, right, you know, shop for parts online and get it shipped directly. So that's a space that we're excited about and we're excited for the aftermarket because historically I think the aftermarket has lagged across from other industries, right, being able to buy parts online and there's more complexity than just other industries. But that's going to be a big segment of growth.
Speaker 1:And I know that before the COVID-19 pandemic started, there was a lot of investment in the e-commerce platforms by retailers and manufacturers. What do you think is driving that continued adoption?
Speaker 2:Well, I think it's really sort of consumer buying behaviors, right? Folks like to spend less time at this physical store. I think all of us have gotten accustomed to Amazon today, or when you just go online, quickly, purchase it and it shows up to your doorstep, right? I think that shift has now sort of made its way into the aftermarket, even in the installer, right? If you know you can get the part that you need quickly at a good price, you're probably going to choose that avenue.
Speaker 1:Right and I think during the pandemic it was a well, let me try this Sure. And people got used to it and comfortable with it, and perhaps if they have the same car, and they're used to purchasing it. If it ain't broke, don't fix it, type of thing, right, yeah absolutely.
Speaker 2:And listen, I think investors coming out of the pandemic were very focused on what your e-commerce strategy was. I think now that we're sort of back in our new normal, that's important, but it's not everything. So, even if you have brick and mortar or you have online, what is your mix in terms of your sales channels is?
Speaker 1:important Right, and I think if you don't have an e-commerce strategy by now, it probably behooves you to have one right.
Speaker 2:Yeah, yeah, exactly, and I think it's over time, like anything. Things are going to continue to shift.
Speaker 1:Sure. And for this year's e-commerce study, what were some of the big takeaways that were? Either this validates what I've kind of knew, or this was a little more surprising. Is there anything that kind of was interesting for you?
Speaker 2:Yeah, I mean I think the adoption slowed a little bit with folks. Definitely, you know, you know, listen, you look at the post pandemic kind of the near term right after that and call it 21, 22. Definitely there was more buying behavior online. I think it's continued to grow, but maybe not the same rate that we would have thought. Right, I think folks have definitely come back to the store a little bit. So you've got a nice, more of a shift but more of a good mix. But you continue to have that as a big channel. I mean, I think if you look at amazon, I think they're, you know, 13 billion of sort of part sales. And if you look at, you know, ebay, it's similar, it's similar and Walmart's a little bit further behind but they're catching up right that market. Call it 40 plus billion of online part sales. It's going to continue to grow. I mean that's going to be 50, 60 billion here in the next 10 years.
Speaker 1:Right and kind of like you were saying in the beginning of our conversation, is that not going to necessarily light the world on fire, but it's steady growth, it's reliable and I know we did a study on this a few years ago at AutoCare is the recession proof?
Speaker 2:I don't know how to make a noun out of that, but it's resilient in terms of recessions and seasonality. And you get a little seasonality in auto parts right. I think in the summertime you're more apt to probably fix your AC compressor than what it broke Right, and then in the winter you definitely see a little bit of an uptick on tire sales, moving over to the kind of winter tires and so forth. But for the most part it's a really kind of steady, recurring industry.
Speaker 1:Oh yeah, and I think the benchmarks we used there were automotive aftermarket versus, say, retail, writ large, as well as construction which, as we know, has its own seasonal challenges. Sure, sure, but yeah, definitely from parts category to parts category. The more you dig in, there's a little story there and, kind of like you mentioned, with Vehicle Miles Traveled as you go from national to specific regions, metro areas, there's a little bit of a narrative to each area which is very fascinating.
Speaker 2:And one set of data we also look at is sort of congestion index as well. So congestion sort of drives a lot from a collision perspective in repair. So not so much vehicle miles traveled in the collision space, it's actually more congestion. So big cities accidents happen when there's a lot of traffic and so forth. So that's one of the other sort of kind of macro trends we certainly look back. And now when you see, you know this push going back to the office, you know all that congestion, you know, and certainly in Boston, where we are, it's certainly back in full force and that's definitely a macro trend we look at.
Speaker 1:Yeah, it's an interesting one because I feel like that's another set of onions we could peel right In terms of day of week, time of day. That's one onion. Perhaps Another could be more advanced technologies and auto parts, yep, and how that can drive costs up for repair insurance et cetera. I mean, are there other things that?
Speaker 2:you're thinking, yeah, no, look we in. The technology that's on a vehicle today is certainly a lot different than it was 10, 15 years ago, right, especially when you look at all the diagnostics that have to happen post repair, right, there's just so many more sensors, cameras. All of that has to get recalibrated kind of upon, you know, going back into onto the road, so that's and that's also driving kind of your average ticket from a collision perspective for that repair, because there is a lot more technology that has to go onto that vehicle. You know, it's just not a simple bumper anymore, you know, there's sensors embedded and there's a camera on your windshield, right, for a lot of vehicles. So when you see all of that kind of continue in the evolution, um, you know, I think there was a, if you kind of go back a few years, folks said, hey, listen, you know, with all this safety going into the vehicle, what's, what's going to happen to the collision repair industry, right?
Speaker 2:Well, what you found out is that, a, the margins tend to increase because your repair gets so expensive. And B, as long as their cell they're cell phones there's going to be crashes, right, and so that's. You know, unfortunately, the iPhone's a big problem when it comes to that, but you know.
Speaker 1:We do have data on distracted driving as well as high speed driving, and we mentioned that vehicle prices are going up.
Speaker 1:So it's kind of this all the levers are in favor of more expensive uh repairs and perhaps more frequent repairs due to collisions, sure, so it'll be interesting to see if there is regulation and so forth on something like a calibration of ados, and who is responsible and are shops able to do these types of uh sort of operations and procedures, if you will. So I think there's a lot of interesting developments that I'm kind of keeping my eye out for. Over the years, and earlier you mentioned e-commerce growing to perhaps 50, $60 billion, and I think we have in the report a CAGR of maybe 6.7% and $50 billion being reached in the next several years. Thinking about just forecasting in general a lot of the data that we publish in terms of how big the market is, or perhaps DIY, difm it's a triangulation of some sort, right, but can you tell me a little bit about the forecasting that your team does in terms of saying how large, say, in the e-commerce study? Can you just give us some?
Speaker 2:So listen, yeah, so we use several points of data and Hedges Co does a great job in their collection IMR, partstech so it's really sort of a, as you said, a triangulation of a lot of a tech. So it's really sort of a, as you said, a triangulation of a lot of industry participant data that we look at. And plus, we've had the benefit of sitting in our seat for 20 plus years of looking at kind of the trends in the year over year. What did that data say four or five years ago versus what it says today? So for us it's a lot of analysis, pulling from different pieces of information to sort of kind of align on what we think the size of the market is.
Speaker 2:And I think our team does a really great job kind of pulling that together with you guys and your help. And you know the 6.7% K year, as you mentioned, that certainly outpaces sort of the overall industry right. As kind of to my earlier point, you know e-com is going to continue to grow at a nice rate, but the overall market still, you know, three plus percent growth year in a year and nice rate, but the overall market's still three plus percent growth year in a year and that's definitely going to be a driver of that, right.
Speaker 1:Yeah, there's certainly a lot, of, a lot of benefits in the aftermarket from an investment standpoint and then positive growth for all the participants. So very exciting to see, and I guess, just from a data perspective, something like forecasting. Maybe it's more of a project management question, but how good is good enough in terms of did we get all the right variables? Are we, you know?
Speaker 2:Market data is never perfect. That's one thing I will say. You know, I think if we have enough data that sort of cooperates with each other, it gives us the confidence level that you know. The growth seems sort of on track, let's say Right, you know, I don't think we're being overly aggressive at 6% to 7% growth and I also don't think it's overly conservative. So for us, I think we feel like it's pretty confident. We feel pretty confident in the data, but it's never perfect and always looking historically is a good indicator of what's going to happen in the future.
Speaker 1:And you mentioned the 20 plus years experience that your team has and being able to draw from that to kind of say, yep, this intuitively makes sense. Or perhaps there are other factors that are influencing that growth rate and things that we could perhaps be watching for.
Speaker 2:That we'll continue to keep an eye on and listen. We have clients that operate in this space every day and so being able to have those conversations with them and understanding and taking in that information to kind of see what they're seeing, I mean from our seat. We get to have so many conversations with so many great founders and business owners and investors in our space that we can triangulate a lot of that data to just kind of what we're hearing in the street.
Speaker 1:Right, as well as the sort of scenario planning that you might have. For example, it could be the base case and you have a low growth, a high growth and, thinking about the time of year that we're talking presidential elections, new administrations, perhaps different regulatory points of focus as we think about a new president coming in and as he or she establishes their administration, what are you and your team seeing as potential impacts to the aftermarket?
Speaker 2:So the number one word is tariffs. When you think about the supply chain and the number of parts that come out of China, there's one candidate that's probably going to be more aggressive on the tariff front. So I think any company that's had large exposure to that has certainly been on the sidelines watching right, and I think folks have really been planning to get out of that supply chain or out of that country to move to other parts of, you know, Southeast Asia. That's super important. I would say to other parts of Southeast Asia. That's super important. I would say that's sort of number one. On the flip side, other candidate is very pushing the EVs right and sort of clean energy and so forth. So we'll see kind of what happens. Obviously, today is election day.
Speaker 1:It's an exciting time to be here in Vegas, but I think you've got different, very, very polar opposite views on two very important topics for the aftermarket, definitely, and like you were saying earlier, in the case of tariffs, that would sounds to me like ultimately make its way back to the consumer in terms of how that is taken care of. And then for the electric vehicles, that has different implications of its own, different implications.
Speaker 2:And on the tariff front, I think that you know, from a, from a business perspective, a it's going to, you know, impact your margin and then at some point there's only so much cost you can pass on to the consumer, right. So what, what's that balance? And does that look different from from your, from your perspective?
Speaker 1:you know I appreciate those insights and we'll certainly certainly see what happens in the months to come. Certainly, and any other things that come to mind in terms of data and trends, as far as you and your team using them in the public markets.
Speaker 2:You know, watching the stock market grow and all the growth you've seen over, you know, this year and I think that's been very positive from that perspective. Financing is coming back in our world, so that's certainly it's a great credit market. What's lagged a little bit is M&A, as you mentioned earlier. So M&A, I think for us we have a big 25 predicted for a lot more deals getting done and I think you know part of why you know you're not seeing a lot back.
Speaker 2:Half of this year is like I think the underlying businesses have been either flat or, you know, slightly up right, and I think if you're going to sell your company you want to make sure you're selling off a nice trajectory. Now that we see sort of that second half of the year increase and folks starting to perform well, we think that's going to open up. I mean, I will say from an election perspective, I don't think the election is going to dictate whether deals get done or don't get done next year, right. So the m&a market's still gonna. You know it's been soft the last couple years.
Speaker 1:I think it's going to be back and it's you're starting to see it do you think that there has been perhaps a little bit slower uh deal making, as people are kind of observing and waiting for what happens.
Speaker 2:I think a little bit right, um, you know a lot of folks kind of talk about that, but the same time, it's not like you're doing deals every three years and you take a year off either. Right, exactly, um, but this is definitely a more polarizing election, I think you know, that I can remember right, um, but I think you're starting to see it and I think businesses that have that tariff impact, or maybe have that EV impact, I think, are certainly very keen and watching closely at what happens.
Speaker 1:Because, if I'm thinking about it from a financial forecasting perspective, what's my stream of revenues coming in? Sure, you're always looking at as a company. You're always looking at as a company how are we investing our, our resources and assets, and what is our growth? Does it make sense? To acquire or sell, and you put the election in that context with regard to if tariffs, if evs.
Speaker 2:Sure so and I think factors into the calculus quite a bit and I'm sure the consumer is also factoring too right at the underlying. At the end of the day, what's driving sort of growth across any in any industry is the spending from the consumer, and I think folks are definitely keen on what's going to happen.
Speaker 1:Are there other economic or regulatory policies that come to mind that could be impacting the consumer, that we should be mindful of? That your team has been watching.
Speaker 2:Not nothing direct that I can think of. I mean, what I would say is you know, from an aftermarket perspective, you're always kind of constantly looking at the regulatory changes and what NITS is going to force in terms of more technology onto the vehicle, and what does that look like? You know, of course we look at the independent repair, making sure that you have the right to repair and and you guys do a great job advocating for that For the consumer, I think, what's going to be their disposable income going forward? Right, it's going to be what's the taxes? What's that situation is going to look like? And I think, in some ways, maybe the market's looking for some status quo, because I think you've got some very polarizing candidates. But as long as we're sort of steady and not going to an extreme one way or the other, I think that's a good thing.
Speaker 1:Great Well, I appreciate those perspectives and you mentioned we're here in Las Vegas at Apex and what are some of the things you're looking for and kind of what are you looking forward to seeing and learning while you're here?
Speaker 2:Well, listen, it's always great to be here with everybody. Every year we get to come here and do the show, and good to see you guys, of course. Um, you know, I love to see you know, meet the companies, meet the ceos, kind of hear about new product launches. Um, you know, it's always fun to kind of get the whole industry together. I think there's a great energy here, so it's always it's a good time that's fantastic and I'll just share this.
Speaker 1:I was, uh, helping out in the import vehicle community with some of the new product awards and just for myself it was helpful just to pick up a caliper or a part and be like this is pretty heavy, these coiled springs, these are no joke. And just touching, feeling the parts and then interacting with members and employees across the different roles, I learn a lot, too personally. So it's great and for us.
Speaker 2:We do a lot of matchmaking here, so we're always connecting our clients with more folks in the industry, and not just from investors perspective. But you know there's a lot of commercial help that we can provide to and making sure that you know these CEOs are talking and open up opportunities and really, you know, we try to facilitate a lot of that and just be really good industry participants. I think we're different in the regards that. You know, we kind of submerge ourselves with you guys and the auto care team and we're really just in the industry. We're not just, you know, sitting on Wall Street kind of you know observing, we're really we're here walking the floor.
Speaker 1:It makes a big difference and we're doing it. It really makes a big difference. Think, an in-person venue like this, yep, couldn't ask for much more yeah, yeah, I know it's great it's great. And I guess, while we're on the topic of las vegas, uh, most uh things you like about vegas, things that are things you might avoid I always joke.
Speaker 2:I'm like vegas is always a big maze, so I you never know what time it is here. So it's always always bright lights and lots of people. So, um, that's always the challenge every time you come out to Vegas, but I always love getting a great meal with folks and kind of having a good time, and it's always a pleasure to be here.
Speaker 1:And I really appreciate you coming on to the show. Thank you for having me this is great.
Speaker 2:All right, have a great day everybody.
Speaker 1:Thanks for tuning in to another episode of Auto Care On Air. Make sure to subscribe to our podcast so that you never miss an episode. Don't forget to leave us a rating and review. It helps others discover our show. Auto Care On Air is proud to be a production of the Auto Care Association, dedicated to advancing the auto care industry and supporting professionals like you. To learn more about the association and its initiatives, visit autocareorg.
