Factories punish rogue exporters
Skip to main content
Sister Publication Links
  • Automotive News Canada
  • Automotive News Europe
  • Automotive News China
  • Automobilwoche
AN-LOGO-BLUE
Subscribe
  • Subscribe
  • Account
  • login
  • HOME
  • NEWS
    • Dealers
    • Automakers & Suppliers
    • News by Brand
    • Cars & Concepts
    • Coronavirus Coverage
    • China
    • Shift
    • Mobility Report
    • Special Reports
    • Digital Edition Archive
    • This Week's Issue
    • CarMax
      CarMax plans bonuses for 22,000 employees to reward pandemic efforts
      COVID-19 vaccines reaching auto plants, but challenges remain
      Working online to book COVID shots, office manager Billie Jean Pellet “typed so fast smoke came off the keyboard,” said dealer Earl Stewart.
      Dealership team hunts for vaccine
      Hope stalls for rebound in European auto sales
    • Sanden's plant in the north China port city of Tianjin
      Hisense to acquire Japanese auto air-conditioner maker Sanden
      A Cadillac XT5 fitted with the 48-volt system 
      Cadillac launches XT5, XT6 fitted with 48-volt system
      Chinese tech companies are turning their sights on EVs
      Telecom firm ZTE preparing electric vehicle product line
      Changan
      Huawei, battered by U.S. sanctions, plans foray into EVs, report says
    • VW unit is pumping funds into mobile charging robot
      Companies work smarter, not harder, with logistics-focused robots
      Other industries combine for more bot orders than automakers, suppliers
      Gatik capitalizes on growing demand for shorter-distance deliveries
    • driverless-vehicle interior
      Consumers fear self-driving future, but like the tech that blazes the path
      The Cruise AV autonomous vehicle, based on the Chevy Bolt
      GM-backed Cruise is in talks to buy startup Voyage, report says
      A worker fixes a power line in Austin, Texas, last month.
      Bidirectional EVs could lend a hand in power crisis
      Fisker's next wave: A premium people's car
    • Elon Musk interview
      Tesla’s Model Y, on sale since March, is a showcase of EV technologies competitors will benchmark.
      Technologies of Electrification
      Cadillac’s Lyriq EV will be unveiled Aug. 6.
      Future Product Pipeline
      A CALL TO ACTION
    • driverless-vehicle interior
      Consumers fear self-driving future, but like the tech that blazes the path
      Ikuo Mori, then Fuji Heavy Industries CEO and Tom Doll, stand alongside the redesigned 2009 Subaru Forester, which debuted at the 2008 Detroit auto show. The redesigned crossover helped kick-start Subaru's U.S. sales growth.
      How Subaru survived and thrived after 2011 quake
      President Joe Biden’s nomination of FTC member Rohit Chopra as director of the CFPB signals that it could be a “much more activist bureau.”
      White House could shake up auto finance
      COVID-19 vaccines reaching auto plants, but challenges remain
    • Access F&I
    • Fixed Ops Journal
    • Marketing
    • Used Cars
    • Retail Technology
    • Sales
    • Best Practices
    • Dealership Buy/Sell
    • NADA
    • NADA Show
    • Automakers
    • Manufacturing
    • Suppliers
    • Regulations & Safety
    • Executives
    • Talk From The Top
    • Leading Women Network
    • Guide to Economic Development
    • PACE Awards
    • Management Briefing Seminars
    • World Congress
    • Aston Martin
    • BMW
      • Mini
      • Rolls-Royce
    • Daimler
      • Mercedes Benz
      • Smart
    • Ford
      • Lincoln
    • General Motors
      • Buick
      • Cadillac
      • Chevrolet
      • GMC
    • Honda
      • Acura
    • Hyundai
      • Genesis
      • Kia
    • Mazda
    • McLaren
    • Mitsubishi
    • Nissan
      • Infiniti
    • Stellantis
      • Alfa Romeo
      • Citroen
      • Chrysler
      • Dodge
      • Ferrari
      • Fiat
      • Jeep
      • Lancia
      • Maserati
      • Opel
      • Peugeot
      • Ram
      • Vauxhall
    • Renault
    • Subaru
    • Suzuki
    • Tata
      • Jaguar
      • Land Rover
    • Tesla
    • Toyota
      • Lexus
    • Volkswagen
      • Audi
      • Bentley
      • Bugatti
      • Lamborghini
      • Porsche
      • Seat
      • Skoda
    • Volvo
    • (Discontinued Brands)
    • Virtual reveals (Sponsored)
      • MITSUBISHI: 2022 Outlander
      • NISSAN: 2022 Pathfinder and 2022 Frontier
      • GENESIS: 2021 GV80
      • KIA: 2021 K5
      • LEXUS: 2021 IS
      • NISSAN: 2021 Rogue
      • TOYOTA: 2021 Venza and 2021 Sienna
    • Auto Shows
    • Future Product Pipeline
    • Photo Galleries
    • Car Cutaways
    • Design
  • OPINION
    • Blogs
    • Cartoons
    • Keith Crain
    • Automotive Views with Jason Stein
    • Columnists
    • China Commentary
    • Editorials
    • Letters to the Editor
    • Send us a Letter
    • The new Stellantis pickup: Schrödinger's Dakota
      Fisker gets a rare second chance to build his own car company
      Gerry McGovern is right man to steer Jaguar reinvention
      Forget the Ford GT; Moray Callum's biggest hit is the aluminum F-150
    • Jaguar is about to undergo its fourth reinvention in five decades as owner Tata Group takes a second crack at shaking up a brand whose glorious past has rarely translated into a profitable present or sustainable future.
      Jaguar Redo, Part IV
      view gallery
      1 photos
      Chip Shortage
      Record Dealer Profits
      view gallery
      10 photos
      Leo Michael Cartoons - Q1 2021
      Dealers hiring from hospitality sector
      view gallery
      1 photos
      Hospitality Hires
    • Shifting gears away from the stick shift
      SEMA still a wonderful circus
      Penske still has plenty of races to win
      Ford's turn in the hot seat
    • March 2, 2021 | Will EV bets pay off?
      February 23, 2021 | Reliability continues to soar
      February 16, 2021 | Apple looks to take bite out of automotive
      February 9, 2021 | ‘Super’ opportunity for automakers
    • Mark Paul
      What dealers can do if D.C. power shift affects recalls
      Reinvention of Jaguar is a tall task for McGovern
      Jamie Butters
      EV plans and some damn lies
      Are we in the midst of a fourth industrial revolution?
    • Geely HQ
      Why Geely wants to be a contract manufacturer
      Shanghai hints at how Chinese cities will pursue electrification
      How Tesla, GM transformed EV market in 2020
      Is sales recovery nearing an end?
    • U.S. Dealership lot
      Lean lots won't last without new dealer discipline
      Taiwan Semicon microchips BB web.jpg
      Chip shortage shows need for new thinking
      Digital demands squeeze smaller auto retailers
      President Joe Biden’s move to electrify all government vehicles could push forward charging infrastructure development.
      Dealers aren't wrong to be wary of EV hype
    • Embrace EV ideas at our doorstep
      New look at Nissan a positive sign
      Buying EV without dealer is just easier
      Dealers are right to worry about EVs
  • DATA CENTER
  • VIDEO
    • AutoNews Now
    • First Shift
    • Special Video Reports
    • Weekend Drive
    • AutoNews Now: Peugeot's U.S. comeback uncertain amid Alfa Romeo appointment
      AutoNews Now: Next parts shortage could be foam for seats
      AutoNews Now: Chip woes persist: GM extending output cuts
      AutoNews Now: Toyota, Mazda, Subaru, Hyundai, Kia slide in Feb.; Volvo, Genesis rise
    • First Shift: Ford criticized by ITC for SK Innovation battery deal
      First Shift: GM, LG Chem mull second U.S. battery plant
      First Shift: Stellantis aims for higher profit margins in 2021
      First Shift: Volvo's electric push includes online-only sales
    • Bert Ogden Auto Group
      How a Texas group is cutting costs, saving millions
      COVID, chips and checks: Sales headwinds and tailwinds for 2021
      N.J. dealer helps position peers for ‘electric revolution’
      DCH Millburn Audi
      'Finding the diamond in the rough': How 2020's No. 1 dealership retains talent
    • Why the pickup is the auto industry's 'battleground'
      Carlos Ghosn's quest to restore his reputation
      Why Ford must execute to avoid 'deep trouble'
      Why Honda is 'locked and loaded' for 2020
  • EVENTS & AWARDS
    • Events
    • Awards
    • Congress Conversations
    • Retail Forum: NADA
    • Canada Congress
    • Europe Congress Conversations
    • Leading Women Conference
    • Fixed Ops Journal Forum
    • ANE Shift
    • Shift: Mobility at a Crossroads
    • Shift: The Future of Mobility (CES)
    • 100 Leading Women
    • 40 Under 40 Retail
    • All-Stars
    • Best Dealerships To Work For
    • PACE Program
    • Rising Stars
    • Europe Rising Stars
  • JOBS
  • AN Solutions
  • +MORE
    • Leading Women Network
    • Podcasts
    • Webinars
    • In the Driver's Seat
    • Publishing Partners
    • Classifieds
    • Companies on the Move
    • People on the Move
    • Newsletters
    • Contact Us
    • Media Kit
    • RSS Feeds
    • Shift: A Podcast About Mobility
    • Special Reports Podcasts
    • Daily Drive Podcasts
    • AAM
    • DealerPolicy
    • Gentex
    • Reputation.com
    • Ricardo
    • Ricardo
    • Allstate: Want more from your F&I?
    • Ally: Navigating the future of automotive retailing
    • Amazon Web Services: Any place, any time, any channel
    • Amazon Web Services: The power of the cloud
    • Amazon Web Services: Universal translator: Harnessing sensor data to build better automotive software
    • Epic Games: Transforming the auto industry with digital assets
    • FTI Consulting: Crisis as a catalyst for change
    • Google: 5 trends shaping the auto industry's approach to a new normal
    • IHS Markit: Automotive loyalty in the wake of the COVID-19 recession
    • IHS Markit: Autonomous vehicles: Automotive and transportation disruption
    • IHS Markit: COVID-19: The future mobility delusion
    • Level5: 2020 Automotive E-Commerce Report
    • Naked Lime: Bring social reputation together as part of big-picture marketing
    • Wells Fargo Auto: Switching gears from LIBOR to SOFR
    • Ally: Do It Right
    • DealerSocket
    • Deloitte: Cyber everywhere: Preparing for automotive safety in the face of cyber threats
    • Facebook: The road to a zero-friction future
    • Guide To Economic Development
    • PayPal Credit: How consumer financing helps drive sales for online auto parts retailers
MENU
Breadcrumb
  1. Home
  2. Retail
May 12, 2008 01:00 AM

Factories punish rogue exporters

U. S. dealerships reap big gray-market profits

Donna Harris
  • Tweet
  • Share
  • Share
  • Email
  • More
    Print
    Keep 'em here

    Dealers are taking steps to protect themselves from factory penalties when they sell new vehicles that turn up on the global gray market. Dealers are

    • Charging customers steep fees if they export vehicles

    • Requiring vehicles to be titled, registered through dealership

    • Investigating out-of-state buyers

    • Warning on Web sitesthat exporters aren’t welcome

    • Lobbying for state laws to limit automakers’ penalties

    As the weak dollar continues to make U.S. goods a bargain, automakers are cracking down on U.S. dealers who are exporting a growing number of new cars and trucks to foreign customers on the gray market.

    In some cases, though, dealers say they're unwitting and unwilling participants who have no idea the vehicles they sell are going overseas.

    Last month Mercedes-Benz warned its 344 U.S. dealers that it is raising financial penalties and cutting allocations for dealers who sell more than 2 percent of their vehicles to exporters, states a letter obtained by Automotive News.

    The punishments apply even if dealers did not know that buyers planned to export the vehicles.

    Mercedes-Benz spokeswoman Tracy Darchini said last week: “We are confident that there is a "home' here in the U.S. for every vehicle that we are allocated.”

    Booming business

    Gray-market exports are a growth industry. According to the North American Automobile Trade Association, 60,000 new gray-market vehicles were exported from the United States last year, up 68 percent from 2006.

    Werner Schumacher, a major Mercedes-Benz dealer in Phoenix, was penalized $18,000 after his dealership sold a dozen new vehicles that later were exported. Schumacher, who chaired Mercedes' dealer council last year, says he didn't know the vehicles had gone to foreign buyers. Exporters hired straw purchasers, he says.

    “Some customers said they wanted to register their car in California because their mother or sister lives there,” Schumacher says. “They looked like nice people, but they were lying through their teeth.”

    Schumacher says he now requires out-of-state buyers to register their vehicles through his dealership.

    Other dealers are protecting themselves from export penalties by demanding written agreements from buyers that they won't resell vehicles outside the United States. Dealers also are lobbying for state laws to limit the factories' ability to punish them.

    Exporters typically buy vehicles from a U.S. dealer, then ship them to foreign clients or to brokers. Those foreign consumers often can import new vehicles from the United States more cheaply than they can buy them at home.

    Most go to Canada

    About two-thirds of last year's gray-market vehicles went to Canada, says Brian Osler, president of the North American Automobile Trade Association, an organization of dealers involved in importing and exporting.

    Other hot markets are China, Russia, Saudi Arabia and South America. The greatest demand, say dealers and exporters, is for European-brand luxury vehicles.

    Nearly all automakers forbid U.S. dealers to sell new vehicles for export, citing warranty concerns and their own sales plans. Automakers work with customs officials to track unauthorized exports, using vehicle identification numbers to determine which dealerships sold the vehicles.

    Manufacturers' penalties include charge-backs against dealerships' retail and fleet incentives and holdback allowances. Last month, Mercedes raised the “administrative fee” it charges dealers for unauthorized exports by 20 percent, to $300 per vehicle.

    Dealers say other automakers are stiffening export restrictions.

    Jack Fitzgerald owns 13 dealerships, most of them in the Washington, D.C. area, that sell 19 brands. Fitzgerald notes that Chrysler LLC now charges an export penalty of $3,000 a vehicle. Fitzgerald says his five dealerships that sell Chrysler brands have not had to pay penalties.

    Mike Charapp, a lawyer in suburban Washington who represents dealers, says several clients are appealing factory charges and other penalties — some amounting to hundreds of thousands of dollars.

    “It's a big problem,” he says. “With the dollar weak, there is a lot of money to be made by these brokers.”

    One exporter, who asked not to be named because he fears factory retribution, says he provides a legal service.

    “A Mercedes-Benz in China sells for four times what it costs in the U.S.,” he says. “We have people from Europe buying European cars in the U.S. Because of the value of the euro vs. the dollar, it is like getting 50 percent off.”

    But because of the factory restrictions, he says, he expects to export no more than seven or eight new vehicles this year, down from as many as 100 in his best years.

    The exporter concedes that he sometimes resorts to “subterfuge” to buy vehicles from dealers because of factory prohibitions against exports.

    “What if all of the BMW dealers in Chicago decided it was OK to export new vehicles?” he says. “The factory couldn't do anything about it.”

    The American Automotive Shippers Association Inc., a group of 37 exporters, is considering a trade-restraint lawsuit against automakers over export restrictions, says association President Max Ruefenacht, an exporter in Rockaway, N.J.

    Self-protection

    Dealers are taking steps to protect themselves against sales that could lead to export penalties. Joel Weinberger, an Audi dealer in suburban Chicago, just posted a notice on the dealership's Web site: “Persons interested in purchasing vehicles for export are kindly asked to refrain from contacting us.”

    Says Weinberger: “We turn them all away. We don't want to play that game.”

    Other dealers demand that customers pledge in writing not to export vehicles. A Chicago Mercedes dealership owned by megadealer Fletcher Jones requires buyers to sign an agreement to pay the dealership $10,000 for each vehicle they export.

    Last year, a Nevada exporter sued Mercedes-Benz of Laguna Niguel in Southern California over a similar contract with a $7,500 charge per export. Aaron Jacoby, a lawyer for the dealership, says an out-of-court settlement favored his client.

    Meanwhile, dealers in several states seek protection in franchise laws against factory export penalties.

    New York, Florida and Virginia prohibit automakers from penalizing dealers who can show they did not know the new vehicles they sold would be exported. A measure before Florida's legislature would ban penalties if an exported vehicle is titled or registered in the United States.

    Dealer Schumacher says the export problem will disappear on its own once the dollar strengthens. “When it does not make economic sense anymore,” he says, “that will be the end of it.” 

    Harry Stoffer contributed to this report

    RECOMMENDED FOR YOU
    Ford says 'no negative impact' to dealers from chip shortage
    Related Articles
    Fla. law: Automakers can't force dealer upgrades
    Fla. law: Automakers can't force dealer upgrades
    Fla. law: Automakers can't force dealer upgrades
    Fla. law: Automakers can't force dealer upgrades
    Letter
    to the
    Editor

     

     

    Send us a letter

    Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.

    Recommended for You
    Ford says 'no negative impact' to dealers from chip shortage
    Ford says 'no negative impact' to dealers from chip shortage
    GM to launch EV digital retail tool powered by Tekion
    GM to launch EV digital retail tool powered by Tekion
    Vroom's Q4 net loss widens on expenses amid record online sales
    Vroom's Q4 net loss widens on expenses amid record online sales
    Sponsored Content: All-new 2021 Toyota Sienna – A behind the scenes look
    Sign up for free newsletters
    EMAIL ADDRESS

    Please enter a valid email address.

    Please enter your email address.

    Please verify captcha.

    Please select at least one newsletter to subscribe.

    See more newsletter options at autonews.com/newsletters.

    You can unsubscribe at any time through links in these emails. For more information, see our Privacy Policy.

    Digital Edition
    Automotive News 3-1-21
    THIS WEEK'S EDITION
    See our archive
    Fixed Ops Journal
    Fixed Ops Journal 2-8-21
    Read the issue
    See our archive
    RETAIL TECHNOLOGY NEWSLETTER: Sign up for our Tuesday afternoon newsletter that breaks down the latest developments in how technology is changing the auto sales landscape.
    WEEKLY NEWSLETTER: Sign up to start your week with the top stories from the latest issue of Automotive News, delivered to your inbox first thing each Monday morning.
    Get Free Newsletters

    Sign up and get the best of Automotive News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today

    Get 24/7 access to in-depth, authoritative coverage of the auto industry from a global team of reporters and editors covering the news that’s vital to your business.

    Subscribe Now
    Connect With Us
    • Facebook
    • Instagram
    • LinkedIn
    • Twitter

    Our mission

    The Automotive News mission is to be the primary source of industry news, data and understanding for the industry's decision-makers interested in North America.

    AN-LOGO-BLUE
    Contact Us

    1155 Gratiot Avenue
    Detroit, Michigan
    48207-2997

    (877) 812-1584

    Email us

    Automotive News
    ISSN 0005-1551 (print)
    ISSN 1557-7686 (online)

    Fixed Ops Journal
    ISSN 2576-1064 (print)
    ISSN 2576-1072 (online)

    Resources
    • About us
    • Contact Us
    • Media Kit
    • Subscribe
    • Manage your account
    • Reprints
    • Ad Choices Ad Choices
    • Sitemap
    Legal
    • Terms and Conditions
    • Privacy Policy
    • Privacy Request
    Automotive News
    Copyright © 1996-2021. Crain Communications, Inc. All Rights Reserved.
    • HOME
    • NEWS
      • Dealers
        • Access F&I
        • Fixed Ops Journal
        • Marketing
        • Used Cars
        • Retail Technology
        • Sales
        • Best Practices
        • Dealership Buy/Sell
        • NADA
        • NADA Show
      • Automakers & Suppliers
        • Automakers
        • Manufacturing
        • Suppliers
        • Regulations & Safety
        • Executives
        • Talk From The Top
        • Leading Women Network
        • Guide to Economic Development
        • PACE Awards
        • Management Briefing Seminars
        • World Congress
      • News by Brand
        • Aston Martin
        • BMW
          • Mini
          • Rolls-Royce
        • Daimler
          • Mercedes Benz
          • Smart
        • Ford
          • Lincoln
        • General Motors
          • Buick
          • Cadillac
          • Chevrolet
          • GMC
        • Honda
          • Acura
        • Hyundai
          • Genesis
          • Kia
        • Mazda
        • McLaren
        • Mitsubishi
        • Nissan
          • Infiniti
        • Stellantis
          • Alfa Romeo
          • Citroen
          • Chrysler
          • Dodge
          • Ferrari
          • Fiat
          • Jeep
          • Lancia
          • Maserati
          • Opel
          • Peugeot
          • Ram
          • Vauxhall
        • Renault
        • Subaru
        • Suzuki
        • Tata
          • Jaguar
          • Land Rover
        • Tesla
        • Toyota
          • Lexus
        • Volkswagen
          • Audi
          • Bentley
          • Bugatti
          • Lamborghini
          • Porsche
          • Seat
          • Skoda
        • Volvo
        • (Discontinued Brands)
      • Cars & Concepts
        • Virtual reveals (Sponsored)
          • MITSUBISHI: 2022 Outlander
          • NISSAN: 2022 Pathfinder and 2022 Frontier
          • GENESIS: 2021 GV80
          • KIA: 2021 K5
          • LEXUS: 2021 IS
          • NISSAN: 2021 Rogue
          • TOYOTA: 2021 Venza and 2021 Sienna
        • Auto Shows
        • Future Product Pipeline
        • Photo Galleries
        • Car Cutaways
        • Design
      • Coronavirus Coverage
      • China
      • Shift
      • Mobility Report
      • Special Reports
      • Digital Edition Archive
      • This Week's Issue
    • OPINION
      • Blogs
      • Cartoons
      • Keith Crain
      • Automotive Views with Jason Stein
      • Columnists
      • China Commentary
      • Editorials
      • Letters to the Editor
      • Send us a Letter
    • DATA CENTER
    • VIDEO
      • AutoNews Now
      • First Shift
      • Special Video Reports
      • Weekend Drive
    • EVENTS & AWARDS
      • Events
        • Congress Conversations
        • Retail Forum: NADA
        • Canada Congress
        • Europe Congress Conversations
        • Leading Women Conference
        • Fixed Ops Journal Forum
        • ANE Shift
        • Shift: Mobility at a Crossroads
        • Shift: The Future of Mobility (CES)
      • Awards
        • 100 Leading Women
        • 40 Under 40 Retail
        • All-Stars
        • Best Dealerships To Work For
        • PACE Program
        • Rising Stars
        • Europe Rising Stars
    • JOBS
    • AN Solutions
    • +MORE
      • Leading Women Network
      • Podcasts
        • Shift: A Podcast About Mobility
        • Special Reports Podcasts
        • Daily Drive Podcasts
      • Webinars
      • In the Driver's Seat
        • AAM
        • DealerPolicy
        • Gentex
        • Reputation.com
        • Ricardo
        • Ricardo
      • Publishing Partners
        • Allstate: Want more from your F&I?
        • Ally: Navigating the future of automotive retailing
        • Amazon Web Services: Any place, any time, any channel
        • Amazon Web Services: The power of the cloud
        • Amazon Web Services: Universal translator: Harnessing sensor data to build better automotive software
        • Epic Games: Transforming the auto industry with digital assets
        • FTI Consulting: Crisis as a catalyst for change
        • Google: 5 trends shaping the auto industry's approach to a new normal
        • IHS Markit: Automotive loyalty in the wake of the COVID-19 recession
        • IHS Markit: Autonomous vehicles: Automotive and transportation disruption
        • IHS Markit: COVID-19: The future mobility delusion
        • Level5: 2020 Automotive E-Commerce Report
        • Naked Lime: Bring social reputation together as part of big-picture marketing
        • Wells Fargo Auto: Switching gears from LIBOR to SOFR
        • Ally: Do It Right
        • DealerSocket
        • Deloitte: Cyber everywhere: Preparing for automotive safety in the face of cyber threats
        • Facebook: The road to a zero-friction future
        • Guide To Economic Development
        • PayPal Credit: How consumer financing helps drive sales for online auto parts retailers
      • Classifieds
      • Companies on the Move
      • People on the Move
      • Newsletters
      • Contact Us
      • Media Kit
      • RSS Feeds