EVs Through the lens of Investment Banking

Episode Highlights

 

(0:38) – Episode beginning

(1:19) – Background on guest JT Taylor

(6:27) – American “mobi-culture”

(8:30) – JT’s take on some of these new EV programs and how they effect dealerships

(14:46) – Who will maximize EV opportunities the most?

(16:45) – What does 2023 hold for EVs?

(19:57) – Episode wrap-up

Links

Connect with JT Taylor on LinkedIn

Transcript

Elena: JT Taylor, how are you this afternoon? Thank you so much for joining me.

JT: Elena. It’s great to see you again via virtual reality here but it’s always great to exchange ideas, thoughts and discussions with you on the things that you are very well informed on and thank you for what you do for our business.

Elena: Oh, no, thank you, JT. I am so glad you had just a little bit of time in your day today to talk about evey dealership buy /sells all things automotive, so you are the perfect person to have this conversation with so just to bring the listeners up to speed if they do not know you already. I don’t know who doesn’t know you. I mean, there may be like two people out there that don’t know you but just to bring everyone up to speed. Tell us a little bit more about what you’re working on today and a little bit about your background.

JT: Well, my background – I’m one of the few people that you’re going to meet Elena that always wanted to be in the car business professionally and as a hobby, but it’s been great to my family. Started off right out of college with a small engineering firm got an opportunity to go from there and then there was Detroit and to the west coast of California, and I had been asked to interview and I received an opportunity to be what became the third person on the Lexus payroll. And it was great to be part of that process and you’ll learn a lot and it’s exciting for current people to be involved in something that’s new. And back then I got to be part of the launch of the product. And then was asked to take a role on the Toyota division side. And I got into the field sales organization back in the Midwest and discovered that the dealer world was the world that eventually I wanted to arrive in and the mid 90s I got to do that. And it was a fantastic opportunity for me to be involved with automotive retail and for most of my career intermittently had opportunities to help other people with their businesses. But as you know, this is an industry that we all tend to know each other. And when I say we all know each other, it’s the folks that are either very involved in the granular parts of the business making things happen on a day to day basis. Also the strategic thinkers that are out there seeing where things are going, trying to identify trends, build businesses that maximize those opportunities that are presented by those trends. And it’s been a pretty exciting time to be in the car business. It’s been more than three decades that I’ve been able to enjoy it and in the meantime, my wife and I have raised six children, all married and educated, had a great family. We live in South Florida where we’ve been since the late 90s. And that’s kind of been my pivot point launching point for when we’re out there traveling and visiting with clients. Today, I’m in the investment banking world, I’ve been in the finance world since 2014. And always around automotive whether that’s automotive retail, automotive technology, automotive finance, and today’s with Truist Securities, is wholly owned by Truist Bank. We have an automotive investment banking practice that covers all of the public companies and activities around the car business, as well as we provide merger and acquisition services M&A buy / sells for auto dealers and related companies. That’s a great focus of our practice. It’s obviously something that’s very meaningful to most of my friends that have been lifers in the business as auto dealers. And let me say something that’s a little self serving but, I consider auto dealers to be the fabric of the American entrepreneurial culture. They operate these incredibly granular local businesses but still maintain this sophisticated relationship with a franchisor. These manufacturers that are global companies. At the same time, they’re serving the families that are involved in their businesses as well as their local communities. They are typically involved at the state level with government and regulations. As we all know, they are very regulated businesses, but they’re also highly profitable, operated the right way. You know, consumers consider auto dealers, sometimes like a dentist, sometimes like your best friend, I say dentists too. So my best friends are dentists. I use it in a kind way because we only go see a dentist typically when we have a problem right? The car dealers kind of have graduated from that stereotypical white belt white shoe plaid coat “if I could would you” kinda salesperson to trusted advisors on transportation. And I think that’s where our franchise auto system absolutely excels. Yes, it is a 110 year old business model, but it’s one that’s been thoroughly vetted. It’s been thoroughly successful throughout that time period. And quite often when we look to times when the United States was in a tough place economically, it was the automobile business that led us into better times. That continues into mobility as you know, Elena, you’re right in the heart of it, you’ve really embraced it and you stay on top of the things that are important like these changes. Mobility is a big deal. And for an American, frankly, most folks, you know are kind of born with this innate right to get from point A to point B whenever however, and however frequently they want to do it. It’s legitimately unique globally. And you know where else can a 16 year old person who is licensed to operate a motor vehicle anywhere they want to go has the opportunity to buy it, not only if they can buy it they can also get their own insurance have a job to be able to provide them income to maintain it and gas it. It’s unique. And it is definitely our culture. We’re very familiar with the phrase agriculture because we all have to eat, but in our team meetings, we talk about mobi-culture, because as Americans we all have to move.

Elena: Well first of all, JT I love your story. Your story is epic. And what you do at Truist is also epic, but “mobi-culture” can that be like the new like hot phrase that we all use? Explain a little bit more about that because I’m intrigued.

JT: I think when we take a look at our lives, and how they are conducted and how they’re managed, and where the efficiencies lie, there is almost always an element of being able to get from point A to point B like we said before, but then second point A to point B there’s typically many stops in between there. And our lives are one big trip ticket. You know, it’s just the itinerary that we follow, almost always is us being able to move and frankly, the number one reason someone can’t get a job is because they don’t have a car. They don’t have their reliable transportation. So it’s an impediment to the American dream. You can’t take advantage of what we have here in the United States. So I think that it’s so ingrained in our culture, it’s also should be ingrained in how we look at the overall goodness of how it could be right when mobility is at its best. How is it serving everybody? Dealers, governmental agencies all have a certain look at this and they think there’s different approaches to it. But the reality is, if there are affordable, meaningful ways for folks to be able to provide themselves personal transportation, they have a leg up on success in United States. And I truly believe that auto dealers are the best of serve that and at Truist we really are a car bank. We will love the dealer model and love dealers, and we’re there to support them when they try to endeavor to improve mobi-culture in their particular communities.

Elena: Absolutely. It was an amazing segue into the EV portion of the conversation right where we’re talking about, hey, this is a different propulsion method, right? We’re not talking about ICE vehicles, we’re talking about electric vehicles. And as you know, a lot of the OEMs have put in significant investment into electric vehicles to bring them mainstream. So I would love your opinion and your perception of this which is how are some of these new programs these new EV programs by the OEMs how is that affecting dealership buy / sells? I know you’re in that world day in and day out. What are you seeing?

JT: Well, it’s a reality today. I think we all have bought into the prospective promise of EVs providing us a two fold advantage cleaner or rather, we hope overall cleaner as an operating unit than a internal combustion engine today and then also the promise of them being more affordable from an ownership and usage standpoint, sometime in the near future. So both those things haven’t been completely answered yet, but they’re here and they’re upon us. And the manufacturers are invested greatly because they believe that the technology is there and eventually those things are going to be realities. So how do we provide that for everybody? Well, let’s go ahead and mandate in one shape or form, what brands are going to lead that, you know if we’re going to invest as a manufacturer into developing products. Brand is important within these manufacturers portfolios and they’re laying it out. So the dealers have to respond there because they’re franchises are aligned by brand. So if I’m a Buick dealer, and I look at Buick, which by the way, globally is a pretty powerful brand in the US not so much. I really take a hard look at this mandate about are you all in on EV or not because the Buick Electra is coming back. And that’s cool, but if I’m in by what’s my competitive set, how many are in my market? How big is my market? Am I willing to make the kind of investment so when you talk about that, that becomes a modifier for the future? Is the value going to be there if I continue to pursue it? Ford has a little different approach. You know, I think it’s two thirds of their dealers have signed up for some shape or form of being an EV dealer in the future. That’s probably not a great percentage. Certainly that may have been expected by the division. I don’t know. But I do think that if EVs become as popular as ICE powered vehicles, then we will likely see a disparate value attached to Ford dealers who are even accredited by Ford Motor Company. It’s a different business model. Looks like it’s going to be one that’s going to be favored by Ford Motor Company. Now, interestingly, we see some very prominent leaders, CEOs and senior leadership within the automobile companies that are saying, hey, there’s a silent majority of leadership within the car companies that say, okay, we can develop these products. We hope that there’s going to be, you know, technological breakthroughs. We’re willing to pursue that hope with our investment dollars. And our development dollars, but we’re also going to hedge our bets and maintain a strong and viable internal combustion engine lineup as well. And they continue to make those cleaner. The question becomes, you know, is that ever going to be something that’s understood by the general population that these vehicles may have a net effect on our climate that’s equal, and it’s really a choice of drive trains or our electrified vehicles and genuinely going to have a breakthrough and provide us with the clean air, clean water, just greener climate attributes that are promised? We don’t know yet. But we do know this. It will cause dealers to look seriously at their investments in their dealerships, and how they value the dealership, you’ve asked a great question. Are these technological changes that are upon all leaders today? Are they going to change the value of their dealerships? Yes, they are. Are they going to initiate owners into making decisions on whether they remain in the business or not? Absolutely. And it’s driven by something that all of us hopefully are going to be able to go through..aging. Right, Boomers own car dealerships, the Boomers own most of the car dealerships, the United States, and those individuals, you know, may have families that are very interested in succeeding and taking over the business, wonderful, a huge percentage don’t. So they’re facing a situation of I’m gonna stay in the business and healthy, I understand the business. It’s a great business, but I’m going to have to invest $1,2,3,4 million, depending on the size of my operation, and maybe I have multiple operations and then I had to hope that there’s going to be an available market for these EVs. So EV has great promise and dealers, they don’t care what drives the car. They just want to make sure that it serves a consumer best, because what serves the consumer best gets purchased. There’s a value there, if they doubt that they are more likely to sell. So we will drive buy sell. And as I said when there’s other things out there, you know, you stay abreast of as well. Technology changes in how consumers are serving up data, how they want to buy their cars, there’s going to be much more fluid relationship between the consumer and the dealer with regards to how information is exchanged, and then how that information is managed. And all those tools that are out there that are allowing dealers to command a better data management system is expensive, and getting more expensive, because you have to change people you have to be able to manage it. And if you’re a one store dealer, and your neighbor is a seventh store dealer and you’re having to buy the same tool, or the economics of scale is definitely come into play there. Those kinds of decisions are being made as well. Most of us being driven by this transition EV though.

Elena: Now it’s so interesting that what you had said about that and it brings me to consolidation of dealerships. Is this something that you’re starting to see now that almost a line in the sand has been drawn now right? Would you agree? Like here it is. Now this is either jump in with your enthusiasm or get out, right? So are you seeing a consolidation now? How do larger dealer groups, look at it, how do maybe smaller dealer groups, look at it? Is there a difference? Does it matter? So walk me through your thoughts there.

JT: I have yet to talk to one of our larger dealer clients and friends in the business that is not all in on the GM and Ford mandates by brand. They believe that there’s wisdom behind it. They’re going to pursue them they’re going to make the investments like every other dealer and hope that consumers want and can afford better products and that their manufacturer is providing the better products they look at as a necessity. Otherwise, you know, in today’s world the temptation is to become a direct to consumer sales model for any product and dealers you know, have a lot of different things that protect them from that happening because of the franchise system. But the reality is it can’t keep a manufacturer from doing that. Should they choose to have a workaround situation and they want to be value add and they are today. You know, it’s remarkable how dealers are going to be increasingly relied upon by consumers for that level of functional operation about their new vehicle because it is new, everything about it is new. Well, who better to do that than a well trained car dealer who has a vested interest in their consumer enjoying what they take delivery of? So I really believe that the bigger dealer groups are going to be able to maximize this opportunity. Now it’s not to say that smaller dealers can’t it’s just going to be on a per unit basis a little bit more expensive for them.

Elena: Yeah, that makes a whole lot of sense. And yes, the reason why I started this entire podcast was EV education right? And you said it best it’s like when a customer takes delivery of that vehicle they want to know that they’re going to be taken care of after they grab the keys and they’re driving off the lot. They want to know that, when questions are going to come up right so it’s again to your point value add value add. So opportunities for 2023. What are your thoughts? If you had a crystal ball and you can see the future. I know you’re very clairvoyant JT. What are your thoughts and opportunities for this next year?

JT: By the way, some of these mandates sound a little bit like what’s happened in the past, where manufacturers wanted to be more intimate with the retail network. And most of those initiatives, I should say most all of those initiatives have failed for some reason or another. And I think the manufacturers…their biggest opportunity is to provide the products and the services and the opportunity to make enough money at the dealer level in order for them to be excited about it. And to build on the inherent loyalty that dealers have to the brand side. You build good products, you put them out at a good price. A dealer can make a good margin or a good fee for delivery. And they don’t care who pays it. They’re going to take care of that client and they’re gonna do exactly what you just talked about it Elena, walk people into something that’s new, something that they believe that they’re taking care of the climate that they’re doing the right thing and have an enjoyable experience not just using the vehicle, but owning it, you know, and being able to maintain it and have a trusted source for information. Now, we all know that the opportunities really lie with a connected car. These are rolling computers, and they already today even with an ICE but much more so with electrified drive trains, they are going to perform they’re going to act and they’re gonna have the attributes of a laptop of an iPad of an Apple Watch we’re going to be able to enter and integrate all of our digital life tools into our motor vehicle. It’s great, you know, there’s just no cut off. So we’re going to be hopefully going to be more relaxed, more productive, more attached to our families, friends, etc. And our automobile is not going to preclude us from being able to do that. That’s exciting. So how do I do that? Well, I get this vehicle from Ford Motor Company. I’ve got a Ford Lightning pickup and I’m able to get in and I’m instantly connected to work because I’ve got that programmed into my system to my work computer. My work computer recognizes me when I get in the car, and then I’m able to do business to a certain degree as long as it’s telephonic, or or talk to text and after work the vehicle itself is going to have subscriptions that I’m going to be paying for or my firm’s going to be paying for so that I have this utilization of my motor vehicle and the dealer is going to get a piece of that, that’s opportunity. Those subscriptions are a necessity to maintain connection to the dealer, connection to the manufacturer in my connection to my vehicle in my life, digital life. And I understand that. I think if we sit down with our Visa, American Express bills across the United States and took a look at how many subscriptions we already paid for, we’d all be a little surprised.

Elena: I don’t want to know, hear no evil, see no evil. No, I think you’re absolutely right the connected car is just so so exciting and intriguing. And every time I talk to you, I just I get so excited for the future because it’s just like, oh yeah, there’s this opportunity and this opportunity. So I love it. JT, we could talk for another, I don’t know, an hour and a half, but we would probably have to do another episode. So in the meantime, if folks want to reach out to you and connect with you if they’re not already, where’s the best place to do that JT?

JT: Emails the best place to start and that is jt.taylor@truist.com

Elena: Perfect and I’ll also I’ll put that in the show notes again, thank you so much for being on the show. It’s always a pleasure speaking with you. I will see you at NADA? Thank you so much for your time. This was amazing. Such great content today. Thank you.

JT: Elena. Thanks for what you’re doing. And I look forward to seeing you next time. And tell John we said hi.

Elena: Oh, I will.