Both Ford and GM are directing their dealers to stop charging so much for autos, according to a new report by the Wall Street Journal. Dealerships have been marking up vehicles over sticker price as a result of a drought of inventory, attributable to supply chain issues and the semiconductor shortage, combined with increased demand.
But Ford Chief Executive Jim Farley said this week that dealers who gouge prices will "face consequences" that may include losing supplies of future models. “We have very good knowledge of who they are,” he said on his company's earnings call, talking about these dealerships.
Farley noted that around 10% of the roughly 3,000 dealerships in Ford's U.S. network are charging above the sticker price, the report said. Ford will punish those who don't stop with "punitive action", the report said.
GM also called out “a small minority of bad actors” engaging in the practice, and said it could also withhold vehicle shipments as a result.
Most dealerships are franchise dealerships, the Journal notes, "which are independent businesses that purchase cars from the factory". While they control the final transaction with the customer, the auto companies still control supply and can offer promotional programs.
The practice of overcharging has been rare in the past, and companies have said before that they disapprove of the tactic, claiming it reflects poorly on the brand.
But the practice has become routine over the past year thanks to supply chain lockups and shortages in computer chips.
A spokesman for the National Automobile Dealers Association commented: “This is simply a temporary symptom of supply and demand being entirely out of whack. Dealers and consumers have always been free to agree on the price of the vehicle.”
Jon Harding, a project manager for a utility company in Southern California, told the Journal that while shopping around he got more than 12 quotes that were above sticker price. He said the experience was harrowing and left him considering buying another Tesla, a purchase that comes directly from the company, and not through a dealer.
He concluded: “The dealer represents the manufacturer, it’s the person you deal with. Right now, they’re not representing the brands very well by trying to jack people around.”