Is This The End Or Beginning, Hybrid Loyalty Cruising, State Farm's Golden Ultimatum

Welcome to Wednesday as we cover the full restoration of CDKs DMS. We also talk about the big surge in hybrid loyalty, as well as a major insurance ultimatum set by State Farm to the State of California. 

Show Notes with links

"We are ahead of the anticipated schedule, and as of this morning, substantially all dealer connections are live on the Dealer Management System," are words we’re sure that felt great for CDK to say and for Dealers to hear as the company announced significant progress in restoring its DMS services to Dealers across the country

• The reboot is ahead of schedule as the company’s target restoration date was July 3 or 4, with most dealer connections live as of July 2 after the June 19 ransomware attack impacted over 15,000 CDK customers in North America.
• Dealer Todd Szott, dealer partner at Szott Auto Group in metro Detroit and president of the Detroit Auto Dealers Association confirmed his stores are back online and processing transactions smoothly.
• Despite challenges, Szott’s team exceeded their sales goal, selling over 500 vehicles in June.
• CDK has not disclosed if the cyberattacks involved the theft of sensitive customer information, and the company has declined to comment on reports of paying a ransom.
• On July 1, four dealerships and two consumers filed a federal lawsuit alleging compromised private information and business harm, with other related lawsuits pending.

Customer loyalty to hybrid vehicles reached a record high in the first quarter while demand for electric vehicles remained flat. This marks the seventh consecutive quarter that hybrid loyalty has increased.

• 42% of hybrid owners who returned to the market in the first quarter purchased another conventional or plug-in hybrid, according to S&P Global Mobility.
• Sales of conventional hybrids more than doubled in the quarter compared with a year earlier, with plug-in hybrid sales rising 59%, according to Cox Automotive.
• Conventional and plug-in hybrids made up about 11 percent of light-vehicle sales, a record high. In contrast, EV share was relatively flat at 7.2 percent, down from 7.3 percent in the first quarter of 2023.
• "Cost is one of the biggest drivers of hybrid sales," said Thomas Libby of S&P. "Many hybrids have sticker prices under $30,000, while the average transaction price for an EV exceeds $57,000."
• John Iacono of BRAM Auto Group noted that "[Hybrids] take care of their sensitivity to the environment, but yet doesn't alter their lifestyle,"

State Farm, California’s largest insurer, has threatened to leave the state unless California’s Department of Insurance approves significant rate hikes for home insurance. 

• State Farm requested home insurance rate increases of 30% for homeowners, 36% for condo owners, and 52% for renters.
• If these demands are not met, State Farm will cease providing coverage in the state.
• Other insurers like Allstate and Farmers Direct have already limited coverage or exited the California market.
• More than half of Californians report risi

Hosts: Paul J Daly and Kyle Mountsier

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Transcript

Unknown: 0:00

And

Paul J Daly: 0:06

I'll tell you why would that short intro now it always catches me off guard.

Kyle Mountsier: 0:10

Right in the face. Well, good

Paul J Daly: 0:12

Wednesday, July 3, getting ready to kick off the holiday. But first we're talking about is this the beginning or the end for CDK? Hybrids, gaming loyalty, people losing loyalty, hybrids or gaming loyalty? Talking about state farms, call it a golden ultimatum. Little little conversation that I have with the state of California right now. Yeah, it's a real conversation too.

Kyle Mountsier: 0:33

That's a whole conversation. I'm just gonna read it and bow out and comment,

Paul J Daly: 0:39

commentary.

Kyle Mountsier: 0:40

That's how the show works.

Paul J Daly: 0:43

Oh, man, we were just looking at our travel schedule with Nathan, our producer. And we're like, what are we going to talk about in announcements today, we're like, we should just talk about all the places we're about to be.

Kyle Mountsier: 0:51

We're going all the places people. So

Paul J Daly: 0:53

if you're going to be there or you want to be there, you can come hang out. We can spend some time together learn from one another share some mutual friends will be great. We're going to be at let's just read this list. Right, Scott? Go This isn't an all invite, but beaver Toyota charity golf event is amazing. This is an example of how an auto dealership can just give gobs of money to get really awesome charities have a lot of fun, involve other community members and vendors in it. Fantastic. That's unlike the 15th After that, I'm heading to Moscow, Idaho, which is harder to get to than Moscow, Russia, I think it definitely is with with our friend, filmmaker music video producer, Darren Doan. He's having this brand Summit. I don't even really know what it is. But it's it's I'm gonna be there for a couple days of like the four days but he's got some really big names like the founder of Hurley and some guy that was just on the Tucker Carlson show. Like it's gonna be a real throwdown. So heading out there. You and I, August,

Kyle Mountsier: 1:49

we're making some trips. Yeah.

Paul J Daly: 1:51

This trip is in August, this trip is in like two weeks. What? No, no, Naima, go ahead. Tell us about August. Oh, in

Kyle Mountsier: 1:58

July still, yeah, we're going to August, the automotive infimum of amplifiers contest Reynolds is putting on where they're reaching out to dealerships and dealers. And actually, you can still submit yours. Just showing like, what are the really boundary breaking things that dealers are doing and service and parts in the community? So we're gonna be moderating and judging panelists on touches, and then we're gonna roll out that night, we're going to head to Miami, where the name ed conference, which that you can't get tickets to anymore, because they were sold out on two days ago. Hey, all done. But that conference is always amazing. Oh, well, the best kept secret in automotive in my opinion, equals gotta get rolling. You know, we'll be with our webcam family there. Ah, right. Yeah, well, the webcam launch is gonna be incredible. They've announced their keynote speaker.

Paul J Daly: 2:49

So and then, from that, it's on to V con and La Vin cues unleashed conference in St. Louis, auto trade association, we're gonna be with all the communications directors for all the OTAs in November speaking, that is gonna be us. And whatever else is added to the calendar, we got to shoot some more than cars episodes, we got to do a few things. But we hope you get to join us and hang out with us. Like we'd like to be out and about, right. That's Kyle and I, right, like the whole with you in person. We're going to do that. And then there's this. We got plans for NADA. Folks. Just Just keep

Kyle Mountsier: 3:24

that you're going to encounter these next couple of weeks. It's coming. We're

Paul J Daly: 3:27

doing a meet up. Yeah. Well, we'll tell you when we tell you speaking and telling you when they tell you. Yeah. All right. Is this the end of the beginning? I don't know. But here's a great quote that I'm sure that we're happy to say here's a quote We are ahead of anticipated schedule as of this morning, substantially all dealer connections are live on the dealer, dealer management system. These words have probably felt great for CDK to say and for dealers to hear as the company announced significant progress in restoring DMS services to dealers all across the country. Basically, the reboot was originally saying like, Oh, by the third, or by the fourth, we'll probably have everything up but actually all the connections were live as of yesterday. Amazing. So they they there's they typically like under promise over deliver maybe June 19. We know it all came down the ransomware attack packed with 15,000 dealers. Dealer Todd sought dealer partner at Zod Auto Group in Metro Detroit and president of the Detroit Auto Dealer Association confirmed that his stores are back online and processing transactions get this smoothly. That's not so nice. Despite the challenges he said our team still exceeded our sales goal selling over 500 vehicles in June props for that.

Kyle Mountsier: 4:42

I saw a bunch of CDK dealers posted on LinkedIn and Facebook like yeah we still crushed it

Paul J Daly: 4:47

do divert I mean the the adversity really does so many dealers step up and into it like ask as some of the people like the best stocks that Damon Lester's like they stepped into it. I'll see the case still hasn't disclosed it You know if the attacks did involve a theft of sensitive data, but they're gonna have to disclose that soon because of some regulations on July 1 For dealerships and to consumers did file a federal lawsuit alleging compromised private information. But you know, we'll see I'm sure there's a lot pending there's this is the beginning of a lot for CBK. But the end of it seems like the end right, have a really tough, tough few weeks.

Kyle Mountsier: 5:23

Yes, still a few things to bring online third party connection. So a lot of CRM connections still to bring online. But for the DMS to be up for service parts accounting to be rocking and rolling, closing out billing out all those deals from the from the end of last month. Big deal. Kudos to CDK We're rooting for you, we're cheering for you. We don't we wouldn't wish this on anyone. And hope the other side of this is is over soon. So I

Paul J Daly: 5:47

also hope that like because everything came back online yesterday, it gave our friends in the back office and the accounting offices a little bit extra time to catch up maybe there'll be able to have a decent Fourth of July holiday still. And not be just like punching in punching in transactions. But you know, there's still there's still a lot of work to do to catch up. I know, I know, but who knows, we'll see what happens. Speaking of gaining some momentum stuff, segway is probably not very surprising. consumer loyalty to hybrid vehicles has reached a record high in the first quarter while demand for EVs remain flat. This marks the seventh consecutive quarter that hybrid loyalty has increased 42% of hybrid owners who returned to the market in the first quarter purchased a nother conventional or plug in hybrid according to s&p global mobility. So sales of conventional hybrids more than doubled in the quarter compared with a year earlier. That's 100% increase year over year animal with plug in hybrid sales of 59% According to Cox automotive, so basically, hybrids 11% of light vehicle sales now record high evey sales, relatively flat 7.2%, actually down a little bit from 7.3. Here's a quote from Thomas Libby of s&p cost is one of the biggest drivers of hybrid sales, many hybrids have sticker prices under $30,000. While the average transaction price for an Eevee exceeds 57,000. Sara

Kyle Mountsier: 7:10

it is yeah, we talked about that earlier in the week. This for me, like I still, I mean, Toyota has got it right. And all of these other manufacturers that are that are playing more of a game in the hybrids and plug in hybrids, we've seen a lot of people a lot of OEMs start to take that path over the last six months and say hey, we're gonna invest more dollars in this clear that the consumer likes this option because it allows them to be like conscious of environment without having to like change management their entire lives around how do I get the fuel that's necessary for this vehicle and can I do long trips is is the perfect bridge and I think we're gonna see this actually continue to climb at a faster pace over the next couple of years as OEMs prioritize this in their manufacturing and consumers just get more used to it. You get the loyalty, all of a sudden you get a massive market for hybrid vehicles.

Paul J Daly: 8:05

Well, you you own a hybrid you own a Sienna on a new Sienna. What differences do you even notice?

Kyle Mountsier: 8:12

The only thing that we noticed go to the gas pump way less Yeah, right that's it. That's

Paul J Daly: 8:18

what is there right so like What is there to check nothing? Nothing like positive changes and

Kyle Mountsier: 8:23

the fact that you sometimes wonder if you actually turn the vehicle on or not right? Like when you Ah yeah, okay, doesn't start up. Yeah. All right. But that's it. That's all yeah, that's all you notice. You get 36 miles a gallon and Van

Paul J Daly: 8:36

minivan with lots of kids lots stuff.

Kyle Mountsier: 8:39

Yep. I

Paul J Daly: 8:40

want to segue into this next story so bad I just don't have one. So let's just give give it to him straight. Up. Give it

Kyle Mountsier: 8:46

to him straight State Farm, California's largest insurer has thrown down the gauntlet threatening to leave the state unless California's Department of Insurance approved significant rate heights for home insurance. Here's the rate hikes that they are proposing get this 30% For homeowners and 36% for condo owners and one pop up a pop being 52% for renters if the demands are not met StateFarm will cease providing coverage in the state. This is already after other insurers like all state and farms directive already limited coverage in the California market. The California Department of Insurance said the review process could take months exacerbated by the increased number of wildfires impacting the insurance landscape. More than half of Californians report rising property insurance costs or being dropped by their insurance in the past year. So people getting high and high high rates are just getting dropped altogether. State Farm remains financially robust, even with the crisis in cost, you know, net worth of 143 billion and reported net income of 1.2 billion for the previous Here's so you know, I think

Paul J Daly: 10:01

that's that's a lot of money. That's a lot of money. Do you know how much Warren Buffett's worth? No clue 127 billion. I know. That's another story for another time. I read it over the weekend. But okay. 140 43 billion in value is one thing, right? cash, cash is a different story. And you think about all of the things that happened in California wildfires and storms and all that how the billions add up really, really quickly. Right. And so there must be a regulation where they can only raise rates by a certain amount every year, right, there's probably a, you know, regulation, they needed an exception for that being the state's largest insurance, this really does tie in, I think, to the overall cost of living conversation we've been having in the auto industry, when it comes to affordability, vehicle affordability, this is just going to be another thing that is weighing down consumers when they walk in to try to figure out what car they can afford, right. And

Kyle Mountsier: 10:52

you even just think about insuring insurance rates on vehicles over the last three or four years, we've seen a massive increase on those as well. And the increase on anything with a battery in it has been staggering. And so it's just it's a consideration piece that we have to be aware of in a consumers buying cycle and their buying journey in order to just care for the customer on the other side.

Paul J Daly: 11:16

Yeah, so if you're in California, let us know. Let us know what you think about this because it's gonna impact you. First and foremost. What do you got? A look, we know a lot of people have tomorrow off. Some people are still on the grind, whether you're off or whether you're on the grind. Let's just take a minute to appreciate the country we live in, and all the fun things and the free things we get to enjoy