Thanks to our Partners, NAPA Auto Care and NAPA TRACS 

Show Notes

• Watch Full Video Episode
• Introduction of Derek Kaufman (00:00:00)
• Discussion on Tariffs and Market Reactions (00:02:28)
• Concerns About Chinese EVs (00:05:06)
• Historical Context of Quality in Automotive Industry (00:05:26)
• Impact of EV Tax Credits on Sales (00:08:25)
• Rethinking Climate Change and Transportation (00:09:27)
• Future of Internal Combustion Engines (00:14:33)
• The Role of AI in the Automotive Industry (00:16:12)
• Humanoid Robots in the Workforce (00:17:01)
• The Aging of Cars (00:19:48)
• Humanoid Technology in Automotive (00:20:49)
• Hydrogen Fuel Developments (00:21:21)
• Refining Capacity and Renewable Fuels (00:22:01)
• Distributed Power and Solar Farms (00:23:16)
• Customer Loyalty Through Expertise (00:25:34)
• Embracing EV Training (00:26:06)

Thanks to our Partners, NAPA Auto Care, NAPA TRACS and Automotive Management Network

Learn more about NAPA Auto Care and the benefits of being part of the NAPA family by visiting https://www.napaonline.com/en/auto-care

NAPA TRACS will move your shop into the SMS fast lane with onsite training and six days a week of support and local representation. Find NAPA TRACS on the Web at http://napatracs.com/

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The Aftermarket Radio Network: https://aftermarketradionetwork.com/

Remarkable Results Radio Podcast with Carm Capriotto: Advancing the Aftermarket by Facilitating Wisdom Through Story Telling and Open Discussion. https://remarkableresults.biz/

Diagnosing the Aftermarket A to Z with Matt Fanslow: From Diagnostics to Metallica and Mental Health, Matt Fanslow is Lifting the Hood on Life. https://mattfanslow.captivate.fm/

Business by the Numbers with Hunt Demarest: Understand the Numbers of Your Business with CPA Hunt Demarest. https://huntdemarest.captivate.fm/

The Auto Repair Marketing Podcast with Kim and Brian Walker: Marketing Experts Brian & Kim Walker Work with Shop Owners to Take it to the Next Level. https://autorepairmarketing.captivate.fm/

The Weekly Blitz with Chris Cotton: Weekly Inspiration with Business Coach Chris Cotton from AutoFix – Auto Shop Coaching. https://chriscotton.captivate.fm/

Speak Up! Effective Communication with Craig O’Neill: Develop Interpersonal and Professional Communication Skills when Speaking to Audiences of Any Size. https://craigoneill.captivate.fm/

Thanks to our Partners, AAPEX, NAPA TRACS, and Automotive Management Network

Derek Kaufmann, managing partner at Schwartz Advisors, discusses the transformative changes in the automotive industry, particularly the rise of electric vehicles (EVs) and the influence of Chinese manufacturers. Derek shares insights on China’s significant investments in EV technology and battery production, highlighting their impact on global market dynamics. The conversation also covers the challenges faced by legacy automakers in the U.S. and Europe, the competitive landscape of EVs, and the future of the automotive market.

Derek Kaufman, Managing Partner, Schwartz Advisors, Listen to Derek’s previous episodes HERE.

Show Notes

• Watch Full Video Episode
• China’s Market Impact (00:01:54) Derek predicts a complete transformation of global car markets due to Chinese competition in the next five years.
• Strategic Moves by China (00:03:16) Discussion on China’s investment in EV battery minerals and production, establishing dominance in the EV market.
• Chinese EV Companies (00:04:37) Derek explains the reduction of Chinese EV companies and the emergence of viable players in the market.
• Chinese Exports and Global Competition (00:06:02) China’s rise as the top auto exporter and the implications for U.S. brands in global markets.
• Sales Forecast and Market Shares (00:07:44) Overview of global vehicle sales, emphasizing China’s significant market share and future growth potential.
• Comparative Vehicle Design (00:08:44) Discussion on the superior vehicle design and technology of Chinese manufacturers compared to U.S. automakers.
• Tesla vs. Chinese Competitors (00:10:21) Derek compares Tesla’s Model Y with the Chinese XPeng G6, highlighting differences in pricing and technology.
• Future of Domestic OEMs (00:16:30) Concerns about the future competitiveness of U.S. and European automakers in light of Chinese advancements.
• Lessons from the Past (00:18:25) Derek draws parallels between the current situation and the 1970s Japanese auto market entry.
• Embracing Chinese Manufacturing (00:21:01) Derek advocates for U.S. collaboration with Chinese manufacturers to enhance competitiveness and consumer choices.
• Toyota’s Hybrid Strategy (00:22:18) Discussion on Toyota’s shift to hybrids and the importance of Tesla in the EV market.
• Elon Musk’s UFO Development (00:22:51) Derek shares a fascinating claim about Elon Musk’s development of a high-speed UFO at SpaceX.
• The Importance of EV Training (00:23:38) Emphasis on the necessity for aftermarket shops to embrace EV technology and training.
• Derek Kaufmann’s Insights (00:24:37) Carm expresses appreciation for Derek’s vision in the automotive industry and suggests future discussions.

Thanks to our Partners, AAPEX, NAPA TRACS, and Automotive Management Network

Set your sights on Las Vegas in 2024. Mark your calendar now … November 5th-7th, 2024. AAPEX – Now more than ever. And don’t miss the next free AAPEX webinar. Register now at http://AAPEXSHOW.COM/WEBINAR

NAPA TRACS will move your shop into the SMS fast lane with onsite training and six days a week of support and local representation. Find NAPA TRACS on the Web at http://napatracs.com/

Get ready to grow your business with the Automotive Management Network: Find on the Web at http://AftermarketManagementNetwork.com for information that can help you move your business ahead and for the free and informative http://LaborRateTracker.com

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Derek Kaufman, Managing Partner, Schwartz Advisors, President of C3 Network. Listen to Derek’s previous episodes HERE.

Show Notes

• Watch Full Video Episode
• The European Union’s Mandate and E-Fuels (00:01:19) Discussion about the European Union’s mandate to eliminate the sale of internal combustion engines by 2035 and the potential of e-fuels to coexist with electric vehicles.
• Introduction to E-Fuels (00:02:39) Explanation of what e-fuels are, how they are derived, and their potential to act as a carbon-neutral replacement for gasoline.
• Challenges and Potential of E-Fuels (00:03:55) Discussion about the complications and costs associated with e-fuels, the need for renewable electricity to produce them, and the efforts to ramp up production through the E-Fuel Alliance.
• The transition to battery electric vehicles (00:08:50) Discussion on the increasing power demand for battery electric cars by 2050 and the need to transition the power grid to support electric vehicle usage.
• The potential for alternative fuels (00:10:05) Exploration of the role of low emission or carbon neutral fuels in coexisting with battery electric vehicles, particularly in heavy trucks and industrial equipment.
• The complementing technologies of batteries and internal combustion engines (00:12:00) Explanation of how batteries and internal combustion engines can work together in different applications, highlighting the importance of both technologies in the future of transportation.
• The transition to AI in automotive service (00:18:13) Discussion on the potential of AI and machine learning to assist in vehicle service procedures and the importance of having the right talent and training.
• The importance of human interface in automation (00:20:00) Comparison of two companies’ customer service experiences during a power outage, highlighting the value of a personal connection and efficient communication.
• The future of AI in automotive service (00:22:21) Exploration of the possibility of combining AI solutions with human expertise to enhance customer service and improve efficiency in auto repair shops.

Thanks to our Partner, NAPA Auto Care

Learn more about NAPA Auto Care and the benefits of being part of the NAPA family by visiting https://www.napaonline.com/en/auto-care

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Watch Episode HERE

Jake Sorensen, 2019 NAPA ASE Technician of the Year and 2019 Ratchet + Wrench All-Star technician of the year. Shop manager and diagnostic technician at McNeil’s Auto Care in Sandy, UT Listen to Jake’s previous episodes HERE

Chris Chesney, Training and Organizational Development, Repairify. Chris’ previous episodes HERE

Derek Kaufman, Managing Partner, Schwartz Advisors, President of C3 Network. Listen to Derek’s previous episodes HERE

Show Notes:

• Looking up and reading service procedures is already a must, but even more so as technology advances.
  • Example: ADAS systems now require calibrations when performing repairs like an alignment or bumper cover removal. If you change a headlight assembly that requires bumper R&R, you may need to perform a radar calibration. The only way to know for sure is to read service information.
• Reading technical information/technical reading skills- much different than reading newspaper or Facebook posts, a book etc.
• Evelyn Wood speed reading course- reading with purpose
• An explosion of information- computing power for all industries 
• 2022 captures over a trillion data points that will be aggregated to provide insights
• AI- mining data for trends
• Diffusion of innovation curve- 17+ years for EV’s
• We have expected Technicians to be masters of everything. 
• Many better diagnostic technicians are inefficient at R&R and do not enjoy it.
• Shift mindset to a technology industry
• Even today, electric vehicles account for 18% of new vehicles sold, and those won’t be in our bays tomorrow.
• By 2030 the population of vehicles in operations, over 300 million, and only 8% will be electrified.
• Get ready, or some other service industry will beat you to the punch
• How are you presenting your shop to the public?
  

Thanks to our Partners Shop-Ware and Delphi Technologies

Shop-Ware: More Time. More Profit. Shop-Ware Shop Management getshopware.com

Delphi Technologies: Keeping current on the latest vehicle systems and how to repair them is a must for today’s technicians. DelphiAftermarket.com

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Important Books

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What does the future look like for the automotive industry? Listen to the perspectives of Jennifer Maher, Executive Director of the TechForce Foundation, Derek Kaufman, Managing Partner at Schwartz Advisors, Matt Fanslow, Lead Diagnostician and Shop Manager at Riverside Automotive, and Dustin Brown, Shop Owner of Brown Auto Experts with 3 locations. We have an open discussion about future trends, aftermarket challenges, and electric vehicles.

Watch Episode HERE

Jennifer Maher, Executive Director, TechForce Foundation, Jennifer’s previous episodes HERE

Derek Kaufman, Managing Partner, Schwartz Advisors, President of C3 Network. Listen to Derek’s previous episodes HERE.

Matt Fanslow, lead diagnostician and shop manager, Riverside Automotive, Red Wing, MN. Matt’s previous episodes HERE

Dustin Brown, Brown Auto Experts, 3 Locations in New Mexico, Albuquerque, Village of Los Ranchos and Rio Rancho. Listen to Dustin’s other episodes HERE

Show Notes:

• Today’s BEV headlines may be “over the top” in terms of the pace of BEV adoption, but the VIO will definitively change over time – we are forecasting the VIO at 7.3% BEV in 2030, 26.5% in 2040 and 51.2% in 2050
• We know that people are talking about 60 and even 70% reductions in BEV maintenance versus ICE cars, and that may be true – but the true lifetime service of BEVs has more to do with major part failures than it does maintenance. Motors, power modules and other BEV components will fail and the aftermarket will be ready to service them.
• BEVs will generate new under-car and cooling system service opportunities – they are heavier and have higher torque, so suspensions, half shafts, and steering gear will see more wear than ICE cars. Cooling systems will be much more sophisticated with multi-directional and intelligent valves, PTC and Heat Pump heaters, multiple radiators, and many more fluid connectors.
• Multi Shop Owner- consistency of service
• Technology not only makes things more complex, in many cases, but that complexity is usually in the background.  Technology also makes things easier.  Not just vehicle technology itself, but tools and equipment technology.  The technology is here for a 100% automated tire changing system, but it is cost prohibitive for many/most.  It won’t remain so, and if it isn’t 100% automated, you’ll just need someone to take the wheel off and roll it to the machine, the machine will replace the tire, maybe test the TPMS sensor, and then mount the new tire and balance it.  The human will be little more than an assistant.
• Technology may make vehicles, as it has already done, even more reliable, but also change how we service them.
• The following are already expected by most but will soon be expected by all due to the cost of repairs. Top Notch Facilities, clean and professional appearance inside and out. Top customer service experience. Professionalism from all areas of the business. Tools, equipment, digital inspections, customer education materials
• Diversity in the workforce- including more women and the younger generation, puzzle solving
• Variety of vehicles in the next 30 years
• New jobs- power stations, power grids, safety on repairs
• Investors- real estate game (pit stop), autonomous trucks in ‘service center.’
• Be malleable and willing to adapt

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Important Books

Check out today’s partners:

Shop-Ware: More Time. More Profit. Shop-Ware Shop Management getshopware.com

Delphi Technologies: Keeping current on the latest vehicle systems and how to repair them is a must for today’s technicians. DelphiAftermarket.com

Derek Kaufman is constantly scanning future trends in vehicle design and aftermarket challenges, including how recent events in electric vehicles are affecting our near-term and longer-term futures. This is your podcast resource, committed to bringing the future and forward-looking information you can use to inform and map your road ahead.

Derek Kaufman, Managing Partner, Schwartz Advisors, President of C3 Network. Listen to Derek’s previous episodes HERE.

Key Talking Points

• BEVs are running about 5.6% of new car sales in the second quarter of 2022 – that’s up from 2.7% in the second quarter of 2021.
• Challenges- recession, price of battery materials/broken supply chain, Inflation Reduction Act
• China controls 60-80% of the powders associated with battery anodes and cathodes and the lithium transfer medium
• 80-90% of all BEV vehicles do not qualify for the Inflation Reduction Act- – it only applies to BEV cars that are under $55,000, it only applies to people making less than a certain amount depending on their marital status
• Autonomous Neighborhood Electric Vehicle (AV NEV)- AV NEVs are package delivery pods and people shuttles traveling in dedicated lanes in urban centers at less than 30 mph.
• The Federal Government is allocating about $5B of our tax money to install another 500,000 chargers – but if we are going to get anywhere close to their desired sales of BEVs we are going to need over 2 million chargers to keep those cars running.
• Estimated 5% BEV share of new car sales this year growing to 20% in 2030 and 35% in 2035 – by 2050 we have BEVs at around 50% of 2050

Connect with the Podcast:

Aftermarket Radio Network

Subscribe on YouTube

Visit us on the Web

Follow on Facebook

Become an Insider

Buy me a coffee

Important Books

Check out today’s partners:

Set your sights on Las Vegas in 2022. Mark your calendar now … November 1-3, 2022, AAPEX – Now more than ever. And don’t miss the next free AAPEX webinar. Register now at AAPEXSHOW.COM/WEBINAR.

Shop-Ware: More Time. More Profit. Shop-Ware Shop Management getshopware.com

Derek Kaufman has worked for over 40 years in the Transportation Industry with positions ranging from VP Marketing and Product Planning for Freightliner Trucks, SR VP of Sales, Marketing and Customer Support for Hino Trucks, President of Diesel Technology Co, a subsidiary of Penske Corporation, VP of Fixed Operations for Smart USA and CEO of Mission Motors Company.

Derek is also an entrepreneur. He founded C3 Network, LLC in 1997 to help clients launch new products in the transportation industry.

Today, Derek is a Managing Partner at Schwartz Advisors, LLC doing Mergers & Acquisition support and company growth work in the auto and heavy-duty aftermarket. He continues his role as President of C3 Network.

Derek serves on the boards of several companies and is a regular conference speaker at auto aftermarket and trucking conferences. Listen to Derek’s previous episodes HERE.

Key Talking Points

• Electric vehicles- HEV- hybrid/mild hybrid/plug-in hybrid, BEV Battery Electric Vehicles. ICE- internal  combustion engine, VIO- vehicles in operation, VMT- vehicle miles traveled 
• Forecasting EV sales- stay in touch with the Tier 1 and Tier 2 suppliers to the automotive OEMs to keep current on new product development and that has made a continually increase the estimates over the last 3 years. 
• Hybrids have been growing in share but see them peaking and being replaced by mild hybrids – 48-volt vehicles with electric motors that can propel the car for a short amount of range
• A small number of plug-in hybrids will get you even more range, but they quickly peak and are replaced by BEVs – overall, BEVs eventually replace the various types of hybrid powertrains over a longer period of time than 2030. 
• Consumer demand- including governmental incentives.
• 2X Scenario- based on governments around the world, including the USA, mandating the sales of BEVs or bans on ICEs.
• OEMs- globally there are about 500 BEV models either in production or due for launch in the next 2 years. 3% to 9% BEV market share 
• In 2020 there were 1.3 million BEV cars sold in China and they are forecasting 1.8M for 2021- there were about 300,000 BEVs sold in the USA last year. 142 battery plants under construction globally- 107 of them are in China
• Senate bill to increase the $7500 BEV incentive to $12,000 but only for BEVs made in the USA by union labor(like a Ford 150 Lightning), if the car is made in the USA but with non-union labor (like a BMW i3) it is $10,000 and if it is made outside the USA it remains at $7500 and they took off the 200,000 vehicles per year cap and replaced it with a 50% share of the market for all BEVs cap
• If the US federal government mandates BEV sales, the numbers move to 38% by 2030, 57% by 2045 then on up to 67% in 2040, and 0ver 90% by 2050
• The baseline forecast shows BEVs representing about 5% of the VIO in 2030, 11% by 2035, 18% in 2040, and 34% in 2050
•  The 2X Scenario0 BEV VIO numbers of 8% in 2030, 18% in 2035 then up to 30% of the VIO in 2040, and 48% in 2050
• 26% of the vehicles in the VIO have some form of brake job each year. BEV will change that 26% with regenerative braking, 50% reduction and apply it to the ratio of BEVs in the VIO and you get that overall, brake jobs will decrease about 2.5% in 2030, 9% in 2040, and 22% in 2050
• Engine tune-ups- BEVs decrease engine tune-ups by 100% but when the model takes into account the number of ICE vehicles still in the VIO even in 2050 you will see tune-ups reduce about 5% in 2030, 18% in 40, and 36% in 2050.

• Thanks to Derek Kaufman for his contribution to the aftermarket’s premier podcast.
• Link to the ‘BOOKS‘ page, highlighting all books discussed in the podcast library HERE. Leaders are readers.
• Listen for free on Apple Podcasts, Google Podcasts, Spreaker, iHeart Radio, Spotify, Podchaser, and many more. Mobile Listening APP’s HERE
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Learn more about NAPA AutoCare, Gold Certification, and the hundreds of other benefits the NAPA family has to offer by talking with your servicing NAPA store or visiting www.NAPAAutoCare.com.

For 40 years, Derek Kaufman has worked in the Transportation Industry with positions ranging from VP Marketing and Product Planning for Freightliner Trucks, SR VP of Sales, Marketing and Customer Support for Hino Trucks, President of Diesel Technology Co, a subsidiary of Penske Corporation, VP of Fixed Operations for Smart USA and CEO of Mission Motors Company.

Derek is also an entrepreneur. He founded C3 Network, LLC in 1997 to help clients launch new products in the transportation industry.

Today, Derek is a Managing Partner at Schwartz Advisors, LLC doing Mergers & Acquisition support and company growth work in the auto and heavy-duty aftermarket. He continues his role as President of C3 Network.

Derek serves on the boards of several companies and is a regular conference speaker at auto aftermarket and trucking conferences. Listen to Derek’s previous episodes HERE.

Talking Points:

• BEVs or Battery Electric Vehicles have only battery power – no engine at all
• PHEVs are Plug-in Hybrids – they have battery packs that can be charged from the grid and have enough battery power to propel the vehicle for a certain number of miles before their internal combustion engine kicks in to keep the vehicle moving
• Mild and Micro Hybrids – these are hybrid vehicles where the ICE engine drives an alternator to build up a battery pack. In mild hybrids, the motors can add power to the ICE power train. In micro hybrids like stop-start systems you have a battery that will drive a starter to bring the ICE engine back on after it stops to save fuel at an intersection.
• In the USA, about 2.1% of our sales were full BEVs in 2019. To put that in perspective, the number one country in the world for BEV sales was Norway at 49% — a strong market for Tesla
• Number 2 was Iceland at 19%, then you fall down 8.2% for number 3 Sweden.
• China is driving hard for BEVs but they were only at 4.2% last year.
• It is interesting to note that if California was its own country – and lots of people would say it is – it would be right up with Sweden at over 8% BEV sales in 2019. If you go to San Diego, or sections of LA or the Bay Area – you would think that Tesla has a 30% market share – California is the epicenter of their sales.
• Our estimate is that only .22% of cars in shops are BEVs today and that only grows to under 4% in the next ten years.
• The European Union is all in on electric drive – and they are driving the market by imposing a 95 gram per kilometer CO2 emission limit on vehicle manufacturers.
• You have everyone trying to sell cars in Europe rushing to add BEVs to their product lines even though the consumers in that market are continuing to buy high powered ICEs and even turning now to SUVs. So BEVs are going to be money-losing propositions for a lot of years for OEMs in Europe.The UK just announced a ban on ICE gas and diesel engines as of 2035 – that was pulled up from 2040
• France has a ban slated for 2040 – but Paris is blocking ICE cars by 2030
• China isn’t doing a nationwide ban but is talking about regional bans – and they are making it really difficult or impossible to build any new ICE production capacity in the country.
• The US has been lagging other countries for a number of reasons – our geography makes the whole issue of battery range a tougher issue than in a lot of the European countries where you have less chance of even reaching a car’s range limitWe’re a light truck and SUV country – over 70% of new car sales are light trucks in this country so I think the adoption of BEVs will change once those vehicle designs include electric drive.
• So we’re projecting a slower climb for the USA – the Schwartz Advisors model is showing 16% BEV sales by 2035.
• Rivian as a true inflection point for BEVs in this country and maybe in the world.R.J. Scaringe in Detroit has done a tremendous job of attracting both people and investment for his company. He has people like Mark Vinnels the former director of engineering for McLaren and Jeff Hammoud who was the Chief Designer of the Jeep Cherokee and the new Wrangler – he has raised $2.85 billion dollars from companies like Amazon, Ford, Cox Automotive and T. Rowe Price – he bought the Mitsubishi assembly plant in Normal Illinois and is ramping up production now.
• The Rivian design is unique too – both a pickup truck and an SUV and both are built on what is called a skateboard – that’s a platform that keeps the electric drive motors and battery very low on the frame which allows a lot of flexibility of what kind of body can be put on the chassis.
• Amazon invests $700 million in Rivian and turns right around and orders 100,000 Amazon Prime delivery vans using the Rivian drive system.
• Rivian is actually moving from aspirational to inspirational – they’re going to show how electric drive can take you off-road – or offer contractors electric-powered tools – they are going to make BEVs really multidimensional – and I think that will be a turning point.
• Tesla has been brilliant at establishing the BEV as not only a viable product but as a truly desirable design – they have understood the aspirational approach of Tesla owners to make this world a better place.
• Because of Covid19 Chinese companies will now have a harder time launching new products in the USA – but the Byton design is really interesting.Daniel Kirchet has a long history of running automotive companies in China – He was Managing Director of Infiniti China, President of Dongfeng and the VP of Sales of BMW Brilliance which is the China-based BMW production company – he is now running a company that is launching an SUV this year called the M-Byte – it is a beautiful car with a really good electric drive system 
• JCI’s battery range included lithium-ion batteries for BEVs but the vast majority of their product line was associated with micro and mild hybrids – they spent a lot of time at conferences showing a chart that had hybrids taking over the market with BEVs representing under 15% of global production. But a few things could be changing that scenario.A series of breakthroughs in technology
• New range estimates for the best BEVs are now over 400 miles
• New fast chargers are building batteries up to 80% of a full charge in under 30 minutes – but there are many reports of graphene applications allowing much faster charging
• If battery charging times begin to approach the time it takes to fill a gas tank, Derek say all bets are off on hybrid growth
• At the end of the day, hybrids are expensive to produce for OEMs and may make it really hard for them to earn profits
• Just one year ago, we were talking about vehicle manufacturers investing a combined $90B in BEV programs. The latest number is something like $300B led by Volkswagen
• Tesla gets all the BEV headlines in the USA they have led the way for sure – but if you want to talk about scale, you need to talk about the VW MEB program.They have created a modular component platform called Modularer E-Antriebs Baukasten in German. Translate that to English as Modular Electric Propulsion Platform or MEB
• Components can be mixed and matched to configure different vehicle form factors.
• VW is licensing the technology to other OEMs. Ford, for example, will be using VW components in future BEVs.
• VW is projecting 70 new BEV models to be introduced in the next 10 years with over 22 million vehicles produced in that time
• But there are a lot of factors in figuring the well to wheel green house gas impact of various power sources. The BEV vehicle does not pollute as it idles, it doesn’t increase its emission level as it accelerates, it does not put out particulates that are a really big issue in urban centers.We really don’t talk about power sources and their relationship to climate change very consistently or accurately. 
• If we really wanted to make every BEV a truly clean vehicle, we would be generating all power with the new nuclear power designs or maybe we would be converting faster to hydrogen fuel cells.
• Hyundai, Honda, and Toyota have all developed hydrogen fuel cell designs and recently, BMW has announced a hydrogen vehicle. So maybe we should be shifting our percentage curves in that direction in the future

Resources:

• Thanks to Derek Kaufman for his contribution to the aftermarket’s premier podcast.
• Link to the ‘BOOKS‘ page highlighting all books discussed in the podcast library HERE. Leaders are readers.
• Listen for free on Apple Podcasts, Google Podcasts, Spreaker, iHeart Radio, Spotify, Podchaser and many more. Mobile Listening APP’s HERE
• Find every podcast episode HERE.
• Every episode segmented by Series HERE.
• Key Word Search HERE.
• Love what we do? Buy Carm a cup of coffee HERE.

Be socially involved and in touch with the show:

Facebook   Twitter   Linked In   Email

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Gold Certification recognizes top tier NAPA AutoCare’s with a high level of participation in the AutoCare program. The program was built by AutoCare Centers for AutoCare Centers to provide a consistent consumer experience, maximize technology leverage, and reward NAPA’s most committed partners. In other words, Gold Certified AutoCare Centers are the standard-bearers for the AutoCare brand nationwide. Simply put, the Gold Certified NAPA AutoCare program, powered by your local shop brand, will separate you from the rest helping you boost your bay counts and your average repair orders.

Learn more about NAPA AutoCare, Gold Certification, and the hundreds of other benefits the NAPA family has to offer by talking with your servicing NAPA store or visit www.NAPAAutoCare.com

It is time to schedule training sessions in light of having extra time available. There are many things that can be done from equipment maintenance, painting, repairs, fix-up, clean up and training.

• Dig out the seminar books from the last year and have the technician who attended provide a small class to your team. When you teach you learn.
• Schedule on-line training
• Listen to podcasts. The Remarkable Results Radio brands have over 750 podcasts available on just about any subject you can imagine. Team listening is fun and you can have a discussion after.
• Every podcast has a ‘show page’ where the talking points are done and you can you this for a meeting agenda or as discussion points.

“Terry Wynter — I have always been a big fan of training, but being in SW Florida, it’s hard finding a break to get all the guys together, but with this coronavirus spreading fear, business slowed just a little, a perfect time to gather the troops & listen to a podcast, very informative & always to the point…thanks again, Terry Wynter”

Emerging Technology

• RR 487: Joe Register – Will You Be at the Forefront of Technology?
• RR 393: ADAS is the Next Big Thing. Advice From an ADAS Calibration Shop.
• FTR 022: Scott Brown – Don’t Ignore ADAS. Know it. Learn it.
• RR 381: SVI – Secure Vehicle Interface: The Future In Secured, Standardized, And Direct Access to Vehicle Networks
• RR 354: Geek Talk 2.0 Part Two – Tech Talk From Aftermarket Professionals

Technician Talk

• RR 492: YouTube – Benefit or Burden Part 2 
• RR 464: YouTube – Benefit or Burden Part 1
• RR 490: Technician Round Table – Part 8 – Loyalty
• RR 444: Technician Round Table – Part 7 – Heipp – Landry – Fanslow: Professionalism and More
• RR 475: Dirk Fuchs and Jeff Bly – Will System Training Impact a Technicians Ability to Diagnose and Improve Shops Profits
• RR 419: Bringing Technician Proficiency to the Next Level Through Mentoring Programs
• RR 414: Elevating Our Industry’s Definition of Mechanic/Technician 
• RR 377: Gary Smith – The Knowledge Of Electricity Is The Basis Of Every Solution To A Diagnostics Problem

Tech

• RR 473: Derek Kaufman on Augmented Reality – Closer Than You Think
• THA 138: The Business Side of ADAS – Advanced Driver Assistance Systems
• RR 462: Paul McCarthy – AASA President Has the Back of the Service Professional
• THA 131: Preparing Your Shop For the Next Five and Ten Years
• RR 354: Geek Talk 2.0 Part Two – Tech Talk From Aftermarket Professionals
• RR 328: Trained By Techs – Martino, Kline, Culotta, Miller, Brandt
• RR 309: The Shop of the Future – Are You Prepared? Vision 2018 Town Hall

Resources:

• Link to the ‘BOOKS‘ page highlighting all books discussed in the podcast library HERE. Leaders are readers.
• Listen for free on Apple Podcasts, Google Podcasts, Spreaker, iHeart Radio, Spotify, Podchaser and many more. Mobile Listening APP’s HERE
• Find every podcast episode HERE.
• Every episode segmented by Series HERE.
• Key Word Search HERE.
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• Recent For The Record Release to solidify last week’s CarmCast HERE.
• How to navigate your smart device listening app
• Hot topic – Augmented Reality (AR) New episode with Derek Kaufman HERE.
• Upcoming guests:
  • Dan Taylor EQ Part 2
  • Dirk Fuchs and Jeff Bly (Industry Trainers)
  • Danny Sanchez
  • Louis Altazan
  • Geek Talk Part 5
• Goings on at AAPEX
• How to value the Tag Cloud (Content Discovery)

Derek Kaufman is a managing partner of Schwartz Advisors, a team of auto aftermarket experts who provide acquisition analysis, sell-side representation and growth strategy support for companies in our industry. Derek has over 40 years of experience in the transportation business and speaks nationally on the technology trends affecting auto service.  Listen to Derek’s previous episodes HERE.

Key Talking Points:

• Aftermarket winners will adopt AR to:
  • Increase diagnostic accuracy
  • Speed removal and replacement of components
  • Equalize technician proficiency
  • Turn service bays faster
  • Increase car count: guiding technician to remove and replace parts faster
  • Attract and retain technicians to their shops
• Augmented reality- shop tool of the future
  • Additional digital images, overlaying images so they look realistic
  • Near eye video- term on how augmented reality is delivered to your eye (built into safety glasses, images appear full screen)
  • Using technology to build technician training/guidance programs
  • AR packages more information on wider range of vehicles and delivers straight to technicians
  • Most manufacturers have already incorporated AR with retail 360-degree viewing

Link to Microsoft Hololens 2

Augmented Reality Elevator Repair using Hololens 

Resources:

• Thanks to Derek Kaufman for his contribution to the aftermarket’s premier podcast.
• Link to the ‘BOOKS‘ page highlighting all books discussed in the podcast library HERE. Leaders are readers.
• Leave me an honest review on iTunes. Your ratings and reviews really help and I read each one of them.
• Love what we do, buy a cup of coffee HERE.

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Subscribe to a mobile listening app HERE.

NAPA Autotech Training helps your technicians keep their skills sharp and their NAPA Know How up to date. It’s the highest quality technical training that covers almost every vehicle system and every make and model. NAPA Autotech is presented by experienced instructors who are ASE master certified technicians. Even after a class is over, techs can access course information online with ClassPass. So when questions come up later they can get the answers. AutoCare Center owners who have taken advantage of Autotech Training say that well-trained technicians are helping to increase their shop’s repair capability and raise bay productivity. That results in fewer comebacks, more satisfied shop customers, and reduced technician turnover.

Learn more about NAPA AutoCare and the benefits of being part of the NAPA family by visiting www.NAPAAutoCare.com.

Derek Kaufman is a managing partner of Schwartz Advisors, a team of auto aftermarket experts who provide acquisition analysis, sell-side representation and growth strategy support for companies in our industry. Derek has over 40 years of experience in the transportation business and speaks nationally on the technology trends affecting auto service.

Today, Derek has an intriguing thought on the growth of start/stop systems and what they are really doing for vehicle owners. He is also thinking out loud on what shop owners can do to take advantage of the technology changes entering the market to address some of the battery issues start/stop systems are causing..

Derek Kaufman’s Previous Episodes HERE.

Key Talking Points

• Automakers have added start-stop systems to improve mileage. In most driving circumstances, these systems can add 4 to 5% to a vehicle’s miles per gallon performance.
• Based on complaints from vehicle owners who do not like the constant starting and stopping of their vehicles in heavy traffic situations, most manufacturers have added an ON/OFF button to allow drivers to switch the systems OFF when they so desire.
• There are two versions of these ON/OFF switches – “latched”, in which the system stays OFF once the button is triggered until the driver turns the system back on; and “unlatched “ where the start/stop will always return to the ON position when the vehicle is restarted.
• The EPA will include 100% of a start/stop system’s mileage increase in its mileage rating if the start/stop system is an unlatched design. Latch designs result in a vehicle’s mileage results being tested in both the fully ON and fully OFF mode and then averaged to deliver the mileage number that is printed on the Monroney sticker for new car sales.
• One fun fact not included in the podcast audio – the Monroney sticker is named after Senator Almer Stillwell “Mike” Monroney who served as a Senator representing Oklahoma from 1951 t0 1969. Senator Monroney thought that car makers should be more transparent on their vehicle performance. His bill to create the Monroney sticker created a cottage industry adding huge costs to the automobile industry as companies work to test, certify and print the labels added to each vehicle.
• In many driving conditions where short commutes with heavy stop/start cycles exist, many vehicles equipped with start/stop systems are seeing battery degradation because their standard lead-acid batteries are not sufficiently charged during a daily commute to and from work.
• To counter early battery failures, many manufacturers are moving to adsorbed Glass Mat (AGM) or enhanced lead-acid batteries that are built for the tougher conditions imposed by start/stop systems.
• Tests are showing, however, that even AGMs are showing signs of early failure in certain operating modes. Some AGMs have also shown a tendency to lose charge acceptance levels over a relatively short period of time. As their average charge level reduces, the start/stop system will eventually turn itself off to conserve battery energy.
• The ultimate solution may be the introduction of ultracapacitors which are designed to provide quick discharges of high power for starting and quick recharge to be ready for the next starting event. Ultra caps are usually combined with a lower cost standard lead acid battery that will handle the other electric loads of the vehicle like lighting, cabin air temperature, and infotainment equipment.
• Schwartz Advisors sees other electrification coming for vehicles with today’s belt driven pumps and compressors being converted to electric drive devices. Electric drive turbos are also now increasing in usage.
• Service shops can differentiate themselves by becoming “electrification experts”. Study battery alternatives, stop/start systems and ultracapacitors to understand the products available or about to be introduced.
• If you have commercial customers who have multiple vehicles being used in heavy stop-start conditions, you may have an opportunity to install ultracapacitors that can save them battery costs and eliminate those jumps starts that are costing them time and money.
  

• A special thanks to Derek Kaufman for sharing his passion – For The Record.
• Books mentioned in the content library HERE
• Leave me an honest review on iTunes. Your ratings and reviews really help and I read each one of them.
• Email Carm HERE.

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Chicago. No Car. No Problem.

Joran Thompson lives in Chicago and hasn’t owned a car for years. She does fine commuting to work, buying fresh groceries and dry goods. Her dry cleaning gets done, perfectly and on-time, and her latest IKEA purchase gets constructed. When she needs medicine, pizza or to wait in a line for a restaurant on a Saturday Night she just uses her smartphone. There’s an APP for all of her needs.

The story for aftermarket professionals is that all the miles Joran is not driving are being done by the services she contracts. Transportation as a Service will rack up the miles to support all the Joran Thompson’s who don’t own vehicles. Someone will need to maintain and repair those vehicles. It’s time to make those connections.

My Guests:

Joran Thompson is the Director of Business Development at Digital Kitchen. She is responsible for growing client partnerships and marketing the creative experience company, whose clients include HBO, Amazon and Mercedes-Benz Stadium. Prior to this role, Joran served as Director of Marketing and Sales Enablement at CDM Media. She has worked in both corporate and startup environments alongside clients including Nike, Bloomingdales, MillerCoors, Uber and IBM, as well as numerous hospitality groups local to Chicago. A Pennsylvania native, she has a Master of Science in Integrated Marketing Communications and a B.A in Communications from Augustana College. Joran serves on the Make-a-Wish Illinois Associate Board and is a member of She Runs It (formerly Advertising Women of New York).

For 40 years, Derek Kaufman has worked in the Transportation Industry with positions ranging from VP Marketing and Product Planning for Freightliner Trucks, SR VP of Sales, Marketing and Customer Support for Hino Trucks, President of Diesel Technology Co, a subsidiary of Penske Corporation, VP of Fixed Operations for Smart USA and CEO of Mission Motors Company.

Derek is also an entrepreneur. He founded C3 Network, LLC in 1997 to help clients launch new products in the transportation industry.

Today, Derek is a Managing Partner at Schwartz Advisors, LLC doing Mergers & Acquisition support and company growth work in the auto and heavy-duty aftermarket. He continues his role as President of C3 Network.

Derek serves on the boards of several companies and is a regular conference speaker at auto aftermarket and trucking conferences.

Talking Points:

• Challenges for parking in the city of Chicago.
• Lots of tickets. Expensive to park.
• Uber was her form of transportation.
• She will walk to work in the summer and take the buss.
• Wintertime she’ll take an Uber. You can split the fare with co-workers.
• Her husband has a work car but she could not ride in it at the beginning because she wasn’t on his insurance.
• Joran keeps a delivery folder on her smart phone full of APPs:
  • Her favorite. Grocery store delivered.
    • Instacart will deliver groceries within two hours.
  • For drugstore needs. They’ll almost deliver anything.
  • Task Rabbit. They’ll put up IKEA furniture. They’ll stand in line at a restaurant for you. They’ll go buy a gift for you.
  • Amazon Fresh. They are still getting their footing.
  • Amazon Prime is their primary.
  • Dry cleaning. DRYV. A game changer. They show up when you want and will deliver when ever you want.
  • Grubhub is good for food.
  • Peapod is also good for food.
• The neighborhood is full of shops and you don’t have to go far to find all you need.

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This episode is brought to you by Federal-MogulMotorparts and Garage Gurus. With brands like Moog, Felpro, Wagner Brake, Champion, Sealed Power, FP Diesel and more, they’re the parts techs trust.  For serious technical training and support – online, onsite and on-demand – Garage Gurus is everything you need to know. Find out more at fmmotorparts.com  and fmgaragegurus.com

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For 40 years, Derek Kaufman has worked in the Transportation Industry with positions ranging from VP Marketing and Product Planning for Freightliner Trucks, SR VP of Sales, Marketing and Customer Support for Hino Trucks, President of Diesel Technology Co, a subsidiary of Penske Corporation, VP of Fixed Operations for Smart USA and CEO of Mission Motors Company. Derek is also an entrepreneur. He founded C3 Network, LLC in 1997 to help clients launch new products in the transportation industry.

Today, Derek is a Managing Partner at Schwartz Advisors, LLC doing M&A support and company growth work in the auto and heavy-duty aftermarket and continues his role as President of C3 Network.

Derek serves on the boards of several companies and is a regular conference speaker at auto aftermarket and trucking conferences.

Derek recently wrote an article That’s It. We’re Done. Nice To Know You. In the article, he discusses a report on “Rethinking Transportation 2020 – 2030” from Rethink.com. We talk about the report, his view of the data and the impact it can and will have on the industry.

This is Derek Kaufman’s second interview on the aftermarkets premiere podcast. Listen to his first, episode 215, on Business Model Transformation.

These talking points are based on the article from RethinkX.com:

• The RethinkX.com report says that by 2030 – within 10 years of regulatory approval of autonomous vehicles by federal and state governments in 2020 — 95% of US passenger miles traveled will be served by autonomous electric drive vehicles. They will be owned by fleets, not individuals, and operated in a new business model called TaaS – Transportation as a Service.
• The report forecasts that the number of passenger vehicles on American roads will drop from 247 million to 44 million. And that nearly 100 million existing vehicles will be abandoned as they become economically unviable.
• The report says that the cost of owning a car that sits in your driveway, a very high percentage of the time, is estimated at 9000 per year.
• You have to think about this in terms of vehicles in operation and vehicle miles traveled each year.
• There are over 270 million cars on our roads today. New car sales are currently about 17 million vehicles and scrapping 4.2% or roughly 11 million vehicles a year.
• Remember “Cash for Clunkers”? That 2009 program eliminated 690,000 vehicles from American roads and cost American taxpayers $3 billion. It eliminated low priced cars from low-income Americans and did not spur the sales of new vehicles as advertised. It reduced the VIO by 690,000 vehicles and cost $3 billion.
• If we consider the same reduction strategy with 100 million vehicles, the cost would be over $400 billion?
• Reductions to 44 million autonomous cars handling 95% of our travel, would sharply reduce new car sales.
• Forecasting a 70% drop in new car sales is a 12 million vehicle per year reduction in output for vehicle manufacturers.
• The Auto Alliance estimates the auto manufacturing injects $953 Billion into the US economy each year and that 7.25 million people owe their jobs to the automotive industry. 45 states have more than 10,000 jobs related to the auto industry. Cutting that employment by the RethinkX 70% estimate yields the 5 million lost jobs figure.
• RethinkX says that just 44 million vehicles will handle the 6 trillion VMT in 2030. If 25 million of them are IOICEs, then the 19 million remaining vehicles (all AVs) would need to average 300,000 miles per year to cover the 5.7 trillion VMT. Not unreasonable.
• But RethinkX says that AVs are 10 times more efficient than IOICEs – that they will travel 40% of the time instead of 4%. So if AVs travel 3504 hours a year and do 300,000 miles each, then each AV would average 300,000 miles/3504 hours or 85.6 mph.
• Let’s try it again – take the 244 million vehicles times RethinkX’s 40% IOICE estimate – that’s 17.6 million vehicles (instead of our calculation of 25 million) leaving 26.4 million AVs to handle the 5.7 trillion miles. That’s 215,909 miles per year per vehicle. Also not unreasonable. But if AVs are 40% efficient and travel 3504 hours per year, they would still need to average 61.6 mph to cover the 215,909 miles each year.
• So what happens if AVs average the same 34 mph that today’s IOICEs average? That would mean the AVs need to be on the road 6,350 hours per year or roughly 72% of the time. That could be possible and maybe we misunderstood RethinkX’s 40% utilization efficiency reference. At least we think we did.
• The bottom line is this – autonomous cars are coming – and we think they will, in fact drive up vehicle miles traveled AND the amount of service required – so that’s good for the aftermarket. We see the following:
• Vehicle-Miles-Traveled will move from 3.2 to 4.5 trillion as AVs unlock transportation alternatives for the very young, the very old, and lower income people who cannot afford to own vehicles. Baby boomers will live longer and begin to adopt more AV use as they get older.
• AV adoption in urban centers will be incentivized through a combination of AV taxi and car share programs, AV congestion reduction incentives, dedicated AV lanes etc.
• 25% of all miles traveled in 2030 will be AVs but they will be a combination of full electric drive and ICE/electric hybrids.
• 281,250,000 IOICEs (about 50% of which are hybrid vehicles) will continue their 12,000 mile per year usage rate happily sitting in our garages ready at our beck and call.
• 5 million AVs (BEV, PHE, ICE-Hybrid) will each travel 250,000 miles a year at an average speed of about 40 mph.
• The vehicle scrap percentage will climb slightly from 4.2% to 6% over the period as AVs displace existing IO vehicles.
• The combination of AV TaaS businesses, car sharing, and fractional use business models will reduce new car sales by 300,000 to 500,000 vehicles per year.
• IO Pickup trucks will continue to lead USA sales.

Acronyms You Need to Know

AV: Autonomous Vehicle BEV: Battery Electric Vehicle EV: Electric Vehicle IO: Individually Owned ICE: Internal Comburstion Engine IOICE: Individual Owned Internal Combustion Engine TaaS: Transportation as a Service – Transportation on-demand PHE: Plug-In Hybrid Electric VIO: Vehicles In Operation VMT: Vehicle Miles Traveled

Read Full TranscriptCarm Capriotto: [”[00:04:00]”] It is nice to welcome Derek Kaufman Schwartz advisers for the second time to the podcast. Derek Kaufman is the managing partner at Schwartz Advisers LLC and the president of C3 network. Now Derek and I were together in episode 2 15 as we talked about his one of his favorite acronyms BMT business model transformation. And that was a can’t miss episode, no matter your role in the aftermarket. Derek thank you for that episode. It was great, thank you for all the insights. You’re back with us because you recently wrote an article about the predictions from a group called Rethink and they’re out in the Bay Area and they predict some pretty strong things relative to the autonomous cars in the future of American highways. It’s an article that’s been picked up by a lot of news outlets.

Derek Kaufman: [”[00:05:21]”] You know that that’s right. You can actually find the report at Rethink x dot com. And the basic premise of the article is that by 2030, and that’s within 10 years of regulatory approval of Autonomous vehicles. What they’re saying is that 95 percent of all U.S. passenger miles traveled will be served by autonomous electric drive vehicles. And they’ll be owned by fleets not individuals no will be operated in what they call a transportation as a service business model or TAAS or SAAS Software As A Service.

Carm Capriotto: [”[00:06:00]”] Yeah you know it’s another acronym we all have to learn. TAAS. Thanks for sending me the link. 77 page report. Unbelievable and I read in the report that they’re forecasting that the number of passenger vehicles on American roads. Will drop from 247 million to forty-four million and that nearly 100 million existing vehicles are going to be abandoned as they become economically un-viable.

Derek Kaufman: [”[00:06:28]”] Well right. And that’s exactly what the report is saying. Essentially what what their premises is that the car ownership will become a thing of the past. And basically, for two reasons. The first one is the cost of owning a car which they estimate at nine thousand dollars a year. And the second is the whole issue of safety. So over 35000 people die on American roads each year. And the Rethink X people are saying that replacing people with autonomous cars is the only way to solve that problem.

Carm Capriotto: [”[00:07:01]”] I was at a party last night. Someone brought the whole concept up to me and we chatted a little bit about this report and where I saw the future going where they think the future is going and the older people want that security of the vehicle the younger people said we maybe need to Rethink this. So interesting the Rethink X page quotes someone from the Motley Fool investor Web site is saying quote “I’m convinced that I and you will probably never buy another car again ever”.

Derek Kaufman: [”[00:07:38]”] I read that and that’s why I wrote in the article I said well that’s enough to make me want to can some peas and head for the shelter.

Carm Capriotto: [”[00:07:45]”] Derek. By you just saying that I guess you haven’t bought this article at face value, but you put some time into thinking about where these numbers fit in how viable or real they are.

Derek Kaufman: [”[00:07:58]”] Yeah, the article goes on and on Carm, about the research they’ve done, and you know being in the aftermarket for my whole career we know with the numbers of the aftermarket 270 million they say 247 it’s actually 270 million over 270 million cars on the roads today. We’re currently selling about 17 million new vehicles into the market and our scrappage rates have actually come down because cars last longer. Now they’ve built a better quality. Our scrap rates have come down from over 5 percent a year to about four point two. We’re putting 17 million cars in and we’re taking 11 million out which means that 270 is growing every year.

Carm Capriotto: [”[00:08:43]”] The report says that a lot of those need to be scrapped. Like over one hundred million cars.

Derek Kaufman: [”[00:08:51]”] Essentially, they’re saying that you know with 44 million cars we can handle all of the miles traveled requirements in the United States. So that that forced me as I read the article to go back to some cash for clunkers statistics. That was back in 2009. And I think the numbers are as I looked it up, six hundred ninety thousand vehicles were removed from American roads and it cost to the American taxpayers about three billion dollars to do that. You know there’s some debate on Cash for Clunkers on what it really did. I think it took a lot of affordable vehicles and perfectly serviceable vehicles out of the ownership of people who can’t afford a new vehicle. And it really didn’t spur the sales of new vehicles as advertised. B y reducing the vehicles in operation by 690,000 if that costs 3 billion then 100 million would cost us over 400 billion dollars. And I just don’t think that’s a viable number.

Carm Capriotto: [”[00:10:02]”] I sit here in awe of that challenge but to get down to 44 million autonomous cars handling 95 percent of our travel needs you’d need to sharply reduce new car sales as well. And I can’t help but think of the economic impact, but you know from just a layperson’s perspective that’s a lot of jobs.

Derek Kaufman: [”[00:10:26]”] Yeah it really is. We’re putting 17 million in. We’re taking 11 million out so you can’t simply, basically take cars away from people you have to curtail the sale of new cars into the market. They’re forecasting a 70 percent drop in new car sales in this report. That’s about a 12 million vehicle per year reduction. The Auto Alliance Web site and you’ll see that they estimate that auto manufacturing injects about almost a trillion dollars 953 billion dollars into the U.S. economy every year and that seven and a quarter million people owe their jobs to the automotive industry. They show that 45 states, I think, have more than 10,000 jobs related to the auto industry. So you’re cutting that employment by 70 percent. Rethink estimate yields about 5 million lost jobs. And that is really something to think through.

Carm Capriotto: [00:12:57] I know you are a statistic kind of guy but I don’t believe you just stop there. But you dug deeper.

Derek Kaufman: [00:13:52] I got lost in this one Carm, I really did.

Carm Capriotto: [00:13:57] I’m going to sit back and I’m going to see if I can keep up with you.

Derek Kaufman: [”[00:14:02]”] I just started doing the math of 270 million cars in operation basically vehicle miles traveled today right around three point two trillion miles. And that means that each vehicle averages about 12,000 miles a year. So, if you go to their forecast and what they’re saying is and we agree with their forecast that autonomous vehicles will actually increase that vehicle miles traveled. They’re saying that it goes from three point two to six trillion miles a comeback to that a little bit later. But by saying that 5 percent only 5 percent of the six trillion miles will be handled by internal combustion engines vehicles that are as they say individually owned with.

Carm Capriotto: [”[00:14:50]”] And that’s a new acronym. In fact, let me let me do this for you. You like to tell the audience that the show notes page of this episode. I’ll put these acronyms down there. So, if you if you want to get free and loose and say IOICE people going to say what the heck is that. So that’s Individually Owned Internal Combustion Engine.

Derek Kaufman: [”[00:15:13]”] Right. Pretty soon. You know the acronyms are a full sentence long, but you know you’re basically saying that 5 percent of 6 trillion miles will be handled by the vehicles that we own today. And that’s 300 billion miles. If you divide that by the 12,000 miles per year that they travel you get about 25 million of those vehicles on the road. The rest of them, remember now there are 270 million cars on the road. They’re saying only 44 million are needed for a future of travel.

Carm Capriotto: [00:15:44] But when you actually do the real math based on what people are driving you’re really saying that there are 44 million number is really 25 million cars or vehicles?

Derek Kaufman: [”[00:15:56]”] Right. Because it’s really 19. So, 44 minus the 25 million ICE engine of cars is 19 million electric drive AV’s. Right. And they’re traveling about 300,000 miles a year per car to cover the five point seven trillion miles travel that they’re estimating. So, here’s where the thing begins to fall apart because Rethink X says that AV’s are ten times more efficient than individually owned cars and that’s probably true because you’re individually owned car sits in your driveway. You know a high percentage sound like 95 or 6 percent of the time. What they’re saying is that they’re estimating that your car sits around hours only use 4 percent of the time so that AV’s will be used 40 percent of the time. 4 percent of the time for an individually owned car is about 350 hours a year. They say they’re AV’s are 10 times better. Thirty-five hundred and four hours a year. And they’re going to do 300,000 miles each in their report. When you do all that math and you say well these cars are traveling around at 85 almost 90 miles an hour. So that doesn’t work. You must scratch your head and say that’s come back and say maybe if you take the 44 million cars and take 40 percent of the internal combustion estimate that brings it down like 17 million vehicles you get caught up in the numbers of basically you still come up with the cars going over 60 miles an hour. Their math in the report doesn’t work. We understand that autonomous vehicles will travel further. We understand it maybe 300,000 miles a year for an autonomous car is a realistic number. Then you say well OK it must be on the road you know 72 percent of the time. That says well wait we’re going to have to have a really good maintenance system here that is very systematically servicing these cars which is good for the aftermarket.

Carm Capriotto: [”[00:18:29]”] Sure it is.

Derek Kaufman: [00:18:32] The issue is that it’s a business to business a business model going forward.

Carm Capriotto: [”[00:18:35] “]It is in and if there’s only going to be 44 million based on the that report, you don’t need as many service centers and you need those 24 units. You and I talked about this on the last episode where the car would drive itself to get serviced in the morning hours. You know you’d have to be open 24 hours a day. Interesting business model but. You know when I started to ask some people are you going to start doing shopping at 10:00 at night you’re going to call the car to take get you to go grocery shopping and you know what they said to me. No. Grocery stores are starting to deliver. I don’t need the car to go shopping. I’m going to go online and I’m going to order. I really think that the Internet of Things or online ordering of just about anything you’d ever want in the entire world may be a factor somewhere in there.

Derek Kaufman: [”[00:19:24]”] Absolutely. You have to think very big picture here to understand where all this goes. We absolutely understand that autonomous cars will unlock travel for people for the very old who can’t drive cars today for the very young. Your kids might be taken to their soccer practice while you’re at work now because an autonomous car will come and pick them up and take them there. That’s wonderful efficiency. So what Schwartz Advisory team is saying is that we see Vehicle Miles Traveled actually going from three point two to about four point five trillion miles as AV’s unlock this these transportation alternatives.

Carm Capriotto: [”[00:20:07]”] The article that came out were Volvo says they’re going with all electric now I guess if you read the headline you say whoa. But you know today you almost got to read deeper into an article to really understand what they mean.

Derek Kaufman: [”[00:20:18]”] Absolutely. You know the people who write the articles are not the same people who write the headlines in many many cases, so the headline writers job is to grab you in and suck you into the article. I get that. But in so doing so many of the headlines were misleading. If you read that Volvo article and you get halfway down the article about them going all electric by 2019 the one word one operative word in there and that word is solely and what it says is their power or their product line will not be solely internal combustion engines by 2019. The article doesn’t say there are going to be all electric it fully opens the door for gas hybrids and that’s in fact the way they will go. They’ll go gas hybrids and over a period of time move toward electric. But like I say that word solely means a whole lot in that article and it can be very misleading to just read the headline and you know run on down the road.

Carm Capriotto: [”[00:21:21]”] Derek where do you see the impact of a AV’s.

Derek Kaufman: [”[00:21:24]”] We think that this will be largely an urban center issue. In other words, this is about cities. It’s AV taxis or car share programs. It’s congestion reduction incentives those types of things with AV lanes being established. We get all that and you know we come up with not ninety five percent of travel of miles traveled, but something closer to say 25 percent. I live on a farm outside of Grand Rapids, Michigan. I agree with you that I’ll probably have food delivered more often but I can’t see calling an AV that will take 15 minutes to get here to take me 15 minutes to the doctor’s office or 15 minutes to a restaurant. I’ll pay the nine thousand dollars to have that individually owned car sitting here ready and as I said in the article, one word that they didn’t discuss was convenience and that holds individually owned cars going up to over 280 million and we think that about four and a half million AV’s will travel somewhere in the 250,000 miles a year in running or around at an average speed of about 40 miles an hour or so.

Carm Capriotto: [”[00:22:51]”] So the AV’s of the future that you’re talking about total electric vehicles you’re talking about internal combustion hybrids right. It’s a mix.

Derek Kaufman: [”[00:23:01]”] We think it’s a mix. We know that you know you have to you have to read the headlines here and understand that France is talking about going all electric by 2040. The UK just announced this week the same thing Norway has done as well. Take a look at the geography of the United States and think it’s a tougher situation and you know just harder to do. We don’t believe that you know we go all electric. We think that hybrids hang in for a long time, but you know that a combination of AV’s, car sharing or all; this probably reduces new car sales but as I said in the last point of our thought is that individually owned pickup trucks still continued to lead USA sales long into the future.

Carm Capriotto: [”[00:23:55]”] Pickup trucks. Yes, because someone’s got to do the work on the farm.

Derek Kaufman: [”[00:24:01]”] Number one selling car in the United States is the Ford 150 and it’s over two times almost three times the sales of the leading vehicle which is the Toyota Camry. You look at what people are doing with trucks SUV and in general, CUVs, it’s what is selling in the United States.

Carm Capriotto: [”[00:24:27]”] It’s amazing when you fly over America and you fly over a lake and you look at a marina and you look at the number of boats that are there and you think, or you know, how did that boat get there and you know OK I guess there could be transportation as a service to haul your boat. Hey honey it ends up being a beautiful day. The Joneses can go with us. Let’s take the boat. Let’s go down to the lake. Let’s spend the day at the lake on the way there let’s go shopping with pick up some food some charcoal. That’s freedom. That’s convenience. And there may be, I can’t imagine that the new generations Derek are going to give up freedom and convenience that you know we have become so used to by having that vehicle in the garage ready to go.

Derek Kaufman: [”[00:25:18]”] Yeah. You know we don’t want to stick our head in the sand here. You have the argument and you know somebody said to me the other day well you know you’re going to be the buggy whip salesman in the in the future the horseless carriage replaced the horse and the people who were selling horses at that time said that will never happen. I get that. I just think the demographics here the geography the amount of space that we cover doesn’t lend itself to these predictions and the predictions tend to come out of the not to single on the area. But this is a Bay Area group. It’s a software-oriented society out there. It is the home delivery society out there. I get that. We don’t have blinders on here a lot of this will convert. I understand it but not 95 percent.

Carm Capriotto: [”[00:26:20]”] It goes back to the last episode we did Derek, episode 215, as we were talking about these different business models and the investments that the car companies are going to be making in some of these companies. Where are we going to put our vehicles if our vehicles are going to start serving the public.

Derek Kaufman: [”[00:26:40]”] Right. And you’ve seen that Apple and Google have both made moves with large rental companies Avis and Hertz and I can never remember which was which Apple with Hertz. That makes sense right. You have this infrastructure already in place to handle all the rental cars, so they might be a great platform for autonomous vehicles. And they don’t want to go away. So that makes sense.

Carm Capriotto: [”[00:27:07]”] Can you imagine being Hertz or Avis or enterprise years ago starting this company and not realizing that the entire world would change that would make what you do so relevant in the future because they could be an autonomous base because they know how to do it.

Derek Kaufman: [”[00:27:26]”] They have the infrastructure in place and they know exactly right. They know how to do it. And it’s you know it’s a matter of the geographies. Now they’re positioned at airports. You know other urban centers. How do they handle all the small towns and those types of things? But the platform is a lot better starting place than from scratch.

Carm Capriotto: [”[00:27:45]”] Well thank you for crunching these numbers. If anyone could have done it you could have done it.

Derek Kaufman: [00:27:51] I’m not sure that’s true.

Carm Capriotto: [”[00:27:54]”] Well you know I think you brought some reality about you know how fast does the car have to go in order to cover the miles that they claim we do drive if the vehicles are less. I think things are things are going to change. I’m accepting the fact that the world’s going to be different maybe not as aggressively as the report says as far as the timeline.

Derek Kaufman: [”[00:28:16]”] It will come down to a discussion of freedom. In order to get 100 million vehicles off the road someone is going to have to come and take a vehicle away from you because you’re not going to voluntarily give it up. That’s a discussion of freedom and that will be an interesting debate.

Carm Capriotto: [”[00:28:38]”] You know if I was an urbaner I get what you’re saying I’m in a high rise I really don’t need a vehicle and I’m learning my lifestyle. I figured out how to get around and do what I must to get to the airport how to rent a car how to find a taxi now get an Uber. But like you I’m in the country and the next closest towns eight miles away and I can’t imagine where I could get an Uber to come and find me especially when the urge. You know sometimes I’m done with an episode or two in an interview and I got to go to the bank and my God I may I may go at a completely different time that I called for my ride.

Derek Kaufman: [”[00:29:21]”] Not to mention you’re sitting hip deep in snow half the year.

Carm Capriotto: [00:29:28] Well thank you so much for the enlightenment. I really do appreciate it. Another well written article and some great sage wise words Derek Kaufman managing partner Schwartz advisers and the president of the C3 network. Thank you so much.

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