NADA Special: A Hundred Years of History and Growth

Greg Hi, I'm Greg Uland with Reynolds and Reynolds, and this is Connected. Today I get to talk with Cliff Banks, founder of Autovate and The Banks Report. Cliff, thanks so much for taking time off the floor and sitting here but I guess standing and talking.

Cliff Great. Great to be here again.

Greg Yep, absolutely. So let's start actually, I mentioned Autovate, and it seems like it wasn't too long ago, probably. From everything that I heard, a great show. So tell me about that a little bit, how it was, and how that's going for you.

Cliff Yeah, the event focuses on M&A activity and investment in the automotive retail space. So we bring together investors, investment banks, CEOs, tech companies such as Reynolds and Reynolds, and entrepreneurs and startups at the end of the year in December to discuss the industry. It's a Q&A format, which plays well. We created an environment which was a lot of conversations. It's not really that there aren't presentations or speeches. It's just Q&A and a lot of downtime for people who talk about deals and talk about the future of the industry.

Greg That's great. It seems like it's been growing in popularity in recent years.

Cliff Yeah, we're growing it slowly and methodically and just honing the model essentially because there are a lot of conferences in this space, and I think they're all needed each to fill a niche and serve a need. But I was trying to figure out and learn how to position it and provide the best content and create the best conference in that space.

Greg Yeah, that's great. So what's new from your perspective? You always seem like the one with all the information before anybody else. So what have you been hearing and what's new? What's one or two of the hot topics?

Cliff The show floor, coming into NADA, the hot topic has been, among the vendors, the customer data platform. So dealers are looking at it. I've talked to a couple yesterday. They're looking hard and seeing what it entails and what it means. And so I think that over the next year or two, we'll see that message in that model really get crafted and sharp. I think it's a needed development because as we moving into the collective vehicle phase, I think dealers need to be able to access their data, their customer data platforms, in a way that they haven't been able to.

Greg Yeah. What I think is something to build on that, that's going to be really important going forward is certainly the platform and the data and the cleansing and single source there. All of that matters. But what do you do with it?

Cliff Well, that is what I was saying. I think over the next year or two, we're going to see that concept get sharpened in terms of what do we do with this? Why is it important? And that's what the dealers are looking for to. One of the dealers yesterday that I talked to was questioning, is this necessary? What are we looking to get out of this? So as folks like you put out that message and build these solutions, we're going to be looking to you guys, to others, to you to help shape that message.

Greg Yeah. And I'm excited to see two paths that'll be taken. One that is kind of a self-managed path. And I see one that's a fully managed path like we're seeing with other products but you're going to have some subset of dealers that are going to want to have a marketing staff that basically uses a tool like that for targeting and creating customer experiences. And then you're going to have others that they would rather hire an agency or vendor or whatever you want to use to deliver all that.

Cliff Right. And there's some development work that needs to be. That is going to be part of that. We're seeing the automakers do something similar in terms of the connectivity. The platform gathering system needs to announce that they're building out a platform. GM's going to be launching some vehicles this year on their ultra five platform. And it's somewhat of a similar concept, taking that data from the vehicle. But it's also involved in customer data, too. And that's one of the developments over the rest of the decade that Reynolds and others are going to be right in the middle of in that conversation with the automakers is how to leverage that data in the vehicle to better enhance their customer experience.

Greg Yeah, and as the car becomes even more integrated in the lives of people, I see a world and it can't be too far away where we don't have a phone in our pocket anymore. So if you get into your car and you don't need your phone to give directions, don't need your phone to pay for things, you don't need your phone to call somebody. It's just a part of that car. And so when that happens, then all of that information from the car becomes the ownership experience. And it becomes data that they can pull back in.

Cliff We talked about this a little bit last year when we did the podcast, too, just in terms of how that is going to fundamentally change the relationship to manufactured dealers. And I'm not talking in a bad way, right? I think it could increase the collaborative approach and the manufacturers and dealers who are able to come at it from that perspective are going to win out in the end because they're going to really be able to create experiences that will knock your socks off, in my opinion. You're talking about the vehicle being able to talk to us verbally, letting us know when it needs front brakes. And by the way, ABC Motors has a slot open at 5:30 p.m., and I set an appointment and just the things you could do with that. Yeah, we're getting to that point now.

Greg So it'll be interesting to see if the manufacturers go all in on that or if they partner with others to do it.

Cliff Well that's the big question. And obviously there are some big names out there that I think are going to be in the middle of that conversation, too. But the tech landscape it could look considerably different than what it does today.

Greg Yeah it's always fun but it'll be a fun few years that's for sure.

Cliff Yeah, sure.

Greg So what else? What else are you hearing? And this time of year, you kind of wrap up the year, the end of the year. We had an NADA in January, so it's beginning of the year. A lot of excitement, a little maybe hesitation on some fronts, too.

Cliff There's obviously an era of uncertainty that we are really right in the middle of. And I was writing about this five years ago as we were entering it, there's a mix, there's a lot of optimism. I think some of the hesitation, though, is coming from maybe people that haven't really lived through this. You read some of the social media, read some of the headlines regarding used cars, regarding loan status and loan defaults and loans getting the 84 months or beyond. And people start pulling their hair out or freaking out, predicting this is the collapse of the used car industry. This is going to be horrible. Listen, this industry is over 100 years old and maybe we never saw COVID or pandemic before, but fact is, we know as an industry how to manage and adapt in any situation, whether it be interest rates are sky high or 0%. We know whether how to operate when there's nowhere to go underground or when there's a thousand jobs on the ground. So there's a lot of noise out there. But I mean, this year's going to be an interesting year. But this industry, we'll figure it out. We'll be fine.

Greg Do you remember a year that it wasn't an interesting year?

Cliff Yeah. Yeah, I think maybe the years between 2000 between 2010, maybe 2011 and 2019.

Greg Yeah. That kind of 15 to 19 range.

Cliff Yeah, we were doing 17 million units a year and everything was going in our minds swimmingly. And it's great to see. But then the last two years, taking the pandemic out of the picture, the profitability and the business case has been phenomenal.

Greg Absolutely. Yeah, it's been it's been fun to kind of work through and help out and be a part of. And to your point, there's definitely challenges. There always are. But they're fun to solve. Right.

Cliff  True. But we have the playbooks. I think the two big questions facing our industry are certainly EV question and there's so many questions associated with that. Will the customer buy or won't they buy? Will prices come down? Is someone going to develop a breakthrough battery technology? And those are questions. We know what we're going to be going through in terms of a tunnel or whatever, but a transition, really over the next 5 to 10, maybe 15 years, we don't know what it looks like on the other side of this transition. So you have the EVs, any of the connected vehicles.  And those two questions really could fundamentally change because just think about it in terms of creating residual values and valuations of vehicles. You're driving a connected, truly software defined vehicle off the lot, and six months later, it could be a considerably different vehicle because of software update. So how do you place a valuation on that? And it could be a better vehicle. And then if the OEMs are able to execute on some of their wild projections of revenue in terms of connected vehicles. We're hearing $25-30 billion, that's pretty ambitious, but if they're able to execute on some of that, it does change the game but again this industry, dealers will always be part of the picture. But I think there's going to be a lot of evolution, a lot of change.

Greg Yeah, and really opportunity. It's the one thing that stands out to me is the ability for dealers to find and create value. So you don't sell something if there's not value in it. So dealers over the last hundred years, to your point, have found ways to create value for both the consumer and the manufacturer and executed really well.

Cliff I will say this, though. It would not surprise me in the least if 10-15 years from now, we're having the same conversation. Sometimes things do change slowly and sometimes it changes. If you remember five, six years ago, all the talk was autonomous driving. People were making some wild projections about private ownership is going away. Our kids that are eight years old aren't going to need driver driver's licenses. And we saw how quickly that fell. So maybe the EV revolution doesn't happen, right? Maybe it's just 10-20% of the market. We don't know.

Greg You're right. Good deal. Cliff I could talk to you for hours and days.

Cliff I know, we could stand here all day.

Greg This is Sunday; I think you said you have all day meetings today.

Cliff Yeah. One right after the other.

Greg So good deal. Anything else you want to touch on before wrap? Anything we didn't talk about that we should?

Cliff I will say this about the industry. It's great being back at NADA. Dallas is a new wrinkle, it's a nice touch but the vibrancy and the energy on the show floor at the various meetings and different parties and receptions have been great.

Greg 100% agree. Well, thank you very much for talking, as always. I appreciate it. And we'll catch up again soon.

Cliff Yes, great. Thank you.