The Dealer Playbook

Ep. 659 - Expanding Your Dealership’s Revenue Stream, with Shahin Alizadeh

• Michael Cirillo

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In this episode, my guest is Shahin Alizadeh, President and CEO of Downtown Auto Group – a powerhouse in the automotive and real estate industries. Shahin has redefined what a dealership can be, transforming a small, struggling lot to then developing a leading edge Auto Complex

But this isn’t just another dealership success story. Shahin dives deep into how he leveraged prime real estate to create a hybrid model that generates revenue from car sales, fixed operations, and real estate development – a strategy that’s turning heads across the industry.

We explore the bold moves that took him from washing cars to managing multiple brands under one roof, the challenges of convincing OEMs to embrace a non-traditional model, and why he believes every dealer should think like a developer.

Plus, we get into the rise of Chinese auto brands, the impact of skyrocketing land values on the dealership model, and the future of automotive retail in urban markets.

If you’re looking for practical ways to elevate your dealership and tap into new revenue streams, Shahin’s story is the blueprint you need.

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MC:

This episode is brought to you by FlexDealer Auto industry. Welcome to this special episode of the Dealer Playbook Podcast. I'm sitting down with Mr Shaheen Alizadeh. I can't wait to get into the subject matter today. It's something we have, I promise you, never spoken about on this show before. Mr Alizadeh, thanks so much for joining me on the podcast. Pleasure to be here. Well, it sounds. From what I can understand, it sounds like you have a car business family.

Shahin:

There are, yes, there are, two sets of cousins that are both in two dealer groups. There's this performance auto group and ours is downtown auto group. Mine is more, shall we say, downtown centric, toronto centric, whereas theirs is kind of a broad spectrum of locations.

MC:

Okay, and what was your foray into the auto industry?

Shahin:

Well, it was working at a university, trying to pay bills and washing cars, driving parts trucks, doing whatever had to be done. And that led to, when I came out, when I finished school, looking for a more traditional job, and they weren't as exciting as I had thought they would be with having finished 16 years of schooling. So I went back to selling cars and I guess in some ways I must have done pretty well, because it sort of evolved into a more fast track, if you will, sales management. And then an opportunity came along in around 1980 to actually pick up a small BMW Mazda dealership which at the time was just about going out of business, and we kind of resurrected it from the dead. And that's how I got into beverage and so I grew from there.

MC:

I heard you say there were a lot of sleepless nights.

Shahin:

Well, anytime you start a business, I mean I remember when I first started. Anytime you start a business, I mean I remember when I first started. First of all, it was an era where there were opportunities for people like me who didn't have piles of money behind them. It wasn't like there's a family treasure that you drew from. And it was tough because you had to deal with banks, you had to deal with manufacturers, you had to deal with staffing, none of which I had really been totally exposed to. So it was a learning curve.

Shahin:

I kind of learned as I went, but the key was to have kind of set a goal and say, okay, where do you want to be in five years or 10 years or 15 years? And that's kind of what I did, and I was fortunate enough, I guess, to be able to accomplish that in a way that you know. Got into management quickly. Then, as I said, got into a small dealership and let me tell you, when we started this dealership, there were like six of us and I was everything from a front desk to a sales manager, to a salesman, to an owner, to a general manager, all positions wrapped into half a dozen people. But fortunately, we grew it from that small operation to when I sold it in 1990, we had over 120 employees and had one of the more successful operations in the city and so moved, looked at maybe getting out of the car business, and that was not to be. The temptations were my wife and I lasted all of two weeks in a sunny spot before I said I got to get the hell out of here.

Shahin:

You're not wired that way, no. So I came back and started focusing on the downtown business. And because I lived I'd always lived downtown and I love downtown Toronto I think it's one of the most exciting cases in North America and, notwithstanding whatever political stripe you attach to it or what have you, it's a great place. And so I enjoy being downtown. And so we started assembling some dealerships and started with taking over a Mazda dealership downtown. Then I was appointed to the Saturn Sabu Suzu dealership which, as you know, is extinct currently. It was extinct back in 2000 and something.

Shahin:

And then our big break came when I was awarded the Toyota franchise in downtown Toronto and a small operation, but the brand was at its I wouldn't say certainly infancy, but it was at a time this was early nineties and there certainly wasn't the kind of momentum that the brand has today. And so we it wasn't an easy process we kind of did what we had to do and fortunate enough to take over the competing Toyota dealership down the street from us and consolidated Toyota's business in the city. And then came the reality of how do you deal with the? The? Well before we get to that, others, other brands realized that perhaps I had kind of gotten a feel for what's what it's like to be downtown. So I got approached by a number of brands hyundai, nissan, infinity, and and so we started these kind of makeshift facilities all over the place, and not really because of anything other than the fact that it was not possible to do a traditional, you know, two-acre site in downtown Toronto that could constitute a realistic relationship between real estate values in this market, where lands even in by early this would have been 2010, 11, lands were still 15, $20 million in AFIR, and so to justify a traditional lot just didn't make any sense. So we had a fortunate enough to be able to acquire a not just a dealership, the Toyota dealerships site which we owned, but next door, and we assembled roughly a five acre site, and then it sort of became a question of how do you deal with that, based on values again. So we partnered up with a development company and which were traditional condo builders, you know, commercial builders and so we turned a site, just five acre site, into a combination of nearly 900 condos and yeah, it's astonishing when I think about it and seven, eight dealerships in that location.

Shahin:

We started out with Ford, oh, and Ford was looking, ford and Lincoln were looking to establish themselves downtown. So when they heard about our sort of project, they said, wow, we're in. So they joined our forces. We joined forces, I should say. And so they became another. So we had Toyota, we had Ford, we had Lincoln, we had Lexus. At another location, on Dundas, we had Hyundai Genesis, and so we assembled these brands into one call it big, happy family.

Shahin:

It was something that probably would not have been even envisioned 20 years ago, because there's so much of politics, going into images, imaging and who gets what and what's the footprint, and so on and so forth. But I think the OEM partners that I was involved with realized that this is not a market where you can have a traditional business model, so you have to think outside the box, and they did. Fortunately, all of them worked with me. It was not an easy process, but it took me probably from 2012, 13 till 15, about a good two years to get everybody on site. Then came the city. Then having to deal with the city, it was next. We got that all settled with a lot of help from the development partners. They were experts in that subject. So by 2016, we were starting construction and our first building was our Toyota building, and then we went to the South side and started to expand it from West to East, and then came COVID in 2020. Right, and so it slowed us down quite a bit.

Shahin:

And but by the end of 21, what are we in 25 now? In the 21, mid 22,? All the brands were in the auto plexus, we call it, and it has worked well. I mean it's not. Some of my colleagues come and visit and see it and they say, oh gee, I don't know how you do this, but it actually is not that complicated. It's about using common sense and it's about using the most effective utilization of land values, you know. And space, I should say so we have roughly 60 service bays below grade that services all of our brands. We have nearly 500 spaces for parking on its four levels below, three levels above. And you know there are days when it's really busy during the spring busy service season. You know you have some pressures that are a little too much, but generally I think we've managed to kind of learn our way around working with these environments.

MC:

It's not for everyone I can tell you I have. Well, we know, based on the number of people I know who have done this, which is one.

Shahin:

Now, well, I've had visits from some us retailers who have looked at it and that's why I said there was a san francisco dealer toyota dealership that the owner and general manager came up and spent some time with me and the next thing you know they were in automotive news, retail and residential in downtown San Francisco. So I think we've started the trajectory that is going to be, over the course of the next few years, more and more taken into consideration.

MC:

Hey, does your marketing agency suck? Few years, more and more taken into consideration your better quality leads from local SEO and hyper-targeted ads that convert. So if you want to sell more cars and finally have a partner that's in it with you, that doesn't suck visit flexdealercom. Let's hop back into this episode. I've been doing this show for 11 years. I think this is the first time I'm speechless.

Shahin:

Should I be proud of that, or should I?

MC:

be pissed. Yeah Well, because my second inclination is I don't have much money, but how do I get involved? I'm like let's go and build residential at dealerships all across North America. There's something there.

Shahin:

Well, I know some colleagues without necessarily divulging their names that are looking at sites that are not necessarily in downtown area, but they also have come to the conclusion that the land value just doesn't justify being a car dealership To have a three-acre site and for vehicles to be parked all over the place. It really makes no financial sense.

Shahin:

I don't care where you are, unless you are in some remote city or town in northern Ontario or in Saskatchewan where you don't have density, population density, where you don't have the pressures of real estate because of space. Other than that, I think we're headed in a direction that is very much aligned with what I've done and I've been a genius to think about it. It's just the pressure of having to decide how do you take a five acre site, which on its own has considerable value, and deploy it for an automobile dealership?

MC:

We just can't Right, right. Well, and you? I mean you created another profit center. We've got variable, we've got fixed and now we have passive real estate.

Shahin:

Exactly so. That was the kind of incentive because our partners were in that business and we made a deal with them. We said, look, whatever happens with our condos, wonderful, but we want our auto place, as we call it, with certain amenities at a certain price. And that was their incentive to partner with us.

MC:

Do you know how many of the 900 residents?

Shahin:

sold out bought cars from you.

Shahin:

It's an interesting question. Quite a few, quite a few. We do offer incentives. We do offer kind of neighborly deals. It's a, you know, it's a kind of a double-edged sword. There are also some residents who may have not realized that being next to 300 employees in a seven-dealership facility has its drawbacks too. You know, a truck pulls up dropping things off and the neighbors get a little irate and we have to deal with it. But for the most part, yeah, we have quite a few of our neighbors that purchase cars from us. I mean, you know, I've been downtown now for 30 plus years as a dealer. And the notion of people moving into a condo in downtown Toronto and say, well, I really don't, I'll take Uber and I'll do this or that, is a fallacy. I really don't, I'll take Uber and I'll do this or that, is a fallacy, because what happens is they end up having to visit their parents in the suburbs.

Shahin:

They end up having to go traveling and car share programs are a wonderful idea, but the availability is. You know, a friend of mine who's in that business said, you know, from a Thursday to a Sunday, forget it, there's nothing to take. So we're seeing people gravitating back to in fact, I was reading an article in Automotive News yesterday or the day before, where young generation is not as adverse to purchase of a car, mainly for transportation. They're not as much into the status of any particular brand, but they really need to have that freedom and to be able to just feel that they can jump in their car and go somewhere Sure, and that's not something you can do with CarShare and with Uber and the rest of it.

MC:

I'm not one for curveballs, but given your vast experience, I have to ask you this. I was just in Holland speaking at some events there. In that market there must have been 30 of the Chinese auto brands.

Shahin:

Right.

MC:

Are you watching that market? What are your thoughts on how that might impact Canada and North American markets?

Shahin:

Well, the political landscape has pretty well defined their growth. You get BYD is now a larger electric producer electric producer than Tesla will ever be there by a long shot and so what you've got now is a sort of almost a hold off, a holding pattern for the Chinese. Everyone in North America is fearful. Okay, what happens? The problem with the Chinese brands is, let's be honest, the Chinese are great visionaries, great executors, but they don't play it fair. They don't always play it fair when it comes to pricing, when it comes to what it takes to. I saw an article that if you were to produce, even in China, some of the vehicles that are being sold at ridiculously low prices, you'd go out of business. But there you have government support, you have these big conglomerates.

MC:

There's an agenda. There's an agenda for sure.

Shahin:

So am I worried? Well, I think I'm getting to a point in my career that in my lifetime I don't think they'll become a huge threat. And mainly because, even if they assumed, even if one were to assume that they would have some traction, they would have to set up a dealer network. They'd have to set up service. Sure Right, it's a long-.

MC:

There's logistics. Involved politics. There's logistics involved.

Shahin:

So, listen, I drove a Chinese. Someone brought me one a couple of years ago last year actually, I drove one of the Chinese brands and I was very impressed with it. I mean from a vehicle, face and finish and all that. It's not something that you know. It's not the same Chinese as 50 years ago when we looked at a Chinese mechanic. But I think there's too much, in my opinion, there's too much baggage with the whole process of trying to launch the Chinese product. And in fact, in Europe they've been quite successful sure?

MC:

yep, yeah, I was. I mean, I was blown away by it, so that that that makes all the sense in the world. The second thing I want to pick your brain on is you've seen many ebbs and flows now in our industry yes in addition to maybe at times creating your own in figuring out the real estate. What's your take on this whole tariff thing? Do you think there's a bigger agenda at play?

Shahin:

I you know, if you were dealing with logic and rational thinking, you would not even consider it. Quite frankly, regardless of the disproportionality of trade balances, you know, the president of the United States claims that they're subsidizing us by $200 billion. That's just a trade surplus. I mean, it's as simple as that, and I don't think the man is not smart enough to know the big difference. So I think there's politics involved, there is posturing involved, but there is, I don't know. I mean, are we talking 51st state? I don't think so. Are we talking, you know, sending troops to Ottawa? No, I don't think so. I don't think so.

Shahin:

So you know again, I've been at this game long enough. I remember the days when the government of Canada prohibited us from bringing so many imports from various countries and we were limited. If you were a Japanese car dealer which I was you couldn't get what you wanted because they had quotas. So I've seen ridiculous decisions like that as well take shape. But at the end of the day, our biggest problem with our industry is that political shifts don't always align with where the OEMs are headed for I was at the conference with CADA and speaking to a couple of OEM presidents, both of whom say you know what, when you think about all the anecdotal parts of this tariff business, the reality is the OEMs have to have a window that they can decide what is next, what comes next and unfortunately politics has taken over.

Shahin:

I mean, the Zev mandate that was enacted is you know both sides of the border, we seem to pretty well. You can kiss that one goodbye as far as I'm concerned. So I think the tariffs are a talking point. It's negotiations, it's posturing, I don't know, I'm not an expert. It's negotiations.

MC:

It's posturing? I don't know. I'm not an expert, well, although given a very clear and wisdom-filled answer on that, so I don't know who might have to rethink the expert thing. For sure you know a lot. There's obviously any of the conferences or trade shows or events that we attend in this industry tend to talk about the friction, or potential friction, that exists between the dealer body and the oem. You know, from your vantage point now, working with many different oems, what do you think the solution is to this? How do we come together and say, well, we are the distribution network and you are the, you know, the creation network. Let's find a path that's, you know, for the benefit of the customer and get past this kind of one sidedness that we tend to always fight against?

Shahin:

I wish I had a. That's a discussion. That's, as I said to Rose, we're not going to cover in 30 minutes.

MC:

That's a discussion that needs 30 days.

Shahin:

I'm always. I have served on dealer advisory boards, I've served on dealer councils, I've served at the regional marketing and you know, 44 years of being a dealer you tend to. You've done it all, I've done it all, but one thing that I think has become over the last few years much more clear is that neither side can afford to kind of work in isolation Not the dealers and nor the OEMs. There has to be a partnership, especially given the wacky governmental side of things. So for us to get together and have a three-ring circus between us, the OEMs and the government, we would lose. So I think the solution, in my opinion and I've shared that with my OEM partners is a partnership. It's to define what is the best approach to combat not just tariffs but market conditions and ZEV mandates and you name it.

Shahin:

So traditional conflicts that we've had between dealers and OEMs are, in my opinion, and OEMs are, in my opinion, pale compared to the bigger picture, which is what is the future of retailing? What do we want? Is it direct sale has worked for some, hasn't worked for a lot. Is it a? You know, I have a Genesis operation distributorship, as we call it. It's very different than the traditional relationship. We don't inventory cars and it's worked out well, but it's still a partnership.

Shahin:

It's not like there is a heavy hand or hanging over your head to tell you what to do. It's just we have upfront pricing, we have consistency in how the 30, whatever number of dealers there are, how we all behave, and I think that's the kind of format that can lead to a more sustainable long-term plan, because we know it's going to change. One of the things that I envisioned within our Aut plex was the flexibility to be able to change If things happen, if adversarial things happen between two brands and things don't go well or at least something happens and somebody shuts down and decides to move on. You have to be flexible and the only way you can maintain that flexibility, in my opinion, is by working together and be true partners. The governments, in my opinion, will never be anybody's partner.

MC:

No, I agree, that's my personal opinion. They can't even figure out how to be each other's partner Exactly.

Shahin:

Two parties, three parties I don't care how many parties you have From a political perspective, and both here, US, Europe. Political processes are dysfunctional, yeah, and they can't decide for themselves, as you stated, how to maintain a certain sense of direction, let alone them deciding what car should be sold, under what condition and at what point. So that's where I think the dealers and the OEMs owe it to each other to get together and decide you know what are we doing here?

Shahin:

Where's our future? You know, you read about dealers up in arms and one of the brands is introducing a division of theirs in the US with direct sale and dealers are up in of theirs in the us with direct sale and dealers are up an arm going. You know, I don't get it. I really don't get it. I'm sorry, maybe I'm too old and too jaded, but I don't get it right someone to to disrupt what is effectively a working model. That's sensible, may need tweaking, may need adjusting, but if it's working, if it ain't broken, don't fix it. That's my philosophy, but it makes sense well, and the cascade of that.

MC:

To me, the implication of it is, even when I buy things online, when I have a problem, I still want to talk to a real person, absolutely, you know, and and so there, there's always an element of the human relationship that I just don't see us getting over, even in this quote.

Shahin:

Unquote direct to consumer you know people compare us to. Well, if Amazon can be a direct sale process, why can't we just gravitate to that? I get it and I think there is absolutely no question in my mind that a good portion of our industry is headed for some type of an online. In fact, it already is. Genesis was a really good example. When we launched Genesis in Canada, the idea was no showrooms, boutiques and I was one of the first boutiques in Canada and everything being online. Like you go on Genesisca, you got your car, you decide there's no price negotiation and you go pick it up. So that went on for about, I'm going to say, two years, from 17 to 19.

Shahin:

And I always believed in my own gut that at some point we would gravitate more to brick and mortar. Sure enough, we did so. Now, if you're a Genesis retailer, you have to have exactly the same stuff that every other OEM had, and it's fine, we're all doing it, we're all working with them. But the notion that you could have used cars is a different scenario. Used cars, you know Carvana has done in the market. Some of the other, that interaction between a hopefully a professional salesperson, sales associate at a retail facility and the consumer so that they know what the hell they're getting themselves into Right, I agree.

Shahin:

And all the research and all the you know, reading up on everything there is, does not equal to having a professional dialogue or conversation with someone who does this for a living.

MC:

Right. Well, the amount of enlightenment that can be received through the exchange of energy in person can't be replicated online.

Shahin:

It can't. It can't and I'm a big believer. My preaching to our theme is treat your customers to come into as though they're a guest in your place. They're there to learn, they're there to understand why they should do business with you. And if you just follow that simple process, I think and not that I'm saying we always do it- it's what you aspire to, and not that I'm saying we always do it because we fail. It's what you aspire to, no-transcript.

Shahin:

I mean remember 2000, 2001, 2002, you know, everybody said it's a franchise model, the dealer model is extinct. Right, that's everybody. I remember going to an NADA convention I think it was 2000,. And literally the entire exposition was about suchinsightscom, Right, right, and there was, and you know, I looked at it and say, yeah, okay, if that's what it is, that's what it is. But fast forward, they all went up, fell by the wayside. None of them actually survived.

MC:

Right. So and here we are all these years later. Isn't that funny about human nature? It's we tend to lean towards the absolutes, and then the absolutes that we thought were absolute end up not being absolute at all. Exactly Well, this has been one of my favorite conversations, particularly through the lens of my own bias, which is an aspiring real estate entrepreneur and perhaps car dealer at some point. I can't tell you how many times during this conversation I said I need to get on a wait list to be one of the people who live in one of those buildings, because I just want to come and live in a dealership environment and observe you. I want tax advice, I want entrepreneurship advice, I want everything from you, and so I would love the opportunity to have you back on the show. I would be delighted. Well, I appreciate your time. Thank you again, mr Aliza Day, for joining me on the Dealer Playbook Podcast, nice to meet you Likewise.

MC:

Hey, thanks for listening to the dealer playbook podcast. If you enjoyed tuning in, please subscribe, share and hit that like button. You can also join us and the DPB community on social media. Check back next week for a new dealer playbook episode. Thanks so much for joining.

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Michael Cirillo

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