With dealers having spent the last 12 months placing egregious markups on automobiles, it has become a seller’s market, to say the least. New vehicle transactions are currently averaging $6,000 more than they would have been in the previous annum. But prices had already climbed by $3,000 (year-over-year) in 2020 due to production shortfalls, encouraging fleet managers to scoop up every used vehicle they could find until secondhand cars became likewise overpriced.
It’s an abysmal situation for consumers and automakers have begun to realize they’ll be getting blamed if something isn’t done. As a result, we’ve started to see manufacturers publicly chiding showrooms for placing lofty “market adjustments” on new automobiles. Ford Motor Co. and General Motors have both made formal declarations that they’ll be penalizing dealers who issue ludicrous markups on products wearing their emblems, with Hyundai Motor Group issuing similar threats to greedy retailers this week.
Automotive News intercepted a letter the automaker sent out to dealers suggesting that anybody setting prices well above MSRP was negatively impacting the Genesis, Hyundai, and Kia brands. It also warned that such actions could result in the relevant showrooms seeing reduced allocations, advertising support, and incentives (though the latter item doesn’t really exist in 2022).
The notices were signed by Randy Parker, senior vice president of national sales at Hyundai Motor America, and Claudia Marquez, COO of Genesis Motor North America.
“We are writing now because with great regularity our customers around the country are voicing displeasure with certain pricing practices which, if left unchecked, will have a negative impact on the health of our brand,” the letters said.
Hyundai seemed particularly displeased with dealers who had advertised vehicles at one price only to raise it ahead of a sale.
“All of these practices result in the sale of vehicles for above-MSRP prices, in some cases way above-MSRP prices, damaging our brands’ long-term ability to capture new customers and retain loyal ones,” explained the letters. “You are, as an independent business, of course free to adopt any policies, including pricing policies, that are consistent with the law and your contractual obligations. But we cannot stand idly by watching the actions of the aforementioned dealers undo all the efforts we collectively have put into making these brands what they are today.”
Some manufacturers appear to be coming to the realization that shoppers have memories and might recall the name of any brand that overcharged them. While that may ultimately have less to do with the factory than the dealership, most consumers won’t bother to differentiate. Unless the economy has been irreparably damaged, prices will eventually stabilize (used vehicles actually came down a little bit last month) and there will be a few million people upset that they overpaid.
That could be enough to send them elsewhere for their next automotive purchase. Though the real surprise is that only a portion of the industry seems aware of this possibility and it took them a whole year to figure it out.
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