Panic Buying/Selling: What Should My Inventory Level Be? w/ guest COO of Matthews Auto Group Vincent Salvagni

Episode #1009: Today we sit with COO of Matthews Auto Group Vincent Salvagni to discuss the question on every Dealer’s mind; What should I be doing with my inventory level? As consumers rush to beat tariffs, Dealers are worried about overpaying for replacement inventory and getting stuck holding the bag when things normalize. 

We also talk about Nissan delaying production cuts at its Smyrna, TN plant and Carvana's approach to the tariff headwinds. 

Show Notes with links:

• Nissan’s plans to cut a production shift at its Smyrna, TN plant have been reversed thanks to new U.S. tariffs on imported vehicles. The automaker is prioritizing domestic output to avoid hefty import duties.
  • Nissan initially planned to end a shift at Smyrna as part of a 9,000-job global cut.
  • Keeping U.S. production high avoids tariffs on Japanese-made Rogues, which made up over a third of 2024 U.S. Rogue sales.
  • Workers had already been offered buyouts; Nissan hasn’t confirmed how many accepted.
  • “It could mean saving jobs or it could be hiring people,” said a Nissan spokesperson.

• Carvana is stepping into the tariff era with confidence, positioning itself to capture increased used-car demand as new vehicle prices rise. After turbulent years marked by overestimation and investor skepticism, the company has streamlined operations and could now benefit from changing consumer habits.
  • New 25% tariffs on imported vehicles may steer price-conscious buyers to the used market.
  • Analysts expect an initial bump in used-car sales, especially from buyers priced out of new models.
  • Carvana has reined in costs, insourced inspections, and restructured debt, improving operational health.
  • Despite holding $5.6B in debt, the company is now generating enough cash to begin self-financing.
  • “We’re in a much stronger position than we were 3–4 years ago,” said CFO Mark Jenkins

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Transcript

Paul J Daly: 0:01

Good morning, everyone. It is Friday, April 4. You know, everybody's trying to answer the big question, Should I buy more inventory? Should I sell it all? I don't know. We have CEO of Matthew's Auto Group, Vinny, somebody to try to help us make some sense of all this mess. And boy, is it a mess.

Kyle Mountsier: 0:19

It's, I mean, I was wondering. I was like, Oh, we're gonna answer the question that everybody wants to know, is a hot dog a sandwich? Oh, no, no, it's the tariffs.

Paul J Daly: 0:29

No, that's an easy no. What do you think on that one? Is that actually a question for you?

Unknown: 0:34

Is a hot dog a sandwich? That's a no, right? Is it a hot dog? Just a hot dog, though, is meat in bread, a sandwich. Paul, no, I mean, it's, I've never seen it marketed as the same way. Is it a hoagie? Therefore, is a hot dog, a hoagie. Good gracious, my friend. Do you know where I come from? Get that word out of your mouth, right? That word right out your mouth. Can't say hoagie if you're not from Philly,

Paul J Daly: 1:01

oh, but not that, not in terms of including a hot dog in the conversation. What in the world? Oh, my goodness. There's so much going on in the world right now, and which, in our opinion, there's that's no better time to get together in person with hundreds of your peers who are fixing and challenging and innovating around the same problems. You know the place that I'm talking about is ASOTU CON, coming up in 38 days from now, may 13 through 15th, Hanover, Maryland. We have tickets. They're on sale. They're as cheap as they're gonna be. I do believe the event hotel is sold out at this point. Yeah,

Unknown: 1:35

is it is gone. The good news is, we've arranged a lot of other hotels around which are just super close. But if anything that should tell you that people want to be at ASOTU CON, you should be there to go to ASOTU CON com, get your tickets. Um, is pitch tank? Is the pitch tank? Stage done? It's not done. You have Okay, the 11th to get your pitches in so you can go to ASOTU CON com, forward slash pitch tank. If you are a startup or a legacy company, or you're building something new and fresh that you want to tell people about. You can pitch you got to drop us our video. The judges are standing by to get the top nine semi finalists to the event.

Paul J Daly: 2:12

All right, want to thank our friends at Reynolds and Reynolds and goober goo for helping us make a soda con happen this year, along with a lot of other industry partners that are going to be there. There's so many cool activations this year. Make sure you go to the site and of course, as always, show them some love for helping making ASOTU CON much more affordable than it would be if they weren't there. All right, let's bring in today's guest. Today's guest, first time on the show, Vincent Salvagani, CEO of Matthews Auto Group, formerly CFO of Todd Caputo Sun Auto Group, which many of you know very well. Vinnie, it's so great for you to join us today. Last minute, we need you to tell us all the secrets on what you're doing for your individual beer. Thanks, guys. So you and I were on a call yesterday, and we were just talking about the inventory situation and trying to solve the problem. We were talking about how Ford kind of did they zagged when everyone else was zigging and they said, You know what? We're going to make our vehicles cheaper. And now I've heard some other OEMs are kind of following suit. Nissan this morning announcing that they are actually not cutting production as originally planned in Tennessee and their plant. You you all, can you tell us what, what franchises you all represent? There's quite a few. Yeah, we have

Vincent Salvagani: 3:28

16 stores and 15 brands. Eat into Kia. We have five Kia dealerships, three Hyundai dealerships, three Nissan. We have Mitsubishi, Volkswagen, Subaru, Chevy, Ford, GMC, Cadillac.

Kyle Mountsier: 3:44

That's, I'll tell you what that's like. Someone with 16 kids, naming their children and getting them all right? That's impressive, right? There's someone

Paul J Daly: 3:51

like the little one, you know,

Kyle Mountsier: 3:54

the little one at the end. Yeah. So, so you're having, you're dealing with a lot of it. Obviously, stellantis kind of followed the the suit of Ford yesterday afternoon. So any of those brands are doing the same thing, it's close to home for me that Nissan is not cutting their production at their Smyrna Tennessee plant, which they had originally planned to do, obviously, because, hey, that's American like, final manual, final build, you know, vehicles right here in the in the Nashville area. How is that in? How is this impacting and what are you all doing when it comes to inventory management right now, and making sure that you have the right cars for your customers and that they're advertised correctly?

Vincent Salvagani: 4:34

I'll be honest with you, we're we're at a decision point every day. We don't have answers. All we have is uncertainty. We have to choose how we think this is going to play out. And it's a blended approach with with a with the size of our group, it's a lot easier than if you're a single point, we're looking at everything on a company wide basis. So. Go inventory levels for me, for Kia, with five Kia dealerships, I can carry a heavier inventory. I can go, take more inventory, and be okay if this doesn't play out exactly the way that it could play out. I mean, this is somewhere between, you know, the next few days, something can change. But the the word on the, you know, the words in the press conference were permanent and duration of the presidency. So we have to decide where that changes now on the, you know, the Hyundai and the Kia side, I have eight of those total stores. We've looked at that and said, especially given the the demand in March, I'm okay being a little heavy on inventory right now. I think we've got a couple of months where there's people that have to make a decision from a consumer standpoint, and I think those consumers will decide, is this the best time to go purchase a vehicle? And if they do, I want to be ready to to help them with vehicles that aren't tariff affected.

Kyle Mountsier: 6:04

Well, yeah, and when you think about it, like anything sitting at the port right now that might be available to you from a wholesale perspective, if your rep is coming to you saying, Hey, do you want this extra inventory? It's like absolutely, because that's the inventory that is already processed customs, right? And so that's an opportunity for you with these multiple rooftops where you can kind of share inventory and make sure that it moves around correctly to have stuff available for the next 60 days for your customers, you know, and maybe carry a bit higher of a day supply, but still meet customer demand.

Vincent Salvagani: 6:38

Yeah, there's a couple of things going for us. We're in the spring market, which is a time where I enjoy having a lot of inventory. But this is reminiscent of COVID, where, if you remember the beginning of COVID, the dealers who accidentally had way too much inventory, who had a problem, became geniuses, the head gold. And we are. We are right back at that point where if we're right, yes, if we're right, in prices go up and demand goes up. In supply, I don't think we're gonna have a supply constraint. I think we're gonna have a who has the vehicles that are more affordable than than the next guy who has the vehicles that are pre tariff. That's a really you're gonna

Paul J Daly: 7:19

have an advantage. That's your that's a really interesting point, because we know we're not going to have supply constraints, right? When COVID, it was like, we know there's going to be a stop in production. We're going and we didn't even know at the time how bad that was going to get, and it got real bad, but we don't have any issue with supply. There's going to be plenty of supply, but it's where the car is coming from. What costs are there? You know, one part of the conversation that is a major, major consideration is the used car strategy in this yesterday, when we were talking one of the things we were saying like, man, we were trying to solve affordability issues, where people got buried in trades because of what they paid during the COVID and the supply shortage, and just three years later. Now their used cars are worth more than they were 60 days ago, and they're probably about the peak. This might actually present a solution for some of those folks to get out. I mean, it actually, it's just a game of kick the can, right? Because it's going to happen again. But this might provide a solution used car to get out.

Vincent Salvagani: 8:18

Yeah, it's a consumer hedge, if you can time this right where you where you can trade your your used vehicle in as the market's rising and still purchase a vehicle that you know you've got OEMs who are have announced more aggressive pricing to try to grab market share during that time, if you can maximize on the way up on your Car and still maintain level OEM pricing, you win.

Kyle Mountsier: 8:43

Wow. What a great time to be a customer, I'm telling you, and a dealer, because, like, demand is increasing. We're seeing the shot. I was actually watching some Google shopping behavior analytics yesterday. Did a little bit of research on like, specifically Ford and stellantis, and just the shopping behavior around keyword terms, around employee pricing or additional rebates up already. So I'm watching for big weekends out there. You know, you

Paul J Daly: 9:09

just said an interesting thing. You were like, it's a great time to be a consumer and a dealer. Yet neither party feels that way, right? It's full of panic and uncertainty. Probably a great segue. We're going to keep you on for the segue. So speaking of used cars segue, perfect segue. And you have some unique understanding of history with Carvana as well. So I think it'll be good for this one. Uh, Carvana is stepping up their terror into the tariff era with confidence positioning, positioning itself to capture increased used car demand as new vehicle prices rise after turbulent years marked by their overestimation and investor skepticism, the company has streamlined operations and could now benefit from changing consumer habits. Basically, the 25% tariffs may store steer people toward used cars, and we'll see what the market does. Analysts are expecting an initial bump in used car. Sales. We've been talking about that already. They should just call us instead of these analysts, right? Just, I don't even know why. It's like this is like reading a history book now Carvana. Carvana has definitely reigned in cost over the years, and CFO Mark Jenkins said we're in a much stronger position than we were three or four years ago. Also said in that article that we've been focusing on a business that is resilient in any climate. So Vinny, you have a lot of experience with Carvana. When you were with takaputa and San Auto Group, you were running some pilot programs with them. What's your perspective in general, in carvana's position in the market right now? And if you're a dealer, how are you positioning against them?

Vincent Salvagani: 10:37

I don't know if I can disagree with them. I do think that the the tariff will affect new cars, new car production. It does affect the cost of maintaining a used car with it, with the cost of parts going up. But right now, every used car that is a static number as of this moment, right now, and every one of those cars is unaffected by tariffs. So if you can control, if you can step up into the use, you give the consumer more options, and it also makes more options for the dealer, because you're the inventory that I have right now is doing what it did three to four years ago, which we never thought was possible, is appreciating. You know, cars, cars aren't an investment, they're a cost. They're a depreciating asset. But right now, everybody's vehicle that they're driving is ticking up minute by minute as consumer demand in uncertainty fight against each other because people want to call want to know if this is the right time to do it. Now if again, what we do that a lot of dealers don't do, is we have a large used vehicle inventory, but it's not you know. If you come to one of our stores, we share our inventory amongst three states in and our play is to get the right vehicle to the customer at any time. So if it's a new car, great. If it's a used car, and it's in Massachusetts, I'll have it to New York tomorrow so that you can buy it. So we again, have an an advantage over a single point dealer. Or, you know, we're playing the car bottle

Paul J Daly: 12:18

model that's even faster than Carvana. Say, model Yeah,

Vincent Salvagani: 12:21

I don't necessarily want to coin that phrase for legal purposes, but yes, we are pretty fast. So I do believe that multi store, multi location, dealers who have options can give customers right now more options, which is what the consumer needs. The consumer needs not just to be backed into a corner where they have to buy a particular vehicle that may or may not be affected by a tariff today, tomorrow or in the future. So I don't necessarily disagree that Carvana is in a good spot. We're just going to try to match that at the Matthews Auto Group to to have the right used car inventory and meet demand. Now we talked about supply constraints earlier. The only supply constraints we're going to have is if the OEMs actually constraint supply on their own, because demand is so uncertain and and consumers say, Well, we're going to wait this out so they have the throttle. I don't see them doing that right now. I saw

Paul J Daly: 13:31

anyone cars in America? Yeah,

Vincent Salvagani: 13:33

yeah. See this as the exact time where the consumer can benefit from uncertainty in a lot of ways. And Paul, you and I were talking yesterday, one of the things that you know, especially on the used car side, that that struck me as a possible, it's a win for a consumer. You talk about hedging, the consumer that bought a car two years ago and they and they protected their used car with a vehicle service contract or their new vehicle locked in an insurance policy based on pre inflation costs. Right? We're now about to experience parts that have seen inflation, labor that's seen inflation, but parts now that have a layer of tariff on top of it. So let's

Paul J Daly: 14:22

not even talk about reinsurance contracts. Yeah, right. To hit them.

Vincent Salvagani: 14:29

12 loss ratios are inherently going to go up because you can't react fast enough. Yep, there's a which benefits the consumer. It

Kyle Mountsier: 14:37

benefits we have absolutely Yep, yes, that's that's so smart. I want to go back just I have a quick comment on the Carvana and used car thing, you know, watch, I would say to any dealers like watch your turn over the next 14 to 21 days, because on those vehicles that you have already reconditioned and you have the right price point and the ability. To make margin and beat out the market, those cars are going to, you know, obviously have a fixed price. You don't have to worry about the price changes on parts. But watch your turn, because if those vehicles turn quickly, and the recoup of those vehicles comes in with a higher cost, you just got to watch like to make sure that you have the right available inventory going into May and June.

Vincent Salvagani: 15:23

Good luck. We have a temporary known, in a in the right, around the corner, an unknown. And you're absolutely right, that car that I sell today, I may replace, you know, weeks or months from now, at a at a much higher cost, and then, and then that same consumer that just purchased that vehicle is going to expect to pay that much more for that exact same That's right, absolutely. Well, Vinnie,

Paul J Daly: 15:46

thank you so much for giving us a few minutes of your time. I know you're running all around you named all of your dealership children. So well, we're all going to ride this one out together, and if you're out there you need some help, just pay attention. Send us an email. We'll we're here for you.

Vincent Salvagani: 16:00

Nice call. Thanks. Nada.

Unknown: 16:09

You.