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Growing Lean
Electrifying Drive into the Future: Insights on Electric Vehicles with John Ellis
John expertly navigates the complex terrains of the EV industry, dissecting the role of technological and economic factors. He'll reveal the success metrics and KPIs that help steer his businesses. If you're curious about how established Original Equipment Manufacturers (OEMs) are faring in the EV market, John's got the inside scoop. He'll also share his vision for EV adoption by the end of this decade. John's infectious passion for the blend of automotive and economics will leave you buzzing with new insight into managing a thriving business in a rapidly-evolving industry. This episode is a must for anyone intrigued by the future of EVs and the exciting challenges and opportunities that await us.
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Welcome back to the growing Lean podcast sponsored by Lean Discovery Group. This is your host, dylan Burke, also known as Deage. I'm happy to be here with John Ellis, co-founder of BEV Everything and founder of the Automotive Advisory Team. Welcome, john.
Speaker 2:Thank you, deage, it's nice to be here.
Speaker 1:Amazing. So, to get us started, can you give us a little bit about your background and how you ended up where you are today in terms of your businesses?
Speaker 2:Yeah, certainly so. I'm an economist by education Doesn't mean a lot, but it's kind of the way I think, right, studying international economics and finance. So actually I use a lot of that in this current automotive market because there's so much leverage with our international climate and the economies that we have in our situations today. So about 20 years ago I jumped in this industry. I'm 55. So I've been in other industries too, but I joined the automotive industry and fell in love with it. Started at the ground floor selling cars, working for some of the largest vendors in North America in almost every area of automotive so inventory, marketing, digital marketing strategy, product development, even, as of the last few years, electric vehicles, and I'm sure we'll get into some of that today. So through all of that evolution of automotive I'm working with OEMs as well, like Gulf States Toyota. I've learned the business inside and out, not only as an operator but from the outside, looking at it as a consultant.
Speaker 2:So about five years ago I started a couple of different companies. One is the automotive advisor team, which is what you know is that today which is a consultancy of all retail operations so new car, used car, fixed operations, finance. And it's not just mine. We have a. It's my company, but I have a team of principal consultants in that organization that have areas of expertise that really incubate a dealer and give them help wherever they need, and they're the best of the best.
Speaker 2:And then about two years ago I started a company called BED everything. So battery electric vehicle, bed and then everything. It's everything we do. So we don't focus on fuel cell hydrogen vehicles, we don't focus on plug-in hybrids. We're really trying to get our dealers ready for the battery electric vehicles that will be coming in more than seven and a half percent adoption in the next 10 years. And so we focus strictly on training, coaching, developing and the operational sense. So that's really taken off in the last year, leaps and bounds. So we're putting arms around it, kind of build a team around it, technology around it, so that we can help us support them when we're not available and face to face. It's been a lot of fun, but it's taken me to the point today where these are all I do. So these are the two companies I founded and what I focus on every day.
Speaker 1:Amazing, Awesome. And for the automotive advisor team do you, do you advise on the entire process for dealers or do you focus on, like sales, for example? Yeah, great question.
Speaker 2:So I inside of that company we have consultancies. So my company's in there called double e-consulting and I do advise on retail operations but on the variable side, so the selling side of new and used cars, how to run the departments most efficiently, sell the most cars at the least amount of expense and as quickly as possible. Those are some of the key points in our industry. But I do have people in the fixed operation side and vendor analytics side. So if I have a vendor relationship that the dealers really not sure the value of that relationship At this point. These people will come in and analyze how well you're using the product. If the product's meeting its needs and that's a really good need in the industry Then I've got a cage automotive is inside of there and they study CRMs and BDCs, business development centers and really you know, determine the most efficient way to run yours if it's not and help you get better at your craft. And, of course, the service side of the business.
Speaker 2:I mentioned fixed tops and finance. Those are keys and we have great people in there. And finally, we have training folks, right people that train in general automotive training. So employee development, hiring employees, finding good technicians, finding good sales people and leaders and managers. We have a recruiting arm in there as a consultant city, so none of those folks work for me. They're just certified consultants under the automotive team umbrella. It's kind of a Charles Schwab. You have all these independent agents under Charles Schwab umbrella. It's the same thing. Automotive advisory team is built that way.
Speaker 1:Okay, amazing. And which? Which is your main business in terms of your bread and butter?
Speaker 2:So right now it is a doubly consulting company. I've got a handful of clients that I really manage. Their use car operations, buying, selling and trading inventory so that they can have the best inventory on the lot and the right amount of volume and then sell it effectively to make their profit and then do it again next month and that's a lot. It sounds simple but it's not with this market. It's so volatile. So, being an economist, I'm on a few different podcasts and morning shows where I update the industry on what the outlook looks like as far as fiscal, the UAW strike, all the things that you have predictors to help forecast the next two weeks to two months, and so I help with that a lot in my consulting. I do it for free on other platforms I just mentioned and then I get really down into the strategic operational running of their business and so they pay me for that on a monthly basis and they do very well. So that's my bread and butter while I'm building the BEV, everything the electric vehicle outside of our business.
Speaker 1:Okay, amazing, I love that. And can we talk more about electric vehicles? You mentioned forecasting, and I'd love to hear your forecast of the next couple of years in terms of electric vehicles, because they've become super popular over the last few years. With all the new technology and at our current point in this pivot of technological evolution, with the assistance of artificial intelligence, I'm sure the technology is going to get way better and extremely fast. So what's your prediction for electric vehicles over the? And we can talk about autonomous vehicles, if that's the thing too for you? I'd love to hear your thoughts on that.
Speaker 2:Yeah, certainly. I just wrote an article about this. You folks can find it at the automotiveadvisorteamcom and there's an article library. I have quite a few EV articles in there and the last one was I wrote about AI. But we'll start with forecast.
Speaker 2:So we know we're like seven and a half percent as of the end of Q2 and adoption in North America and now globally, china and Europe has a much better adoption numbers. Europe matches California, you know, almost in the 20% top plus. But for the United States we only had the West Coast and the Northeast that really have embraced EVs in that form and fashion. And a lot of that has to do with the local governing bodies and how they support the market Right. But at the end of the day we've had a couple of we've had a bifurcated situation that happened. So all the traditional OEMs have said, hey, I'm in, I'm in the game, I'm going to go work with battery manufacturers, I'm going to start building more EVs. And then I thought I was last year the market strong and it's all because Tesla's proven that there's a market there for it and so they want a piece of that pie. And I've written about this a few times in there as well, what's happened is we've we've seen ourselves hit kind of a slowing or a bottleneck for these traditional OEMs in the fact that they built, they used the cart before, the horse theory and how they wanted to go to market. So they started producing and producing vehicles, but they forgot that what Tesla did first was build an infrastructure for their users to enjoy the vehicle they just bought and be able to have that and build a lifestyle around an electric vehicle. And that's why you've seen Ford and GM and Stirlantis and Porsche and all them kind of go okay, I'm in in, you know, north America, and charging standard in ACS, I'm in, I'm on Tesla standard. Now I want a relationship with Tesla. They have all the charging set network setups that my customers want. So they really kind of shot themselves in the foot by not building relationships with. You know a hotel chain even, like Exxon and Shell, putting chargers and gas stations off in the corner just to really build the infrastructure out, which they're doing now to to increase the adoption. So because of that, that option hasn't it hasn't halted, it's just slowed a little bit. It's starting to pick back up.
Speaker 2:And what the projections are, as we know, by 2030, right, which is only about six and a half years away. They're expecting that we're going to be above 10%, maybe 15%, possibly 20. But I think this last few months we've seen that inventory day supply, which the amount of inventory but on the day supply of inventory in a dealer's lot for EVs is about 100. And typically for used cars about 42, for new cars about 60. So we're getting a little overstocked and the good news is it's bringing the price down and it's making it more affordable, which would help adoption.
Speaker 2:But again, we have to have the infrastructure. I think all of that put together, I think by 2020, if a dealer's not all in there, they're going to be in trouble, and that's only a few six and a half years away. So what we're doing now is saying build the infrastructure on your dealer lot, train your people, start bringing into those used EVs, since your new EVs are trickling in. Let's really show the market that you are EV ready and you're the experience center that they need when they're ready to learn more 100%.
Speaker 1:I think I actually I'm not sure it was at your post. I saw on LinkedIn showing that the price of used EVs is currently higher than new ones. I saw a post on LinkedIn. That was you right.
Speaker 2:It has. It has happened. I probably had there's many, and I can say I've had one. The the reason. That's a thing today and it's what the traditional OEMs are really struggling with now and, note, to no fault of their own. They have been so successful in ice engines, right in the gasoline and diesel engines, and they built their manufacturing and supply chains around that success. Moving into EV, they've had to morph, they've had to adjust, build new supply chain relationships, modify manufacturing facilities for Automation and more EV production, which is a lot different. You heard Toyota call the Model X a work of art.
Speaker 2:They had never seen anything like it, and so there's a vantage to the non-traditional OEMs like Tesla and Rivian and Lucid and the like, that their manufacturing Facilities were completely built around EV automation and AI, which makes it easier to build faster, cheaper. Which is why you see, when Tesla brings their price of to market down 20%, they're still highly profitable and OEM and a traditional can't do that. They're there because they're still working through those efficiency models to get to a true EV vehicle. So at the end of the day, you know the price drop has made use vehicles. So if I can buy a new vehicle for 25% more than last week and I in the auction sold that used vehicle for that price or higher a week before, yeah, you've got a problem. You've got to use vehicle. Now that I paid for as a dealer for 35,000, I can buy a brand new one for 35,000 Because he line just dropped the price by 15 or 20 grand.
Speaker 2:You see I'm saying and so that it's a situation here's the, here's the win, here's. I want all your viewers to think about this and get excited. An EB has 20 moving parts. An ice engine has 2,000 plus and look, we're gonna get. We can, we can beck her between 10 or 20 more parts, but at the end of the day, that ratio, the mechanical wear and tear and durability of an ice engine loses value faster than an EV. In Leasing companies, commercials, residual companies, are figuring out.
Speaker 2:I've got to change my Skept, my valuation schedules over time because an EB with a hundred thousand miles is a lot more valuable than an ice engine with a hundred thousand miles. So your long-term residual value on a car that may have lost some value. Today I'm driving my Tesla in the driveway and it went. It's dropped $8,000 in values since it's a lot more expensive than a car. Drop $8,000 in values since Elon's done his, what he's done the last six months. So I lost eight grand.
Speaker 2:But at the end, when I'm ready to sell it in five more years, it's gonna be in so much better shape than its counterpart in the ice engine because a battery lasts a hundred to three hundred thousand miles Plus, and the vehicle only has 20 parts at age, not 2,200 parts, right, so you've got a real durable, reliable vehicle for trade-in, and that's where we're gonna get our value back Right, so don't panic. It's like stock when it starts dropping. It's an EV. Just wait it out and they'll come back. It's tough to do, though. I'm sitting in the cat bird seat because of my knowledge, but I'm also in everyone else's position because I lost all that value on my car too.
Speaker 1:What? What car you driving I?
Speaker 2:Drive a model 3. I've had a model s for nine years, so I've got a model 3 now and I love it. You know, it's actually got more leg room and head room than the model s, but has less trunk and front space. That's a difference.
Speaker 1:Okay, amazing, I love that and yeah, yeah that. That those stats you are saying about the lifespan of EVs. It's, that's crazy to me, because we don't have those. We don't have electric vehicles in South Africa. We just don't have the infrastructure to support it. We bit. We don't even have electricity for the whole country, which is wild, so I don't expect them to come here anytime soon, but it's. It's amazing the adoption rates and the technology technological differences compared to normal cars. It's that blows my mind that one battery can last 300,000 miles.
Speaker 2:That's nuts, the technology. I've studied architecture and chemistry for batteries for a few years now because I know that that's where the advancements in range, durability, reliability and, of course, price considerations are going to come from. If we get the batteries smaller, using less minerals, but it'll still go a good distance in range we're going to get that car cheap right Plus. So in studying that, things like cell to pack and they're talking about solid state, which Toyota's really investing in it's not ready for vehicles yet. We use it in small electronics today those things will make huge advancements. And then we're talking the million mile battery. With a million mile battery, it outlifts the chassis, right. So the batteries are not going to be the problem, right. The car is going to hold its value for a long time.
Speaker 2:Like I said, our Model S is nine years old. It's only got a little shot of 100,000 miles, but it's got like an 89 percent state of health. It's only degraded like 11 percent in almost 10 years. Again, in the 80-20 rule, we don't charge it above 90 anyway. We don't let it go plead more than to 10 percent anyway. That's your. 80-20 is 80 percent. 20 percent is where you really want to keep your car. So look, there's no range loss. Sometimes we'll go 95, we've got a long drive to the next station and we need to be careful, but very rarely. So I still have a brand new car that's nine years old and you should see it Software every month, new features on it, autonomy, all these suspension features you can change around. I mean, I don't have a nine-year-old car. I've got a very cool Tesla that's got a battery that's brand new. Like I said, it's going to be worth a ton of money in another five years.
Speaker 1:That's amazing. That completely blows my mind, because we just have nothing like that out yet. Yeah, it's amazing. But I want to just jump back to the business side of things quickly. Yeah, I want to, because it's like an ever-changing and advancing industry. What challenges or obstacles have you faced specifically during your business, during the start of your business, and how did you overcome them?
Speaker 2:Yeah. So a lot of the challenges I've faced I'm still facing. They say it's the tortoise and the hare. It's like you have to be consistent. Slow and steady runs the race If you get too excited or if you get too discouraged.
Speaker 2:So the challenges for the electric vehicle side of the business are simply that most people don't know or understand the technology or the application or the reliability. So they're fearful. And I'm talking even to people that sell them, not just the people that are thinking about buying them. There's many people that hate them. They love them because we mentioned earlier we're not going to talk politics, but they feel political in nature. Sometimes it's like how do you inject the car into policy? I don't know political policy, but they do, and so at the end of the day, what I try to do is work through the logic of it. It's like in my lifetime, at 55, gasoline cars are not going away. I've got two in the driveway and we have two electric cars, but I think people get fearful that we're forcing them out of their comfort zone. So that's not what's going to happen. You're going to have a choice.
Speaker 2:But the second part of it is the efficiency model of the use of energy in electric vehicle mobility is seven times greater than a gasoline engine. Because the gasoline has to combust in the car and when it combusts to create the energy that drives the power train that gets you moving in a car, you lose 70% of the energy in that combustion process. It doesn't happen in a battery. The battery goes straight to the drive motor. So if I have 100 gallons of fossil fuel and I need the fossil fuel to do the power plant or the fossil fuel to go to the gas station, my electric car only uses 30% of it. The gasoline car needs all 100% of it and it's a whole gallon, a whole hundred gallons. So I can do it 3 and 1 half times with my car. They can only do it once.
Speaker 2:So that's the efficiency model of the use of energy and that's our future, not only for the environment and I know that's important to a lot of people but also for our national sovereignty, for our ability to be energy independent, for our economy to be robust. So you talk to both sides of the. It actually satisfies everybody, the fiscal conservative and the less fiscal, more liberal conservationist. I mean it's like a win-win for both. So I'm just trying to figure out. That's a challenge for me because my good dealers, they're not ready. The others are like oh, we got to do it all tomorrow and it's like whoa let's meet in the middle we don't have to do it all tomorrow and mandate everything.
Speaker 2:Evolution, capital markets, logical prevails, so holding the weight, the scales of that balance is probably the biggest challenge in starting in this industry so early. I mean either the evil person or I'm not doing it fast enough, it's just I'm in a place where it's very controversial, as you can imagine.
Speaker 1:That's crazy to think about, but I love how you praised that. That made a lot of sense. I'm excited to see where it comes, what the future holds Me too, I'd also. I've wanted can you speak of any metrics or KPIs that you use to measure the success of your businesses?
Speaker 2:Absolutely so. The KPIs most important to me are my clients KPIs. It's like if they're successful, I'm successful. Of course we want profitability, we want margins, we want all the good things. But my KPIs and the automotive industry focus on things like growth rates and then market share, revenue volume and those are key terms in our industry with things like front and back in growth or inventory turn, how fast we can turn the inventory as it comes in and goes back out those kinds of things I focus on. So I watch those. And then, of course, things like price to market and actual cash value.
Speaker 2:Those are KPIs that determine how much did I buy a car for in the inventory acquisition side and how much can I sell it for. And if I did that right those two KPIs are measured correctly then I'm gonna make money and keep doing it again. If I do it wrong or inefficiently, eventually I'm gonna be in a problem. Right, I may be turning inventory, but I'm losing money. Everybody's out of business. So I really focus on the efficiency models of our metrics of inventory turn, profitability and, of course, all departmental operational efficiencies to make sure they're successful. And if I say, focus on that, then they're happy, our business is growing and we're off that.
Speaker 2:But I guess the way from that, the other two big ones. Is an economist that I look for or I look at the consumer confidence indexes. I really wanna understand how the consumer's feeling and oddly enough in this tough market they've been pretty happy. The future forecast and current day forecast have been right around the 80%, which is pre-pandemic numbers, but it's starting to waver a little bit. I think that UAW strike we're getting ready to go into political season. Those things can get kind of rough. The consumers are just kind of bracing for that right. All the negative rhetoric that's gonna be coming out pretty soon.
Speaker 2:And the other things I look at are like the value of the dollar against wages and inflation right. So if I'm happy and I'm making a little bit more money and their job's out there, but inflation's outpacing it, then I know affordability is an issue. And then I'll talk to my dealers about the price points of inventory they wanna hold in their stores to make sure that they're matching the consumer's affordability model and they're not overpriced and then losing out on business because they didn't pay attention to the economic metrics too. So I think that's where I get a lot of success is. I'm an automotive operational consultant. I know that business well, but I'm also an economist. I don't try to be one or the other, I try to marry them. So I can teach a dealer how to run their business by looking at economic KPIs as well, not just automotive KPIs, and it works really well.
Speaker 1:Okay, I love that. I love your passion and that you're bringing together all this knowledge to run your businesses. I think you're definitely in the right place. I love it.
Speaker 2:Yeah, thank you.
Speaker 1:Thank you I hope so. We are running out of time, though, but before we hop off, what advice would you give to other business owners looking to succeed in your industry?
Speaker 2:Yeah, I think the biggest one is to be able to break out of your current paradigm and explore new areas of analytics, data growth.
Speaker 2:What I found to be probably the most detrimental to people who have had tremendous success in our industry is that the old way is the way I've always done it and I'm going to keep on trugging along and it's going to keep on working.
Speaker 2:Look, there may be some success there, but it's not your best. Conversely, I've seen that not work and people get in real big trouble. I would ask that they be just open-minded, listen to ideas that are new, probably maybe even some that they've never even considered before. Not that they have to adopt them all, but just be open-minded to think about what can I do different, especially since the market's changing, consumers changing and technology is changing. That could help me get ahead of the curve, because what we try to do with the automotive advisor team is to make sure dealers have a prescriptive lens 30, 60, 90 days out, not a reactive lens where they're trying to fix what they didn't see coming. So I would tell any business owner be flexible, be nimble, be consistent, take the hits, as long as you're with the right people and have the good people around you and you're working towards progress. Don't worry about the cuts and bruises that come along, because there are plenty that are going to come. Just continue to grow and get better, seek out different out-council and you'll win.
Speaker 1:Appreciate that. Thank you so much for your insights. Thank you. John, for your time and being on the show. I've really enjoyed chatting to you. What is the best way for people to reach out to John Ailis? If you've got any advice or offers for them to take advantage of, what's?
Speaker 2:the best way for them to reach. So two things you don't have to reach out to me to be a client. I'd love to just talk to you. If you want to just hear some more wwwand I'll make this real simple the Automotive Advisor Team, singular, theautomotiveadvisorteamcom. If you go there, there's a couple of forms to reach out to us. Get a demo, a calendar, contact list. You can just put your email in and we'll get right back to you. It's super easy. We'd be glad to just open dialogue and hear from you. We'd love to just hear from you.
Speaker 1:Okay, awesome. Well, thank you so much again. I'm very excited to see what the future holds.
Speaker 2:Thank you. Thank you very much for your time.