Ask The Best And Brightest: Will Dealer Markups Kill The Volt?
Well, the debate over the viability of the Chevy Volt has been well and truly joined, as political and auto writers around the web spent the last week weighing in on the issue. Needless to say, a scan of these opinions shows that my NY Times Op-Ed has drawn a wide variety of reactions, ranging from complete agreement to utter contempt. But, in a phenomenon that seems all-too common on the internet these days, very few commentaries on my opinion (positive and negative alike) bring more detail or nuance to the issue. Which is too bad, because I’d be the last person to argue that I’m capable of doing complete justice to an issue as complex as the Volt in only 900 words. The variables and unforeseeable consequences floating around the Volt’s future are so vast and varied, no writer could possibly hope to cover them all. And one such problem didn’t even emerge until the day after I wrote the Times Op-Ed: dealer markups on the Volt.
Edmunds AutoObserver got one California dealer to admit that he plans on charging $20,000 on top of the Volt’s $41,000 base MSRP. And as AutoObserver’s Bill Visnic points out
Unlike typical gouging for high-demand vehicles, the Volt situation transcends mere dollars and cents and moves into the political realm. Will GM sit on dealers scheming big-time price-gouging on the Volt – a car that features a $7,500 federal tax subsidy funded by the same taxpayers who already bailed out GM?
And what would President Obama think – he drove a Volt last Friday and defended GM’s controversial $43-billion bailout – about dealers demanding an incredible markup for a car that’s supposed to help the U.S. auto industry move into a new era and become self-sustaining again?
The market has proven time and again that customers who pay big markups for in-demand models end up the sucker, so caveat emptor. But dealers clipping the very people who helped keep them in business is a new and ugly twist on an age-old auto-industry phenomenon.
A reader at Autoextremist wrote in to say that another dealer was planning on charging $10,000 over the Volt’s MSRP [incidentally, I rarely agree with Pete DeLorenzo as much as I did with his latest rant on the Volt, which may be one of the best pieces on the topic I’ve read in some time].
But whether dealers charge $10k or $20k almost doesn’t matter, considering how crazily expensive the Volt is already. So what’s GM going to do about it? GM’s Rob Peterson tells the Freep
We don’t control any pricing at the dealership, However we have suggested strongly that they keep prices in line with what we have offered
Which means that the debate over the Volt’s price has been entirely academic thus far, since nobody knows just how much one will actually cost at a given dealer. Sure, the Freep found one dealer who promised to charge nothing on top of MSRP, but after the rough couple of years that most Chevy dealers have had, that honest soul is probably going to be in the minority. Even an informal poll at the Volt’s officially-unofficial fan site gm-volt.com indicates that gouging will be rampant. Well, it would if the majority of die-hard fans ever get around to talking to a dealer instead of simply commenting about how the Volt is, in fact, the future of motorized transport. On the other hand, gm-volt’s “dealer gouging” forum offers plenty of reasons to simply run away screaming.
A Volt at $41k is one thing… and I’m sure that early adopters will snap up the first year’s run of 10,000 units at that price. But at $60k? And what dealer is going to offer a lower-cost lease when they can simply auction Volts off (as it appears some are doing). GM might not have a ton of leverage to stop dealer gouging, but shouldn’t The General be trying to do something?
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Dealers will charge what the market will bear. If they can get $20K above MSRP, they will. The Volt may also sit in dealer lots until the price is $30K all in, and that's also what may happen. I have no love for car dealerships, but if there are people who so desperately want the Volt that they will pay the added mark-up, well, so be it. I am NOT a GM fanboi, but I have to say that I'm astounded at the level of hate for the Volt, and for GM, on this site. If everybody stopped buying from GM, American and Canadian taxpayers end up with nothing. I truly hope that GM can make a go of it and repay some if not all of the debt owed to the people. If the Volt helps with this, then all the better. I know the Volt doesn't represent totally all new technology, but the fact that it may actually travel 40 miles without needing the ICE, and the fact that it can be plugged in or recharged as it's driven is cool, I think. I can't wait to see one up close. I am very intrigued by the concept. More importantly, my wife is fascinated by the fact it may go 40 miles on electric power only. What follows is the conversation we had while driving home from Minneapolis on the long weekend. It began with her asking me what was the GM Volt, and if it was electric: "Why does it have a motor! How is that possible with batteries?" A freight train moves past, pulling over 100 cars behind it. I point it out to her and explain that the locomotive is similar in concept. "So how does it run, then?" she's unusually curious about the mechanics of a vehicle. "It's an electric car that uses a gasoline engine to recharge the batteries as it's driven by electric motors." I explain, with the freight train rumbling it's one note song. "So because my commute is only 45 kilometers in total, I won't ever have to fill the tank?" she asks me. "Not unless you go over 70 kms (40 miles) between plugging it in." I tell her. "So as long as I plug it in, I'll never have to put gas in it?" she asks, fascinated. "As long as you travel no more than 70 kilometers between charges, you'll never need to put gas in it." I answer. "So it's better than a Prius then?" (It's the only hybrid she knows by name.) I had to tell her the truth, that I don't know the answer to that. What's important, and that a lot of people commenting on the Volt fail to realize, is that my wife, (and a lot of other "pilots" as opposed to "drivers") doesn't see the purchase price as part of the "ecology" of ownership, but she does see the benefit of never having to put gas in a car. In Canada, electricity is a hell of a lot cheaper than gasoline: if she hardly ever has to fill the tank, especially at the much hated BP or Petrocanada, all the better. The other selling point, which she recognized right away, is that if she exceeds the 40 miles of electric power, the engine will get take over, and she won't have to worry. As I have pointed out numerous times, my wife is the prototypical "pilot". If the Volt eliminates one of her hated duties, which is filling the gastank every week, she's going to be interested in it. She won't ever pay $41K for it, but if she could buy it for under $30K, she will. I think the Volt has a market, and it is centered on the "gotta have it first" buyers, "greenies" and people like my wife, who, if the price is cheap enough, will pester me to buy one for her. Man, some of you folks need to get over your hater attitude. GM is not the GM of 1970 (Vega) or 1980 (Citation) or 1990 (Cavalier), or even 2007 - it's way better product in the last two years than GM has had in decades. Again, I'm NOT a GM fanboi (Toyota and Ford for me), but some of you have to loosen your grip on the past and embrace the present/future.
The phrase 'letting the market work' when it comes to dealers is misleading. If there was a true market in Volts, I could go to Chevy Dot Com, transfer $41K (+ sales tax + registration + destination, etc) from my bank to Chevy. Then, in a few days, my Volt would be delivered to my house. BUT THAT'S NOT LEGAL. Dealers (via their state legislators) have made it so. Of course, if such an internet sales channel WERE possible, aggressive speculators would get Volts early. And flip them. But the greater number of possible transactions would flatten the market quicker. Which is part of what's wrong with the retail car biz. A store with a 30 foot 'Chevrolet' sign can treat customers (and the long term health of the brand) like dirt. OEM's have little control.