By on February 23, 2022

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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.

[Image: Hyundai]

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54 Comments on “Hyundai, Genesis Warning Dealers About Markups...”


  • avatar
    ToolGuy

    Why do Koreans hate capitalism?

    • 0 avatar
      Heavymetal_Hippie

      This has zero to do with capitalism or the myth of a “free market,” which hasn’t existed in the US for over a century. This has 100% to do with the car dealership industry lobbying for decades to get state legislatures to pass franchise laws that benefit only the dealers, not consumers. It’s the opposite of capitalism, actually. If it really were “capitalism,” consumers would be able to choose whether to purchase from a dealer, or direct from manufacturer. Car dealers are the best example of a parasitic middleman that adds nothing of value to a transaction. This has been explained so many times on this and other websites I don’t even know why I bother still attempting to enlighten the uninformed…

    • 0 avatar
      twotone

      On a similar note, I’d gladly pay MSRP (or a bit over) for a new stainless steel Rolex sport watch from an AD. Good luck with that.

    • 0 avatar
      RHD

      On many, many websites, all over the world, the first comment on a new article is a troll, who tries to incite dissatisfaction with democratic governments and free markets. They foment discontent with science, education, whichever government is currently in power, and so on.
      You can see this pattern all over the internet. It’s subversive, and effective (see: Canada truckers, January 6, recall efforts, etc.).
      ToolGuy is obviously such a troll. His (or her) posts have no credibility.

    • 0 avatar
      Kyree

      Well, for one thing, Hyundai Motor *America* issued this statement, which isn’t “the Koreans.” The Korean management probably wouldn’t insert themselves into this sort of thing, which is why Hyundai Motor America exists as an entity, to respond to local conditions. Also, Ford and GM, which are American companies, have issued similar statements.

      Yes, all else being equal, the dealer should be able to charge as much as they want. But it’s also within the rights of the automaker whose brand is on the grille—and with whom the dealership has a franchise—to be able to penalize them for it, or to allocate future inventory accordingly.

      Now, if the federal or state governments were drafting legislation to cull dealer markups, I could see your point. But this is the free market regulating itself, with two independent entities (the manufacturer and the dealer associations) making their own choices.

      I’m not sure what your point is.

      • 0 avatar
        ToolGuy

        @Kyree,

        The ‘traditional’ dealer model vs. direct sales has come up a lot on this site over the years, and invariably the conventional wisdom comes back as:
        a) the dealers save the manufacturers a ton of money and hassle
        b) the dealers provide an important value add to customers
        c) the dealers are independent small businesses and deserve to make a living
        d) the dealers support little league baseball and pet adoptions (not making this up) and therefore it’s ok if they rip some customers off occasionally

        All of this despite two hard facts:
        I) The dealers earn a significant margin on new car sales which the manufacturers could capture under a direct sales model
        II) The manufacturers (e.g., Ford) have initiated direct sales attempts in the past

        [And I have posted very serious comments related to the above, complete with data, which 96.3% of people promptly ignore.]

        And then you have numerous people complaining that dealers aren’t the most benevolent people on the planet when it comes to fair treatment of customers (sales, service, whatever).

        I don’t like being lied to and I don’t like it when people lie to other people and make money off their ignorance. I have a long tradition of trolling my kids with false or partially false statements to teach them to think for themselves and not fall for propaganda. I troll everyone. I troll myself.

        My ‘Korean’ question above was unquestionably stupid – but it does represent (in a satiric way) one point of view: i.e., because we have ‘free enterprise’ that anything a business does is just fine.

        Another similar (only slightly less absurd) question could be “Why does Hyundai Motor America hate small business?” – you see the point.

        Ford Motor Company has pretty much stated out loud that they are seriously re-evaluating the traditional dealer model for electric vehicle sales.

        When I ask a seriously stupid-looking question, it is most likely because I am encouraging people to question their belief system. [Around automobiles, so many people want to just parrot the party line – it’s depressing.]

        (I enjoy your posts. You don’t have to wait for me to say something stupid before you say something smart.)

        • 0 avatar
          bd2

          This has nothing to do with capitalism and everything to do with shady dealership practices.

          As already pointed out, state auto dealership franchise laws (written largely by lobbyists) heavily protect the interests of individual auto dealerships whereby they are free to charge any price they want for a vehicle that they ordered, as long as they clearly state that the price above MSRP is an ADM.

          But unscrupulous dealerships have been damaging the reputation of automakers by taking orders at an agreed upon price (usually MSRP or a little above) and then adding thousands more to the price when the time has come for delivery.

          They also list vehicles as being at MSRP despite having adding all kinds of junk at inflated prices (window tint, Vin etching, nitrogen, rust-proofing, alarm system).

          These type of shady oractices is what automakers are trying to protect consumers from as it actually (unfairly) undermines their reputation even if they had nothing to do with it.

          And it’s not just the Koreans (or actually, the US execs), but other automakers like Subaru and Ford.

          Dealerships are free to charge an ADM, as long as they are clear and upfront about it.

  • avatar
    kcflyer

    I don’t see markups hurting any brands unless or until one major brand steps up and forces dealers to sell at or below MSRP. I don’t see that happening with franchised dealers but maybe this is a chance for TESLA to build brand equity. I realize they have raised their prices regularly and will continue to do so but at least buyers might feel consoled thinking they are paying the same as other buyers of TESLA products. On a related topic, for the last year it seems the Dodge/Ram product lines are better stocked on western NY dealer lots than any other make. Has any one noticed similar trends elsewhere?

    • 0 avatar
      MrIcky

      Yes on Ram being better stocked. I watched an interview with the Ram engineer who was at the last auto show and that was brought up. I don’t know if it’s true but he said it was because Stellantis was better able to leverage their global footprint to figure out ways around shortages.

  • avatar
    mauldin1983

    All dealers have to do to skirt this problem is buy the cars for msrp and sell them as used. Find a “used” vehicle with 600 miles? — You know what happened. I do think consumers’ memories of this will outlast the temporary goldmine dealers find themselves in.

  • avatar
    ajla

    Buying a Genesis or Hyundai (especially their sedans) for over MSRP requires a *dedicated* belief that this is a long-term “new normal” situation.

    • 0 avatar
      FreedMike

      That, or ganja.

    • 0 avatar
      JMII

      These people paying over MSRP are going to be very upset when trade in time comes around in 3 years to find their vehicle is worth WAY less then they think.

    • 0 avatar
      MrIcky

      From an insurance pov- we’re seeing that shops can’t get parts for so long that cars that are clearly repairable are getting totaled. Then we’re getting really high salvage for the parts that remain and far more people in accidents are being pushed to new cars.

      Then we find we can get cars at MSRP if we’re willing to wait for an order and delivery, but cars on the lot and ready to go are at a premium for people who need a car right now.

      Certainly not the cause, but certainly a contribution to the new pricing demands. As an example- there’s an older crew cab 250 that needs passenger side doors. There are 0 new or am doors available right now. They’ve stopped even trying to produce those to concentrate on newer stuff. We couldn’t find a match for salvage doors inside of a 1000 miles. We then found some but the outfit won’t sell the doors unless we buy all 4 for $2.5k.

      • 0 avatar
        WestoverAndOver

        MrIcky, thank you for the insurance and repair story. Here’s mine: On 11/20/2021, I had a run-in with a massive deer in my wife’s 2020 Hyundai Palisade. ~11K in damage. The deer rammed the passenger side very hard and also messed up the interior a little. We dropped the car off for repair on 11/22/21. We are still waiting for the car to be repaired. There have been long part waits, including part-labeling mishaps and the need to re-order and wait for parts again. We still do not know when we are getting the car back. We have been so tired of waiting that we decided to look for a replacement Palisade and sell our current one to CarMax when we get it back. I have a 45.3K online offer from CarMax sitting in my inbox. I contacted a few Hyundai dealers on replacement Palisades. Offers I have received contain 6-7K markups over MSRP. One person told me to get bent when I countered. It is crazy out there. I freely admit that buying the same car you smashed because you are sick of waiting seems nuts, but so does renting a Jeep Compass for months on end, which is also expensive.

    • 0 avatar
      bd2

      Eh, the Palisade (esp. the top Calligraphy trim) and the Genesis CUVs have been selling for above MSRP before the chip shortage really hit, but the poster-child for this is the Telluride.

      It’s been 3 years and the demand for used Tellurides hasn’t slowed one bit.

  • avatar
    cimarron typeR

    meh, charge what you want but don’t grip when I bring in a car I bought 400miles away for a warranty claim
    the avg age of most cars is already close to or over a decade old, whats wrong with adding another yr/15k miles while the business re sorts itself out? Find a local indy mechanic and support him with your business
    I’ll pounce when the next market correction occurs , which will when gas tops 6 bucks a gallon amidst the next/current foreign conflict.

  • avatar
    SCE to AUX

    “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.”

    I don’t hear a lot of defense of the dealer sales model these days, which used to be supposedly lower prices vs factory stores. So much for that argument. Everyone thinks they can negotiate like Donald Trump, but no-haggle price outlets are surging.

    High prices and high margins are with us to stay. Since EVs are typically lower margin, their market growth is going to pressure the mfrs to reduce costs by selling directly.

    As for H/K/G, I’ve seen ADMs on the new Santa Cruz, Ioniq 5, and EV6, on the order of $3000 – $5000. No thanks.

    • 0 avatar
      JMII

      This is why I don’t have a Santa Cruz yet.

      I am in Hyundai’s largest market volume wise (South FL) and the four dealers I’ve talked to are anywhere from $2k to $5k over and never reply my emails. They call me and I kindly inform them its MSRP only or no deal and that is the last conversation we have. One them was especially proud because their over MSRP BS included a “fantastic value” with a paint and fabric protection package. I laughed in the sales fools face and I walked out the door. They tracked me down in the lot as I attempted to drive off and stated they would go up $1k on my trade – which was even more insulting since I never mentioned any trade.

      I’ve given up and will start looking again towards the end of the year. My current truck is 20 years old so its value is pretty much set and hasn’t rocketed up 30% like more modern vehicles on the used market.

      • 0 avatar
        Jeff S

        Same is true for Santa Cruz around where I live. I was looking at Santa Cruz because I was getting impatient waiting for my hybrid Maverick but the Hyundai Santa Cruz is even harder to find than Mavericks so I will wait. Finally got a production date of the week of March 7 but it could be another month before I take delivery from the date of production. Maverick markups above MSRP are just as much as the Santa Cruz.

      • 0 avatar
        Daniel J

        I don’t have a Santa Cruz because none of my local dealerships will get a Limited on the lot. I have no intention of driving a model I’m not going to purchase.

    • 0 avatar
      MitchConner

      @SCE Once production bottlenecks are opened back up the old way of business will return. All it will take is one CMO to come up with a PowerPoint that says “if we crank up production and cut price we’ll pick up a few points in market share while our overall income will increase.” Sure, the profit per model will be down — but that’ll be justified through higher income for a captive finance arm, etc.

      Be patient. Prices will drop — and those who are paying sticker and above are going to be so far upside down they’ll need to unzip their pants in order to see.

      • 0 avatar
        NigelShiftright

        A-yup. Same people who were $200K in the tank on their houses in 2008 are gonna be $30K in the tank on their Tellurides/Denalis/Rams, and for the same reason – “How much a month?”

      • 0 avatar
        Jeff S

        I keep my vehicles for over 10 years so I am not too worried about being upside down since I pay cash. MSRP on the Maverick with $500 off for being a Farm Bureau member seems like a good deal in today’s market. Will get an XLT Hybrid Maverick with full size spare, spray in bedliner, and tray mats including tax, title, and licensing for around 24k. For that I will patiently wait.

    • 0 avatar
      SPPPP

      I have to imagine that the dealers would say something like, “We suffered through the Pony, the Scoupe, and multiple bad generations of the Sonata while we dreamed of this exact moment. Now you tell us not to take profits? Why did you think we bought this franchise in the first place, as a charity?”

  • avatar
    dwford

    I have no problem with the idea of selling cars above MSRP. If a dealer goes from selling 200 cars a month to selling 50, prices are going to go up. Most people understand the idea of supply and demand. But some dealers are taking this opportunity to scam customers with add on fees and mandatory “options,” and to be straight up disrespectful of the customers. That will drive future customers away.

  • avatar
    dukeisduke

    I never thought I’d see the day when Hyundais sold above MSRP. Wow.

    • 0 avatar
      pmirp1

      It depends on the Hyundai. Palisade is a fine vehicle. You stay away from Hyundais that have over stressed tiny turbo engines and dual clutch transmissions.

      Palisade is anything but. It is a comfy vehicle, nice ergonomics, and easy going big V6 and nice normal sequential shift automatic.

      IF you are a car guy you know what to choose even at Hyundai or Kia (Telluride is even hotter).

      If you are not a car guy or gal, just get a Toyota or Honda and life will be good.

    • 0 avatar
      bd2

      For January, according to Edmunds, Kia had the 3rd highest markups (higher than Porsche) – after Cadillac (mostly due to the Escalade) and Land Rover.

      Hyundai was 8th.

      For Kia, it’s largely due to the Telluride and Carnival, and to a lesser extent, the Sorento.

      The EV6 will only add to the markups for Kia.

  • avatar
    pmirp1

    This is all lip service by car companies. As I said before, be prepared to pay market adjustment for cars of various makes all the way through 2023.

    This past weekend my daughter’s Tacoma TRD sport 4×4 in blue crush color (I call it a blurple for blue purple) finally arrived. As we were walking around it with out salesperson for final inspection at our local ginormous northeast Atlanta dealer, a large family of Mexicans surrounded us. They loved it. I let the father sit in it and try it. Afterwards, he took me to the side and asked me how much I paid. We ended up paying $51,000 (including tax and market adjustment of $2,500 for her new ride). The proud Mexican father was willing to pay $2000 more to buy that vehicle from us. I politely declined as she has waited for it for 3 months (almost).

    It is what it is. And people who think they can go across the country to find a better deal in North Dakota or some place like that, have just not been seriously shopping around. My dealer was otherwise great and they took great care of us. I plan on buying my salesman and sale manager premium bottle of aged Jack Daniels and take it to them this weekend.

  • avatar

    “prices will eventually stabilize ”

    I do not want to be political here but the truth is that it will not happen, not while Democrats are in power. They use this tactic to increase prices for ICE vehicles to make EVs more competitive. Believe me EVs will not have this problem, rather opposite – they will be sold with huge tax credits. Tell me that some buyers will decide to buy ICE vehicle for premium when there are much cheaper EVs available from same dealers

    • 0 avatar
      la834

      There has not been any move by Democrats to increase EV tax credits as a result of the current seller’s market that I’m aware of. The federal tax credit for each manufacturer’s first 200,000 EVs or PHEVs was put in place years ago, and additional state tax incentives haven’t changed in my blue state either. Just about every car, electric or ICE, is in high demand now already; there’s little political support even on the left to put additional money on the hood of EVs.

    • 0 avatar
      ahintofpepperjack

      Lol every problem in the world is cause by the Democrats. And the Republicans are the only ones who can save us….

      I always get a chuckle when every problem today is blamed on some political party.

      I hate all politics and refuse to participate in any of it. There is so much anger and “Us vs Them” going on in the USA right now. By saying “I do not want to be political here but the truth….” you are immediately making it political.

      Can we all just agree dealers charging over MSRP sucks. And hope that Hellcats keep depreciating so I can buy one in a few years for $20k.

    • 0 avatar
      bd2

      Maybe the Orange Clown should have treated the pandemic seriously from the start, but the underlying cause for the price hikes (chip shortage) is due to market forces.

      Automakers looking to buy from the cheapest sources – meaning a consolidated chip supply (mostly from Taiwan due to govt. incentives), exacerbated that the margins on chips for the auto sector are low margin, hence chip makers not exactly willing to spend billions to increase production.

  • avatar
    Skippity

    Lip service.

  • avatar
    3SpeedAutomatic

    My car hit the 10 year old mark. Would like to replace it, but saw a USED Telluride listed for $5k more than the original sticker price.

    Will wait it out awhile longer till things get back to normal.

  • avatar
    Astigmatism

    Picked up a new EV6 on Tuesday. The dealer only got the car because we chose them as our preferred dealer when we reserved the “First Edition” with Kia last June, and, sensibly, they charged us sticker for it – but they did say that if we didn’t buy it, they were going to list it for $5k over MSRP. They also said (when we idly asked) that even though they were charging premiums for cars on the lot, a customer could order a new build from the factory through them, which they would then sell at sticker when it arrived.

    In sum, there’s a bit of a wait, but even with shady H/K dealers, you can still get a car without a premium pretty easily.

  • avatar
    Jeff S

    Better to wait if you don’t need a new vehicle now. I am ready for ordering and buying a vehicle directly from the manufacturer. If Ford’s future model is to order and not pick one off the lot then who needs a dealer especially the service department. Yesterday I went in for a recall on my 2012 Buick Lacrosse and got an oil change as well. The service department doesn’t bother to call you when it’s ready, hands you the keys and you have to walk the lot to find you car which is hidden between 2 trucks in the back of the lot, and doesn’t even bother to put an oil change sticker on the inside of the driver’s side of the windshield. When I got to the dealer they were standing around talking with each other in the service department and not busy and the service bays were practically empty. I had some unused stickers so I one on. Don’t need a dealer and the only reason I had them change the oil was because it was in there for a recall. The Buick was originally bought at this same dealership.

  • avatar
    DungBeetle62

    My concern was being able to hit the sweet spot where the prices come back down, but the interest rates aren’t yet up (get ready, folks). Two different Mazda dealers I contacted listed MSRP on their websites, but notify you of the “Market adjustment” when they respond. Nope. And even after that one dealer literally e-mailed FOUR TIMES IN ONE DAY asking if I was still interested. For giggles my folks said “Check the dealers here.” Hell, one of them had the audacity to not just list the Market Adjustment, but an additional $1400 “Reconditioning Charge” on NEW, yes, NEW cars. Holy crap. I’d dropped by the nearest Dealer and a sales guy there offered to contact me when the 2022’s started coming in. OK, we’ll see what happens here.

    No BS from him. Not a peep until six weeks later he calls to let me know there’s a Manual 2022 RF available. Didn’t get there ’til Thursday. Car was sold, but he offered to let me take a short drive to compare it back-to-back with an Automatic (they had 3 available). The automatic wasn’t going to cut it for me. So I ask when they’re expecting another manual. He says a Red one due next week. “MSRP on that one?” I ask. “Yep, we stopped with the Market Adjustment on Feb 1st.” Signed the papers an hour later and picked up the car last Friday. 4.1% APR too. Since then, both other Mazda dealers contact me “No more Market Adjustments.” Too late!!!.

    And used RF’s aplenty were listed in Texas at what I paid for this one with 3 miles on the odometer.

  • avatar
    monkeydelmagico

    Kabuki Theatre presented to you by Hyundai. Please do tell us what you mean by “not stand idly by”. If you flood the market with all trim levels of vehicles and allot more to dealers selling at, or below, msrp then you will win tons of market share and good will. Until then it is empty words. If fact, Kia, Hyundai, and Genesis are some of the worst offenders for markups. M0torTrend just did an article on this. Volvo, Lincoln, and Ram have some of the closest to MSRP deals available. If I was shopping for a new car they would be getting my dollars, not a bunch of rip off dealers like Hyundai and their complicit manufacturers.

  • avatar
    Daniel J

    I have no issue with dealers charging more than MSRP. It happens all the time. Do we know the MSRP of everything in the grocery store? Do we know the MSRP on everything we buy? Car manufacturers have decided long ago to publish MSRP.

    Some companies have MAP prices and won’t allow dealers to sell UNDER msrp.

    For me, personally, I won’t buy a car over MSRP unless it is a rare vehicle. I can wait. Can others? I don’t know.

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