Good morning. It is Wednesday, August 5th. This is the Automotive State of the Union. I'm Paul Jay Daly. That's Kyle Mounts here today.
We're talking about grosses getting squeezed across the board, Lithia getting lean in operations, and LinkedIn fighting AI slop- When I go. The people really wanna know...
because they have to Who I be, they stop and stare when they see me Everything is compression, Paul. Everything is compression. Consider once, now me. Release When is that article coming out?
Tip my hat when it's time for me. To dip low, slam, bam, I am the bomb I ran it already. It's like it's, it's just, I'm just letting these articles kinda live out there. Oh, okay.
If you wanna share it, you know, you feel free. But they- I just want it to exist... re- I just wanna read it. Okay. I just wanna read it. Kylemounts here.com/writing Okay.
I probably will share it, but I gotta read it first. [laughs] You know what I'm saying? [laughs] That's what I'm saying.
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Let's get into it. Nitty gritty. Uh, average gross price per unit softened across the largest public dealer groups in Q2, but the story isn't all bad.
New vehicle grosses came under pressure, but used vehicles provided a sturdier profit lane. June sales helped the quarter finish with more momentum than many expected.
All eight top dealer groups posted year-over-year declines in new vehicle gross per unit. Lithia fell $288. Whoa. Uh, Penske's down $527 per unit.
Lithia remained the volume heavyweight, though, generating 9.8 billion in revenue across 467 stores, retailing more than 104,000 new and 106,000 used vehicles. Wow.
Used vehicle performance also held up better pretty much across the board. Asbury improved used gross by $208, uh, $281 a unit. Lithia's up $107 per unit.
Dealers leaning in more heavily on off-the-street purchases and used demand staying strong. Fewer new sales mean fewer new trade-in, or fewer trade-ins, like we all know this. Yep.
Stevens analyst Jeff Lick said, quote, "Q2 was a lot better than Q1, and the economy's holding up." So- Yeah. Come on, auto. [laughs] Actually, I wanna spin it like this: and auto's holding the economy up. Ooh. Let's go.
Uh, hey, if you're like, "Wait, what if, uh..." 467 stores, remember that Lithia has a bunch of stores in Europe, so, uh, they have that opportunity to sell new and used through that. Um, they're a giant.
They're a behemoth at this point. The, the story is, we know the compression is happening on new car grosses, and so you've gotta make it up on used cars.
Continue to push volume and find those trade-ins, find those local buys.
If you're not doing a service lane, if you're not doing direct customer acquisition, then you're not doing yourself any favors on the used car side of the business. But the profitability's there. It's not like it's not.
We're still not pre-pandemic lows in new car profitability, so don't go running for the hills yet.
And you've got al- you know, I'm, we've, we're already hearing great reports out of July, uh, early reports, and August is gonna be amazing.
And then you've got higher consumer confidence that we've been reporting all week. I'm bullish about Q3. Yeah, me too. I think a lot of people are, you know, especially the folks over at Lithia, right?
Speaking of Lithia. I was just- It's about time... I was a shameless setup for my own segue. Just a full sh- Shameless setup... I can't even believe you. It's fine. It's fine. I know. It makes sense.
We gotta talk about Lithia. It's okay. Posted a record second quarter revenue, uh, marking, but the mega dealer's treating affordability like an operational challenge and not just a pricing issue.
The company rolling out new tech, consolidating management roles, and expanding remote F&I. Hearing more about that- Ooh... lately while leading, leaning on fixed ops and finance to deepen the customer relationship.
Uh, we just talked about this. Consolidated Q2 revenue, 9.8 billion, up 2.2%. Although same-store revenue is down, right? They just have more stores. Interesting. Down 1.6%. New vehicle gross profit per unit down 11.1%.
Used vehicle gross is up. Lithia's preparing to deploy Pinewood AI's digi, dig, uh, dealership management system across all of its US stores and combining some leadership roles across sales and fixed ops. Wow.
Remote F&I is operating in roughly a dozen stores now, offering potential labor savings and giving customers and employees more flexibility. Who can't, uh, can't complain with that.
After sales generated 42.2% of gross profit, while Driveway, the, the brand, Finance, reached 18% penetration of all the US units sold.
CEO Bryan DeBoer said, "If we can service our customer's car for 10 years rather than three to five years, we'll win a lot more."
Very, very clear logic The, the, the, the one that I don't think anybody's paying attention to is Driveway Finance, and I love that we called it out here, that 18% penetration of all US, uh, uh, US units sold.
It's the Carvana play. It's finance your own customers- Mm-hmm...
create that bank s- scenario, that system that allows you to ca- recapture that, uh, buyer back into the market because you have that entire customer's life cycle, the sale, the service, the finance.
Uh, and then you see companies, you know, obviously getting into the F&I products here. You know, that's, like, obviously a, a major part of our business. Mm-hmm.
But getting into the insurance side of the business, and the more stickers you own on that customer's race car, the more opportunity you have to create a life- uh, uh, a flywheel- What-...
lifecycle Where did you get that illustration? Um, me, me and Ben, me and Ben Hadley talk about it all the time. The more stickers- It's like, who owns-... you own on that customer's race car. That's such- Yeah...
a great visual. Yeah. Well- Like, I mean, all, all, like- I get it... everybody's, like, sponsoring that car's ownership, right?
It's like you got the insurance company, the finance company, the, the, the protection company. Uh, uh, everybody- Yeah...
owns a little piece of that pie, and the more you can own of that, the more you have a responsibility to communicate with that customer over their life cycle, and you get to pick up the dollars.
And that's what, uh, companies like Carvana have done so well. It's what Tesla does well, maintaining their own insurance- Mm-hmm... um, maintaining their own finance policies.
Um, and, and I think that, you know, the, the bigger the auto group, the more opportunity you have to, to, to be a more, more a part of that customer's ownership life cycle. Oh, my gosh, being part of customer ownership.
Stop. Segway. [upbeat music] So- Oh... I mean, we're kind of LinkedIn customers. Oh. We are. We pay for Premium.
Look, we pay for Premium, but LinkedIn is adding this AI slop flag that lets users report low-quality AI-generated posts.
The feedback is hoping to-- The, uh, LinkedIn is saying they want the feedback to help the platform retain its detection models and improve what appears in users' feeds.
The new option appears in the three dot menu on every post. LinkedIn says it's not targeting repetitive low-value content, not AI use itself.
So they're, so they're okay with AI use, but just, like, the, the, the slop is what they're after. Yeah, that's a hard thing, yeah. Okay, okay.
Uh, a recent study found LinkedIn accounted for most flagged AI-written long-form posts across several major platforms. The company says it catches hundreds of thousands of automated comments daily- Mm...
and has blocked billions of automation attempts. Other platforms are likely to follow at this point.
The funniest part of this whole one, this is, this is your boy's comment, is the fact that they pushed the AI slop by rewriting automated comments, all of those types of things, right in the platform, and now they're like, "Well, well,
okay- I-... we'll just, like, give you the ability to tell us if it's AI slop" I have a few questions.
The, the third bullet point on this, the study that found LinkedIn accounted for most flagged AI-written long-form posts across- Of course... several platforms, right? I, I do think that
their algorithm's discretion has gotten a little wonky over the last- For sure... six months.
I think some of that probably has to do with AI, but I also think, you know, the hard part about this is making sure the good stuff doesn't get caught up in the dragnet, right?
The AI is making decisions on what's good and what isn't good, right? They're using AI to trigger AI slop. I do think- Yeah... you know, there's possibility- [laughs] There is a possibility- About to talk about that...
I mean, there, I can't think of another way to fight it, though, obviously. There's, there's a possibility for this feature to be abused.
I think some definition would he- be helpful in the little, like, what is AI slop, so that people can- Yep... understand what AI slop is, because all AI-generated content is not AI slop.
But the question that everyone in the auto industry has in mind, and maybe we need to send LinkedIn editors a note to make sure they don't do it, please don't stop Don Brady from putting a sunglass guy emoji and a palm tree on every comment.
Please don't stop that. That's not AI slop. That's Don actually doing it. That's Don being Don. But I'll tell you what. If I find out he's using an automation to do that, I'm calling him right away. [laughs] It's on.
On, right away. [laughs] That's funny.
I, I, I, uh, you know what's so interesting, and the reason why I think you see so much more AI usage on LinkedIn, is because it's a businessperson's platform, and, and people that are thinking about business are thinking more about how to utilize this.
And so it's like a testing ground for a lot of other pl- a lot of other things that people are already doing. Um, you know, do I, do I like it? No, it's nasty.
[laughs] It, it, it's not this, it is this comments on all my posts- Oh, my gosh... get me all fired up. I, I, I love it. We're gonna get to this comment in a second. I love it when I hear people in public office
or, like, on the news or reading things, I'm like, "AI so obviously writ this, wrote this statement." You're like, "Wow." Like, you're not fooling anyone. Somebody- [laughs]...
somebody get him a PR person that didn't just get out of college and know how to use AI. Uh, Charles Higgins on Facebook comments, "LinkedIn is the worst platform for spam. I get less spam on Facebook at this point."
That's saying a lot. Come on. That is saying a lot. Don't, don't say Facebook is good. And Chris Reeves, PS, said he puts the sunglass emoji and the tree emoji in the comments. What a beautiful play.
What a comment section. Let's go. Look, we hope you are enjoying the fact that you get to work in an industry that cares about one another, is moving everything forward.
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