Hyundai and Genesis are the latest automakers in the US to threaten dealers with punishment over marking up vehicle prices. Automotive News obtained the letters that the brands sent to showrooms.
“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,” according to the letters.
The automakers cited behavior like advertising one price online but having a higher cost in the showroom as an example of what dealers shouldn’t be doing. The companies warned that the high markups were “damaging our brands’ long-term ability to capture new customers and retain loyal ones.”
If a dealer is doing this type of thing, Hyundai or Genesis could respond by reducing vehicle allocations or by taking away advertising benefits. “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,” the letters said.
With the lack of supply from the ongoing computer chip shortage, there’s still high demand for vehicles. Dealers are responding by placing markups on vehicles because buyers are willing to pay the extra money. Some showrooms are taking this to extreme lengths like asking nearly $80,000 for a Kia EV6, which is almost $19,000 over the sticker price.
Some automakers have responded by warning dealers not to place too high of markups on vehicles. For example, Ford suggested a two-part strategy for the F-150 Lightning. First, it threatens dealers’ allocations of the electric pickup if the automaker catches a showroom doing something unscrupulous.
At the same time, Ford lets dealers make a contract with buyers that would prevent the customer from selling the F-150 Lightning for one year. This prevents a person from purchasing the electric truck and immediately flipping it for a profit.