Price Gouging

[George And]

I respectfully completely disagree. This isn't about a paradigm shift. As soon as parts, plants and manufacturing lines return to normal, we will ABSOLUTELY see overflowing lots and $5k+ manufacture rebates and $10k off MSRP "Truck Months" again. It might take a year or so but this is a relatively short term supply chain issue.

Not if the factories continue to constrain supply.

Let’s say an automaker can sell 10 SUV’s at full boat sticker (never mind the dealers adding on extra costs) or 15 at a average 10% discount. Never mind bigger incentives for some of these models in the past. Of the 15, they are only getting paid for 13.5 of them. At 70k a pop that’s 157k in discounts. It’s costing them. The question is which would you chose.

700,000 in revenue for 10 at full price with 2/3 the material and labor costs?

Or 945,000 in revenue for 15 discounted ones? With full material and labor costs?

I think the automakers are by far realizing the first scenario is more profitable and will adjust production accordingly.

Just my .02 of a dollar.

There used to be a theory that dealers give away new cars at invoice and make their money on the trades and service. I think that they have figured out they can actually make money on the cars themselves.


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[Stbentoak]

^^^^ This guy here…. He gets it…..^^^^

 

[Rdr854]

Not if the factories continue to constrain supply.

Let’s say an automaker can sell 10 SUV’s at full boat sticker (never mind the dealers adding on extra costs) or 15 at a average 10% discount. Never mind bigger incentives for some of these models in the past. Of the 15, they are only getting paid for 13.5 of them. At 70k a pop that’s 157k in discounts. It’s costing them. The question is which would you chose.

700,000 in revenue for 10 at full price with 2/3 the material and labor costs?

Or 945,000 in revenue for 15 discounted ones? With full material and labor costs?

I think the automakers are by far realizing the first scenario is more profitable and will adjust production accordingly.

Just my .02 of a dollar.

There used to be a theory that dealers give away new cars at invoice and make their money on the trades and service. I think that they have figured out they can actually make money on the cars themselves.


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While profit wise, it makes sense, we have to remember the intangible aspect and that is bragging rights for the most popular vehicle. In the case of Ford, the sales record for the Ford F-150 is coveted and Ford will produce and sell enough trucks so that GM cannot take the crown - no matter the cost. I believe that GM will produce enough trucks and incentivize them in order to have a fighting chance to take that crown.

 

[Quark]

One thing is for sure those plants and guaranteed employee packages don't pay for themselves it takes a lot of sales and those SUVs are big profit. First year demand won't last forever when they are all over town. Sooner than later it will be business as usual. What we have here are buyers trying to justify buying at the height of the market.

 

[mikew2069]

Not if the factories continue to constrain supply.

Let’s say an automaker can sell 10 SUV’s at full boat sticker (never mind the dealers adding on extra costs) or 15 at a average 10% discount. Never mind bigger incentives for some of these models in the past. Of the 15, they are only getting paid for 13.5 of them. At 70k a pop that’s 157k in discounts. It’s costing them. The question is which would you chose.

700,000 in revenue for 10 at full price with 2/3 the material and labor costs?

Or 945,000 in revenue for 15 discounted ones? With full material and labor costs?

I think the automakers are by far realizing the first scenario is more profitable and will adjust production accordingly.

Just my .02 of a dollar.

There used to be a theory that dealers give away new cars at invoice and make their money on the trades and service. I think that they have figured out they can actually make money on the cars themselves.


Sent from my iPhone using Tapatalk

There are other factors at play than just sheer profits. Total revenue, volume and market share all play huge parts. GM has to hit volume targets from their suppliers to keep costs down.

Also keep in mind, GM doesn't care (for the most part) about the dealer's profit. They are going to sell their vehicles to the dealerships at the same cost no matter what.

Sure they might start to offer manufacture rebates once the supply chain returns to normal which will cut into profits but lets say they offer a $5k rebate. They can sell 10 cars at a $10k profit without a rebate or they can sell 50 cars at a $5k profit with the rebate if they have plenty of supply.

So we can use the numbers however we want to make our points. The cool thing is that one of us is definitely right. Only time will tell.

Just my 2 satoshis!

 

[Mxguy741]

Let’s also not leave out that parts business over the life of the vehicle. Parts are sold at very high margin. They will still all thrive to get as many vehicles out the door

 

[Banks22]

So how did we get here, indiscriminate buying? It looks like GM will use any component they can get on these high profit vehicles and people continue clamoring for them. For GM there is no downside.

Biden getting into office and China wanting to push the EV market. Therefor high gas prices and china(my opinion

Not if the factories continue to constrain supply.

Let’s say an automaker can sell 10 SUV’s at full boat sticker (never mind the dealers adding on extra costs) or 15 at a average 10% discount. Never mind bigger incentives for some of these models in the past. Of the 15, they are only getting paid for 13.5 of them. At 70k a pop that’s 157k in discounts. It’s costing them. The question is which would you chose.

700,000 in revenue for 10 at full price with 2/3 the material and labor costs?

Or 945,000 in revenue for 15 discounted ones? With full material and labor costs?

I think the automakers are by far realizing the first scenario is more profitable and will adjust production accordingly.

Just my .02 of a dollar.

There used to be a theory that dealers give away new cars at invoice and make their money on the trades and service. I think that they have figured out they can actually make money on the cars themselves.


Sent from my iPhone using Tapatalk

Except the factories aren’t holding back, Flint, MI who makes the gmc and Chevy HD diesels for the whole country have thousands of them lined up waiting for chips, I’ve heard from someone actually at the plant in Texas that Tahoe’s and Yukon’s are all built waiting for chips.

What I believe is really going on is politicians are stopping gas pipe lines, raising gas prices, China/Taiwan are holding millions of chips to restrict output and raise prices on gas vehicles so they can push their EV agenda. If gas vehicles get too expensive along with fossil fuels they go for EV. China controls the world market for batteries and precious earth metals. China would control the world EV market, thus our corrupt politicians are doing what China wants for money in their pockets.
So until my “conspiracy theories” come true and Biden gets arrested for cheating the election and Trump is back in, this will continue.

 

[Kpwweb]

This has been interesting. It seems some people here are confusing General Motors and the dealerships. The dealers are independent, only affiliated with GM through a franchise agreement. Dealers, like other franchised businesses, buy a vehicle from GM at a certain fixed price. They can then charge whatever they choose for a sale price.

We, the consumer can then vote with our dollars. But GM has no control over the sale price of vehicles except for a MAP price. And GM makes no extra money on higher “market pricing”. They would actually have to raise the price to the dealer.

 

[Stbentoak]

We, the consumer can then vote with our dollars. But GM has no control over the sale price of vehicles except for a MAP price. And GM makes no extra money on higher “market pricing”. They would actually have to raise the price to the dealer.

You are correct, except they can control supply... I believe GM "Carries" these vehicles on a dealers lots just for so many days then the dealer has to "buy" it. If they keep supply tighter (But everything they make is sold...), it creates lasting higher prices for dealers. GM is happy and dealers are happy, ( no cash outlay for them...) but the consumer isn't....

 

[Dez78n]

I ordered a Denali with the premium package and diesel on Saturday. I suddenly don’t feel so bad with my 79,200 price. Now let’s just hope It actually gets built.