The U.S. automotive marketplace is evolving as consumers demand ever more transparency in how they research, shop and purchase vehicles. Some big dealership groups deserve credit for changing their business models to make buying a car easier for consumers, a change that also ought to boost customer satisfaction and profitability.
For example, it was a bold decision by AutoNation to ban dealership employees from charging more than sticker price for the soon-to-be-launched Chevrolet Volt plug-in hybrid and Nissan Leaf electric vehicle. Violators could be terminated.
Edmunds.com reports that some dealerships plan to tack on as much as $20,000 on top of the Volt's $41,000 sticker price. Well-heeled early adopters might pay that much. But marking up the price in effect sucks tax dollars out of the deal -- defeating the purpose of the government subsidy, which is to make fuel-efficient vehicles more affordable.
Price gouging on hot-selling cars is a disreputable practice from a bygone era. Dealers who argue that it is just good, old-fashioned supply and demand fail to realize that short-term profits come at the risk of long-term damage to the reputations of the dealership and the brand.
Further, inflating prices of the Volt and Leaf will create the public perception of greedy dealerships profiteering at the expense of the public good, damaging the image of the system.
It isn't surprising that AutoNation chose the ethical high ground. CEO Mike Jackson was an early, outspoken supporter of plug-in hybrids. The country's largest dealership group ought to extend the no-gouging policy to all makes and models.
Another example of leadership is Sonic Automotive's test of no-haggle pricing at finance and insurance offices in two markets. Beginning Wednesday, Sept. 1, the nation's third-largest dealership group will enact no-haggle pricing on F&I products in eight dealerships in Columbus, Ohio, and northern Virginia. The strategy is to use everyday low prices to build customer loyalty, just as mass merchandisers do.
This is a new, hypercompetitive era for the U.S. auto industry. AutoNation and Sonic understand that in an 11.5 million-unit market, there are fewer buyers and they are more demanding and better informed. Retailers that add value for their customers through a comfortable, transparent purchase experience will thrive; those that don't, won't make it.
And that's the way it should be in a market economy.