Sometimes, the laws of supply and demand can lead to some pretty outrageous prices, as demonstrated by low-volume, high-demand vehicles like the C8 Corvette Z06, GMC Hummer EV, and Cadillac Escalade-V. Per previous GM Authority coverage, some vehicle owners have opted to quickly resell these high-demand GM vehicles for vastly inflated prices, a practice known as flipping, prompting GM to come down on those owners with a list of harsh consequences. But what about dealers who charge ridiculous prices? Should there be consequences for the dealers as well?
First, a little background. As GM Authority was the first to report over the past year, General Motors is imposing restrictions on buyers who purchase a low-volume, high-demand vehicle like the Corvette Z06, GMC Hummer EV, or Cadillac Escalade-V. These restrictions usually involve “forcing” the customer to sign a waiver that their vehicle’s warranty will be voided and they will be prevented from placing a future sold order or reservation for another high-demand model (as determined by GM) if they choose to resell their vehicle within six months of taking delivery, all in the name of discouraging owners from flipping the vehicle for a quick buck.
The question, then, becomes this – what about the incessant dealer markups for these very same vehicles? Shouldn’t these restriction go both ways?
As it stands, GM is somewhat limited in what it can do, as it is unable to set the final vehicle selling price. Technically, GM sells the vehicle to the dealer, which is then free to resell the vehicle at whatever price it deems correct. That said, GM did send a letter to dealers early last year warning against “demanding money above and beyond the reservation amounts set in GM’s program rules,” or “[requesting] customers to pay sums far in excess of MSRP in order to purchase or lease a vehicle.” Per the letter, the consequences for such actions could include rerouting a dealership’s allocations for high-demand vehicles to another storefront, among other actions described by the Dealer Sales and Service Agreement.
Unfortunately, it appears as though the warning letter didn’t really help the situation.
Now, it should be mentioned that there are laws in most states which prevent the OEM from setting the price on its cars, which protects the dealer. However, there could be other avenues to explore in preventing the insane markups seen on high-demand vehicles. For example, dealers could be required to sign a separate agreement when selling high-demand vehicles which could include a clause stating that markups are prohibited.
Either way, GM should put some of its vast resources, which includes brain power and legal knowledge, towards exploring other methods to prevent these markups. And that’s definitely in GM’s interest, as indicated by one recent study showing that markups can negatively impact both the brands and the dealers.
As if that wasn’t enough of a reason to get this done, then perhaps Tesla will actually force the issue. Tesla doesn’t have dealers, but rather, the EV producer sells its vehicles directly to consumers, and thus, there are no dealer markups when buying a Tesla. But if GM is forced into doing something about the markups, rather than being proactive about it, it might be too late – after all, there is a reason GM’s stock hasn’t kept up with inflation, while Tesla’s stock is trading at well over 100 times the inflation rate (and with just a four-vehicle lineup at that).
Either way, GM needs to reconsider this issue and get moving on locking down dealers – just like it’s already locked down on customers.