General Motors Warns Dealerships To Stop Shady Pricing Tactics
General Motors falls in line with other major automakers including Ford to maintain fair pricing at dealerships.
In early January of 2022, Ford sent a letter to dealerships across the nation stating that any unethical markups on their sought-after
F-150 Lightning
would not be tolerated. Now, General Motors—parent company of Chevrolet
—is issuing the same warning to dealerships: Sell cars at a reasonable markup or lose access to our product. Why are dealerships price gouging buyers?
To understand why some dealerships would be inflating prices well beyond MSRP value, consumers have to know how the dealership model was created in the first place.
In the early days of car sales, launching a new model through a dealership helped mitigate the risk taken on by the auto manufacturer, and allowed them to outsource the labor of maintaining a retail space to dealership franchise owners. In many states, there are still laws in place banning direct sales of cars by manufacturers.
Like many other parts of the automotive industry, this process has been vastly disrupted by Tesla, as the ultra-popular electric car company follows a more direct-to-consumer sales model. The cars come at a set price which is ordered online, and there is no dealership negotiation to be had about the final sale.
With this disruption in the traditional sales model, many smaller dealerships are struggling to compete, and are inflating prices or selling through brokers to mitigate lost sales.
What General Motors is doing
While current state laws put much of the power in the hands of the dealership, manufacturers always maintain the right to deny products to certain dealerships should they disagree with their business practices.
For years, automakers were making more cars than they could sell and were competing to discount them. Because of supply chain shortages, many are simply not able to produce as much product as before and are pulling back.
KBB
reported that, according to a letter published by GM North American President Steve Carlisle, “a small number of dealers have engaged in practices that do not support a positive sales experience for our customers.” The letter implies that even in a market where manufacturers aren’t able to produce as much product, buyers still have the power to shop around for an ethical dealership to get a fair price.
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