Federal Incentives: Subsidizing 'Volt-Gouging' By Chevy Dealers?

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2011 Chevrolet Volt test drive, Michigan, October 2010

2011 Chevrolet Volt test drive, Michigan, October 2010

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It's the sign of a successful car launch: Dealers add blatant markups to the sticker price, charging thousands of dollars extra because buyer demand exceeds supply, and dealers have the only supply.

Now it's happening to the 2011 Chevrolet Volt, the range-extended electric car that went on sale in December and has generated huge public interest.

Reports of dealer markups are caroming around Volt forums and other online venues.

Supply and demand, or 'gouging'?

New 2011 Chevrolet Volt on eBay for $4,000 over sticker price

New 2011 Chevrolet Volt on eBay for $4,000 over sticker price

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Meanwhile, at least one party in Sylmar, California, put a brand-new 2011 Chevy Volt on eBay with the MSRP (sticker price) shown as $43,700 (including options) and a Buy It Now price $4,000 higher, marked in the description as "selling price."

Whether it's a dealer or a private party is hard to tell, but the car is being sold as "brand new, never registered, available for immediate delivery," and there's a large "E-mail me for other colors" note. Which adds up to a dealer to us.

While there's no guarantee a dealer will get their markup, it's perfectly legal. State auto-dealer associations are huge political contributors, meaning that in most states, decades-old laws make it actually illegal for a carmaker to sell you a car. Instead, you must consummate the sale with an independently-owned dealer or distributor.

Direct sales by Chevy: Sorry, illegal

New 2011 Chevrolet Volt on eBay for $4,000 over sticker price

New 2011 Chevrolet Volt on eBay for $4,000 over sticker price

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Chevy and other carmakers would probably like to sell you the Volt directly--the same way you can buy an iPhone from Apple if you want, say--to keep better control over a process that all parties agree is unpleasant for buyers. Unfortunately, that's not going to happen.

Under franchise laws, dealers must execute the sale, and carmakers can only "recommend" pricing strategy. So when supply and demand get out of whack, dealers add thousands of dollars to the price.

(The "no-haggle pricing" policy of the now-shuttered Saturn brand were possible because Saturn dealers signed a very different kind of franchising contract.)

Dealers "wouldn't do it"

2011 Chevrolet Volt

2011 Chevrolet Volt

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Last July, when Volt rollout details were made public, GM executives--including the Volt's then-marketing manager, Tony DiSalle--said that while they couldn't legally prevent dealers from adding markups, "dealers wouldn't do it" because they all understood how important the launch was.

It seemed improbable then, and it has now proved to be untrue.

Your tax dollars ---> dealers' pockets?

But electric-car advocate Chelsea Sexton raises an interesting question: Should Federal tax credits for purchase of electric cars--which may soon become the more effective direct purchase rebates--be used to enrich dealers?

In a recent blog post, she suggested that the purchase rebates only be given if the car sells at or below the sticker price.

President Obama inspects the 2011 Chevrolet Volt

President Obama inspects the 2011 Chevrolet Volt

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That way, dealers could still mark up their Volts, and the earliest buyers could choose to forgo the credit and pay more immediately--or wait a while and get their rebate when supply and demand even out.

It would also neatly solve the political awkwardness of Federal subsidies of thousands of dollars going to the wealthiest early adopters, who would buy the car regardless.

What do you think? Should electric-car rebates preclude dealer markups above the MSRP?

Leave us your thoughts in the Comments section below.

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