Hyundai, Genesis warn dealers on price markups ‘way above' sticker price

Hyundai and Genesis are warning U.S. dealers against aggressive pricing strategies that are damaging brand image, including markups that push transaction prices "way above" sticker price, according to letters sent to retailers and obtained by Automotive News.

The automakers, part of Hyundai Motor Group, also warn of potential actions they can take against offending dealers, such as reductions in future allocations, advertising benefits and other incentives. But they acknowledge that retailers can set their own prices.

According to the letters, one of the aggressive practices that is hurting the image of the Korean brands involves "advertising one price online and then marking up that price when the customer comes into the dealership."

The letters include mostly the same language for the two brands.

The Hyundai letter is signed by Randy Parker, senior vice president of national sales at Hyundai Motor America. The Genesis letter is signed by 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.

The automakers cited "affixing side stickers with price markups to our vehicles" and the practice of advertising one price online but raising it later.

"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," the letters said.

Hyundai and Genesis dealers are certainly not alone in adding market adjustments to vehicle prices. Tight vehicle supplies have prompted retailers across the industry to add markups or force buyers to accept dealer-installed equipment that can reach into the thousands of dollars.

According to an Edmunds report last week, buyers paid above sticker price on a record 82 percent of all new vehicles in January, compared with 3 percent in January 2021. The average transaction price was $728 above sticker last month, compared with $2,152 below sticker price a year earlier.

Hyundai Motor Group's stable of brands, including Kia, were among those with the biggest markups when comparing average sticker prices to average transaction prices across their lineups, according to Edmunds.

For Kia, the difference was $2,289 over sticker price; for Hyundai it was $1,498 above sticker price; and for Genesis it was $1,603 above sticker price, Edmunds said.

While dealers have the legal right to set their own prices, Hyundai and Genesis said there are actions the factory can take to discourage markups, which can exceed $10,000 on popular models such as the Hyundai Palisade crossover and the new Hyundai Ioniq 5 EV.

"You are, as an independent business, of course free to adopt any policies, including pricing policies, that are consistent with law and your contractual obligations," said the letters. "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."

After consultation with the brands' national dealer councils, the letters said, "We will explore all options in conjunction with your representatives that may result in the adoption of measures aimed at curbing the behavior of the aforementioned dealers."

The Hyundai and Genesis executives warned dealers that once inventory stabilizes, customers will remember how they were treated.

"Once supply and demand come into greater equilibrium, customers will feel that they were overcharged for their vehicle and thus look to other brands the next time they are shopping," the letters said. "We believe that the risk of losing customers and potential future customers far overweighs any short-term gains to be had from what customers describe as unfair pricing."